CHAPTER 5: SIGNATURE

CONTENTS
Traditional contracts and contracts in cyberspace
Types of contracts
Click wrap
Browse wrap
Shrink wrap
Formation of e-contract
Comments on ECA 2006
Electronic signature
Digital signature
 TRADITIONAL CONTRACTS AND CONTRACTS IN CYBERSPACE
•Same elements, different medium.
•E-Commerce: any business transaction that has been negotiated over an
online system and where the parties interact electronically rather than by
physical exchange or contact.
TYPES OF CONTRACTS
Shrink wrap
Click wrap
Browse wrap
SHRINK WRAP
•Refers to the purchase agreements that
are attached to shipped products,
usually bound by shrink wrap (plastic
wrapping) that contain terms and
conditions.
•Made available either inside the
container or, during the process of
downloading it is accompanied by an
End User License Agreement (EULA).
SHRINK WRAP
•Controversial as:
•Contradict with free consent principle under section 10 of
Contract Act 1950.
BROWSE WRAP
•Agreement entered when one party browsed the other’s site.
BROWSE WRAP
•Specht v Netscape Communication Corp, 306 f 3d 17 (1 oct 2002)

•Hubbert v Dell (2005)

•Nguyen v Barnes & Noble (2014)

CLICK WRAP
•Also known as “click through”
agreement or click wrap license
•Occurs when the end user clicks on a
link amounts to an agreement
•Click on the “I accept” or “I agree”
button
•Showing his consent with the
contractual terms
CLICK WRAP
•Register.com v Verio Inc (2004)

•Steven J. Caspi, et al v The Microsoft Network LLC3

•Groff v. American Online, Inc. File No. C.A. No PC 97-0331, 1998

WL 307001 (R.I. Superior Ct., May 27 1998)
ISSUE: REQUIREMENT OF CONSENT
Uniform Commercial Code (UCC)
 Article 2B provides validity of click wrap and
shrink wrap agreements provided with consent

Uniform Computer Information Transactions

Act (UCITA)
 UCITA provides manifestation of assent include:
 breaking the shrink wrap
 clicking on a link
 commencing to use information
Opportunity to review the terms and conditions

Able to review the terms before clicking will lead to enforceability of

contract

Hotmail Corp v Van Money Pie Inc 1998 us dist lexis 10729 (D N Ca,
16 April 1998)

I.Lan v Netscout Serv. Level Corp. Civ

Freedom to impose terms

Advantage to server’s owner to impose terms on

consumers
Avoid problems of mispriced items
Also used to specify the forum of litigation

Is there any limit?

Comb v Paypal, INC 218 F SUPP 2D 1165 (D
N Ca, 30 August 2002)
Freedom to impose terms

Comb v Paypal, INC 218 F SUPP 2D 1165 (D N Ca, 30 August 2002)

In the procedural unconscionability analysis, the court concluded that the
language of PayPal's User Agreement fell within the definition of
an adhesion contract.
Adhesion contracts: which are drafted and imposed by the party with
superior bargaining power, provide the subscribing party opportunity
to accept the contract "as is" or reject it.
Procedural Unconscionability: "place or manner" in which arbitration is to
occur is unreasonable taking into account "the respective circumstances of
the parties."
Attention to onerous terms

Whether unusual or particularly onerous terms were brought to

consumer’s attention
Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd [1989]
QB
Questions to be considered by the court:
how prominently were the terms posted?
Is it possible to get to the ‘I agree’ button without seeing the terms
Whether unusual or particularly onerous terms were brought to
consumer’s attention
MALAYSIAN POSITION
Contracts Act 1950
 Section 10 on requirement of consent
 No reference to online environment
Electronic commerce act 2006
 Silence on the requirement of consent or assent
 Section 4: indicates similarity with CA
 Section 6: legal recognition of electronic message
 Section 7: formation and validity of contract - Any related communication
may be expressed by an electronic message
 Section 7 to be read with s4(1) of CA
 Section 9: requirement of signature – “the person’s approval”
FORMATION OF E-CONTRACT
•The general rule is that the acceptance
process will complete upon communication to
the proposer; i.e. comes to the knowledge of
offeror.
•Postal rule theory or instantaneous
communications (receipt rule)?
•Sections 20-23 of ECA
•Read this article:
•Alibeigi, Ali & Munir, Abu. (2016). Electronic
Contracts, the Malaysian Perspective
COMMENTS ON ECA 2006
Limitation
• Section 2(2) ECA

Consumer protection
• Not mention any provision relating to consumer protection.
• Consumer Protection Act 1999 (CPA 1999)
• Consumer is protected under this Act for transactions involving online matters.
• Section 2 of CPA 1999
 ELECTRONIC SIGNATURE
•In online contracting, 2 major issues arise:
 How can you be sure that the person with whom you are
communicating is the person he or she claims to be?
 Can an impersonator bind you to an electronic contract?

•All various methods to authenticate an electronic record:

Clicking the ‘I accept’ button
Typing a name into an electronic document
Bitmap signatures (scanned images of handwritten onto a document)
Transaction Authorization Code (TAC)
Password
Smart card/ USB token/vasco token
Biometrics
Digital signature
DIGITAL SIGNATURE
•The development of digital signature is helping to solve this problem as
it provide assurance that it was sent by a known party and not and
imposter.
•Asymmetric cryptography used to simulate the security of a signature in
digital, rather than written, form.
•Digital signature schemes give two algorithms which one which involves
the user’s private key for signing and user's public key for verifying
signatures.
•The output of the signature process is called the "digital signature.“
•A subset to electronic signature
HOW DOES IT WORKS?
•There are 2 keys:
1-Private key
2-Public key
•Trusted third party
• Certification authority
DIGITAL CERTIFICATE
•A digital certificate is a digital file that certifies the identity of an
individual or institution, or even a router seeking access to computer -
based information.
•It is issued by a Certification Authority (CA), and serves the same
purpose as a MyKad, driver’s license or a passport.
•CA (cyber world) - National Registration Department (real world)
•CA issues digital certificates – digital identity
DIGITAL SIGNATURE ACT 1997
•Section 2
•Section 62(2)
•Section 64
•Section 65