Liability for economic loss sustained through the failure of an ISP in the electronic conclusion of contracts

Abstract

Lötz and Du Plessis sum up the problem at hand most succinctly in their stating that “the relevant question is whether electronic contracts of sale can fulfil the general, legal requirements for the conclusion of a valid contract, and also where and when such contracts are (deemed to be) concluded”.2 In light of this statement, consider the following schematic representation of all the parties and their relationships, as typically occurring during the electronic contracting process: This statement succinctly sums up a single aspect of this problem, the so-called “contracting phase”. Following the traditional thought pattern, all aspects leading up to the point of conclusion need to be assessed and critically discussed as a failing or miscommunication in any one of the traditional requirements for the conclusion of a valid contract may later in the contractual relationship affect consensus and thus conclusion. This second phase “remedies and liability” refers to the situation where consensus is defective for one or other reason stemming from a failure in the internet/network services offered by the Internet Service Provider. A practical example of this may be: A and D have concluded pre-contractual negotiations and stand on the brink of consensus. A has signed the agreement and has forwarded same to D by means of e-mail. As far as A is concerned, the contract is concluded and he/she makes arrangements to fulfil of his/her obligations. D does not receive the signed agreement from A due to a failure on the part of his/her Internet Service Provider (C) – the server crashed and as a result he/she has no knowledge of A’s acceptance. D therefore concludes a contract with a third party for the same goods that form the subject of the contract with A and performs in terms of same. In these circumstances A has suffered economic loss due to his/her preparation to perform alternatively, full performance in terms of a contract he/she believed to be concluded. It goes without saying that neither A nor D are responsible for the loss A has suffered. The obvious question is then who is responsible for A’s loss? This work aims to assess firstly, the nature and the scope of possible remedies available to A to redress his/her loss, and secondly, the extent to which the Internet Service Provider can be held responsible for the failure of the communication medium. These issues will be discussed against the backdrop of the general principles of the law of contract and their application to this new and integral component in economic transactions.