Commercial Transactions Module 9 Electronic Commerce & Banking Winter Session 2008 In this module, we will firstly look at e-commerce in a general way ; reflecting on how the type of transactions we have already looked at are affected by this medium. Contract formation Sale of goods
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Electronic Commerce & Banking
Winter Session 2008
We can see Electronic Commerce at work in many ways
- a communications perspective
- a business process perspective
- a service perspective
- an online perspective
- a transaction perspective
- a legal perspective
- a business-to-business and business-to-consumer perspective.
From a communications perspective, electronic commerce is the delivery of information, products / services, or payments via telephone lines, computer networks or any other means.
When looking at the arrangements in place, we normally look to contract law. It can also be a service and s. 74 TPA can be relevant.
From a business process perspective, electronic commerce is the application of technology towards the automation of business transactions and work flows.
In order to analyse the process, we need to understand what is being achieved, the steps and the relationships.
If a new way of doing something, it may be IP, protected by Copyright or be entitled to a Patent. E.g. Amazon.com ordering system.
From a service perspective, electronic commerce is a tool that addresses the desire of firms, consumers and management to cut service costs while improving the quality of goods and increasing the speed of service delivery.
From an online perspective, electronic commerce provides the capability of buying and selling products and information on the internet and other online services.
This can save businesses from having the costs and inconvenience associated with physical premises and permit them to have a much wider reach. By use of logistical services….transport and storage…that need not be theirs….they can have large operations and cover wide areas more easily than formerly. They can also sometimes do things which were not possible /very difficult before-e.g. online auctions.
From a legal perspective, we can consider the need for a signature and whether an electronic signature suffices.Also Evidentiary Matters
- Elements of contract formation.
- Attribution of electronic conduct.
- Intellectual property issues.
- Consumer protection in relation to business-to-consumer transactions or business-to-business (small business) transactions.
Ways of forming contracts
Types of Contracts
The Electronic Transactions Act 1999 commenced March 15, 2000 and is based on the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Electronic Commerce. States are required to enact complementary law. NSW, Victoria and ACT have, but the others not yet.
The legislation is based on principles of functional equivalence
…paper based and electronic transactions should be treated equally by the law and technology neutrality
…the law will not discriminate between different forms of technology.
Note:The local version is not exactly the same as the model law.
Unless otherwise agreed between the originator and the addressee, the time of receipt of a data message is determined as follows:
(a)If the addressee has designated an information system for the purpose of receiving data messages receipt occurs:
(i) At the time when the data message enters the designated information system; or
(ii)If the data message is sent to an information system of the addressee that is not the designated information system, at the time when the data message is retrieved by the addressee;
S.10 of the ETA provides that if the signature of a person is required, that requirement is taken to be met in relation to an electronic communication if:
a method is used to identify a person and to indicate the persons approval of the information communicated
the method was as reliable as was appropriate for the purposes for which the information was communicated
if the recipient is a commonwealth entity any applicable IT requirements have been complied with; and
if the recipient is not a commonwealth entity, the person consents to the method of signature used.
S.11 of the ETA provides that a requirement to produce a document is taken to have been met if the document is produced in electronic form, provided that;
NOTE that the ETA will not apply to formalities required by the parties as opposed to formalities required by legislation.
The Insurance Contracts Act specifies that some communications must be in writing. Most provisions impose obligations on the insurer to advise the insured of something in writing (ss.22,35,37,39,40,44,49,58,62,68 and 74).s,69 permits oral information, provided later given in writing.
The ETA 1999 provides that in general where a commonwealth law requires a notice in writing, it may be given by electronic means provided that the recipient consents. However, the ET regulations exclude the ICA from the scope of these provisions!
Because of the seriousness of some of these notices e.g. cancellation, in a Treasury review of the ICA in 2004, a recommendation was made that E communications be possible with consent and provided a record could be printed.
s.14 Time of receipt
(3) For the purposes of a law of the Commonwealth, if the addressee of an electronic communication has designated an information system for the purpose of receiving electronic communications, then, unless otherwise agreed between the originator and the addressee of the electronic communication, the time of receipt of the electronic communication is the time when the electronic communication enters that information system.
(4) For the purposes of a law of the Commonwealth, if the addressee of an electronic communication has not designated an information system for the purpose o receiving electronic communications, then, unless otherwise agreed between the originator and the addressee of the electronic communication, the time of receipt of the electronic communication is the time when the electronic communication comes to the attention of the addressee.
Intention to create legal relations? Capacity?
Terms are certain?
Can a telephone company change the terms and conditions of its contract by posting a notice on its Website?
Usually encountered when purchasing (shrinkwrap) or downloading and using software applications and electronic information distributed online (clickwrap and browsewrap)
Shrinkwrap…on the clear plastic wrapper
Clickwrap…I agree button
Browsewrap…appears on site somewhere…by using this site….you agree etc…
Quite often order is made by phone and company promises to send the item. Contract usually formed when order made, accepted, payment etc, and cannot add terms later. However, may be situation where on consider and agree/or return basis…sophisticated user with knowledge usual terms…licence terms shown each time program loaded with offer of refund if not acceptable….
If terms desired, need to be made known and agreed to by contracting party at time of contract…conditional on acceptance…return possible?
Agreement to terms and conditions?
Register, a provider of domain name registration services, had agreement with Internet Corporation for Assigned Names and Numbers (ICANN). Register was required to maintain and update a publicly available 'WHOIS' database of registrants' contact information, was not to impose restrictions on use of this data, except re electronic spamming. Register established a WHOIS database, which it updated on a daily basis, and provided a free public inquiry service for the information contained therein. Register's responses to WHOIS queries were captioned by a 'legend' stating that by submitting a query, the user agreed to refrain from using the data to conduct mass solicitations of business by email, direct mail or telephone (a more stringent restriction than that envisaged under the ICANN Agreement, which was only in relation to the restriction of mass solicitation by email).Verio developed automated software program or 'robot' (Robot) to access WHOIS database and compile massive lists of new registrants whom Verio then subjected to a barrage of unsolicited marketing by email, direct mail and telephone.Register demanded Verio stop, but Verio only partially complied, ceasing email solicitations, but continued direct mail and telephone. Register sued for breach terms.Verio argued not contractually because it never received legally enforceable notice of Register's conditions as the restrictive legend did not appear until after Verio had submitted the query and received the WHOIS data.
Particular significance was attached to the fact that Verio was a commercial entity that was making numerous, successive inquiries of Register's database, as a result of which it had become well aware of the terms exacted by Register.
As electronic commerce has developed, courts have been confronted with the task of applying age-old principles of contract law to various online permutations of the classic idea of agreement between parties.
While, in recent years, courts have become comfortable with enforcing agreements supported by 'clickwrap' procedures, Verio is an authority in relation to the enforceability of 'browsewrap' or 'Web wrap' agreements.This case helps to elucidate contract principles as they apply to browsewrap agreements and, in particular, clarifies the circumstances in which the provisions of browsewrap agreements will be held to be enforceable. Although Australian courts are not bound by American case law, the decision in Verio provides a useful guide as to how an Australian court might deal with the issue.
The Court declined to enforce terms specified by Netscape against a user of Netscape's software due to insufficient evidence that the user had seen the terms when downloading the software. The terms of Netscape's offer of software were posted on the website from which the user downloaded the software. However, the user would not have seen them without scrolling down their computer screen, and there was no reason for them to do this.
The Court, noting that the taker of the information was not provided with an 'I agree' icon to click (although fully aware of the terms on which information was offered on Ticketmaster's site), concluded that there was insufficient proof of agreement to support a preliminary injunction.
The Court Verio commented that '[u]nder the circumstances of Ticketmaster, we see no reason why the enforceability of the offeror's terms should depend on whether the taker states (or clicks), "I agree".'
Consider the application to:
S.52TPA and e-commerceA corporation shall not in trade or commerce engage in conduct that is misleading or deceptive or is likely to mislead or deceive
Consider also ancillary liability (s75B aids, induces, conspires, knowingly concerned)
The conduct must have taken place in Australia. Where were the representations made?..relevant conduct not the state of mind.
No need for an active representation. Can be silence e.g. incomplete information, changes not noted or where reasonable expectation of information.
Examples of possible problem areas:
4 step approach to whether conduct is misleading and deceptive in all the circumstances
(1) Identify relevant section of public who may be mislead/deceived.
(2) What is effect of conduct on all those within that section…would a reasonable member of that section be mislead?
(3) Evidence that consumers are in fact suffering from a misconception may be persuasive but is not essential
(4) It must be established that the misconception has arisen as a result of conduct complained of and not some other factor
NOTE that intent of defendant not relevant and not enough to cause mere confusion. Conduct must actually mislead or deceive or be likely to…different to passing off action where confusion enough.
Results of a survey of on line retail sites by ACCC 2004
Terms and conditions compulsory viewing 14.7%
Require positive consent before completion 32.80%
Written contract easy to find 17.4%
Clause attempting to disclaim warranties in breach TPA 50.9%
Clause attempting to limit liability 66.00%
Clause attempting to limit responsibility for inaccuracy 54.3%
Clause stating that use of site is agreement to T&C 48.7%
Both clauses attempting disclaimer warranties
and limits to liability 43.8%
70% of online sites surveyed raised concerns for ACCC
ACCC case against US based SkyBiz.com Inc, illustrating that web-based activities can be subject to laws where information accessed, not just the law of home country operations. Example also of ACCC and FTC co-operation.
ACCC alleged in Federal Court that SkyBiz.com Inc contravened TPA 61 through its operation of a pyramid selling scheme and had engaged in misleading and deceptive conduct and referral selling, prohibited by ss. 52, 59 and 57.SkyBiz. consented to orders that:The Skybiz scheme was a pyramid selling scheme. Skybiz represented the scheme could be used to engage in ecommerce when it could not; SkyBiz attempted to induce people to take part by representing that those who joined would later receive money if they introduced new consumers, contingent on those new consumers recruiting further consumers, thereby engaging in referral selling.SkyBiz represented the scheme would be a profitable business for all persons who took part and could be carried on at/ from, their home, when in fact this was not the case, thereby making false or misleading representations and SkyBiz attempted to induce persons to take part by representing that those who joined would later receive payments.
Same as physical sales plus some
Goods to correspond with description
Do the goods delivered correspond with description, picture?
Important to check pictures and descriptions to make sure they match those delivered.
Any tendency to vary should be clearly noted on site so as to be clear to the customer prior to the decision to purchase being made.
Has the customer made known, expressly or impliedly, the purpose to the Vendor?
Ordered by description?
One purpose only?
Advertised as being appropriate for particular purpose?
As people do not see goods before they buy when bought over the Internet,it will be particularly important to point out any defects.
Note Grays auction site. When they sell factory seconds, they list some or all of the faults, a note that they have not been properly assessed, no warranty etc.
Normally there is a presumption at common law, that a person who enters a contract has full capacity to do so. Some exceptions for those under a disability-might include minors (under 18), mentally disable, drunkards, bankrupts.
It is impossible to be sure of identity of Internet Customer.
Consider the situation with Minors:-
A contract made by a minor is “voidable”, at the minor’s option. One exception involves “Necessities”-food, clothing, education or goods/services fit to maintain them in station of life in which they move. Even so, unenforceable if contains harsh, unreasonable terms or price is unreasonable.
Burden of proof with supplier.
What is the situation with “Luxury items”? CDs, computer games?
The minor uses their own debit card
The account would be debited before goods received. Therefore, once, goods received, minor would have to litigate to recover the money. However, if they changed their mind prior to delivery and informed supplier they wished to withdraw, the supplier would not be able to rely on contract terms and conditions. Minor would be entitled to a full refund.
The minor uses adult debit/credit card without permission
Should be treated same as if card stolen. When adult becomes aware, might choose to ratify; in which case contract would be with adult and fully enforceable. If they denied validity, child could be prosecuted for theft. Credit company would most likely seek to recover the money and the supplier would lose out.
The minor might be obliged to pay after receipt of goods
Seller could not enforce contract to recover money. Unless fraud, they could not recover the goods either.
In NSW law has altered CL position and is different to that in the other States.
See the Minors (Property and Contracts Act) 1970.
Contract between Banker and Customer
Students are expected to have a good working knowledge of the terms and conditions of a bank customer contract for electronic banking, credit cards, internet banking, the application of sections 5 and 10 of the Electronic Funds Code of Conduct to them and be able to work through and resolve a problem with such services.
The EFT Code of Conduct is available on the ASIC website. Note that there are calls for submissions on a Review of the EFT Code in January 2007.
Useful summaries and copies of policy guidelines for the Banking Ombudsman are available on their website.
Contract between Banker and Customer
Contract may consist of more than one set of terms and conditions and terms may be implied by other instruments or by Statute.
See: Electronic Banking Conditions of Use / Terms and Conditions
Note that there are frequent variations from time to time for both
Code of Banking Practice (disclosure mostly)
Electronic Funds Transfer Code of Conduct (especially 5 & 10)
ASIC Act-misleading and deceptive conduct
Tort Negligence Misrepresentation
Dispute Resolution Methods
Internal-See Terms&Conditions of Contract and Codes of Conduct
External-See Banking Ombudsman
What information do you have to be given and when?
You are entitled to a copy of the contract (Terms and Conditions).
The account institution must give you the contract at the time of or before you use a new way of accessing your account.
Your account institution must give you certain information about your new card or PIN and include information about fees, restrictions, accounts that can be accessed, how to report loss, theft or unauthorised use, and how to make a complaint.
If the account institution changes the rules, they have to tell you about it at least 20 days before they take effect.
If you deposit, withdraw or transfer money electronically, the account institution must offer you a receipt showing the date of the transaction, the type, accounts and amounts involved and location of the transaction.
What happens if there is an unauthorised transaction on your account?
- There is an obligation to check your statements.
- Contact your account institution as soon as possible.
- There will be some instances where you will be liable for them, and others where you will not be, and some in between; where you will be liable to a limited extent.
When will you get your money back for authorised transactions?
- there is fraudulent or negligent conduct by employees or agents of the account institution;
- a forged, faulty, expired card, PIN or password was used;
- the transaction took place before your received your card, PIN,password;
- a merchant incorrectly debited your account more than once;
- the transaction took place after you told your account institution your card had been stolen or lost, or someone else may know your PIN or password;
- no PIN or password was required to conduct the transaction;
- it is clear you have not contributed to the loss;
- the account institution expressly authorises the conduct.
When you will not get your money back?
Where the account institution can prove: -
- you contributed to the loss by acting fraudulently, or not keeping your PIN or password secret;
- you unreasonably delayed before telling your account institution that your card had been misused, lost or stolen or that someone else might know your PIN or password.
What is the extent of my liability?
Where the account institution can show that the account holder acted fraudulently or unreasonably denied advice, they will be responsible to the extent of the daily transaction limit and the balance of the account.
When will liability be split between the account institution and the customer?
If a PIN or password was needed to perform the unauthorised transaction and it cannot be proven that the customer contributed to the loss, the customer will only be responsible for the lowest of- $150.00;
- the balance of the account; and
- the amount of money that had gone out of the account before the account institution was informed.
Access methods (which include devices and codes) comprise the keys to your account. You and any other user must take reasonable card to ensure that access methods and any record of access methods are not misused, lost or stolen.
These are Guidelines only. They summarise how you can maintain the security of your access methods and help to avoid losses to you or us. Your liability for any loss will be determined in accordance with the Electronic Funds Transfer (EFT) Code of Conduct, the provisions of which are reflected in the relevant Conditions of Use. For full details on how to protect your access methods (which includes a card, PIN and Password) please refer to your copy of the Electronic Banking Terms and Conditions or Credit Cards Conditions of Use, as appropriate.
Devices (for example, a card)
You must make sure that:
Codes (for example, a PIN or password)
Try to memorise your code as soon as you receive it. If you are unable to memorise your code and need to make a record of it, please ensure you have made a reasonable attempt to disguise your code in the record - that is, scramble the details so that no one else is able to work out what your code is. We are not liable to reimburse you if an unauthorised transaction occurs on your account and you or any other user have not made a reasonable attempt to disguise a code or to prevent unauthorised access to the code record.
For example, we will not consider that a reasonable attempt has been made to disguise a code if you or any other user only:
You or any other user must ensure that:
What to do if your access method is misused, lost or stolen
You must tell us as soon as you become aware (even if you are confident that the codes are secure) that the access method used by you or any user is lost or stolen or you suspect that your (or any user’s) code has become known to someone else because it may help us detect fraud and reduce the need for us to conduct a lengthy enquiry because of extended misuse of the account.
Otherwise, you will be liable for the unauthorised transactions that occur on your account or any account linked to the card if it can be shown that you or any user unreasonably delayed telling us of the access method or code loss, theft or misuse.
You can tell us by calling 13 2221 at any time (24 hours a day, 7 days a week) or visiting your nearest branch during business hours)
You must do everything you reasonably can to make sure that other payment instruments such as cheques and passbooks are not misused or lost or stolen. Not only must you take care to guard against theft, you must always ensure that you draw cheques in a way that does not facilitate fraud.
It is important that you tell us as soon as you become aware that a payment instrument has been lost or stolen. You may be liable for the unauthorised transactions that occur on your account if it can be shown that you unreasonably delayed telling us of the loss, theft or misuse of the payment instrument. If you have a cheque facility you should also check your statements for unauthorised transactions and report them to the Bank as soon as possible.
Even if you are confident that the payment instruments are secure, you must tell us as soon as you become aware of the loss or theft of a payment instrument or of any unauthorised access to your account(s).
No liability for:
1. Losses caused by fraudulent, negligent conduct of employees or agents of bank or networks or merchants
2. Losses relating to component of access method that are forged, faulty, expired or cancelled
3. Losses that arise from transactions using device or code prior to issue
4. Double debits
5. Unauthorised transactions occurring after notification
6. Where it is clear that user has not contributed to the loss
See 5.6 for security guidelines
Internal Complaint handling procedures to comply with AS4269-1995 or other as approved by ASIC
Customers to be advised of procedure in T&C
Decision to be based on all relevant established facts and not unsupported inferences
Information to be obtained.
If equipment malfunction complained of, institution must investigate whether one occurred.
Within 21 days, institution to complete investigation and advise user of outcome with reasons or advise customer of need for more time.
Unless exceptional circumstances, investigation completed 45 days. If longer, must inform customer of reasons, provide monthly updates, estimated decision date
Where customer liable, institution to make available copies of documents etc.
Where institution does not observe procedure external dispute resolution body may make institution liable to compensate for effects of decision or delay
Records of complaints to be kept.
NOTE: 28% EFT complaints (30,375) April 99-March 2000 concerned
unauthorised transactions ATM and EFTPOS transactions. Majority resolved in
favour card issuer; most common reason being cardholder negligence with their
COMPLAINT INVESTIGATION / DISPUTE RESOLUTION
INTERNAL SCHEME EFT Code of Conduct s. 10
INTERNAL COMPLAINT PROCEDURE AS4269-1995 or other as approved by ASIC
INFORMATION TO BE OBTAINED FROM USERS
1. Account type, number, type of access method used
2. Name and address of user
3. Other users authorised
4. Whether device signed
5. Whether device lost or stolen or security of codes breached Date and time of loss, theft or security breach
6. Code details
7. How loss occurred (e.g. housebreaking, stolen)
8. Where loss of device occurred e.g. office, home
9. Details of transaction to be investigated
10. Details of any circumstances surrounding the loss, theft, security breach, or reporting or steps taken to ensure security of device or codes which user considers relevant to their liability
11. Details of last valid transaction.
External Dispute Resolution – AS4269-1995 or other as approved by ASIC Formerly via Banking and Financial Services Ombudsman. Since 1 July 2008, via the Financial Ombudsman service -merger of 3 financial industry schemes See www.fos.org.au
In a letter setting out particulars of the complaint,
name address and telephone number,
name of contact person of bank and contact number,
account number, and
copies of documents if about a loan or cheque.
Ombudsman examines letter
Decides whether in a position to consider it
Allocates a case number
And perhaps an investigator (who liases with the bank)
Sends details to bank
After 30 days bank should have provided O with response. If it asks for longer, has to explain
If complainant receives a recommendation, they may accept or reject. If they reject, the O will not be able to assist further.If complainant accepts and bank does too, case resolved.If complainant accepts but bank does not, the O can issue an award which binds the bank.
When seeking to look at likely outcome of complaint, important to consider terms of reference, guidelines and policies.
When considering a complaint about the stopping or dishonouring of bank cheques, O has regard to the guidelines of ABA and Law Society of NSW. Banks will only dishonour bank cheques in limited circumstances:
NOTE a complaint by payee/holder falls outside terms of reference because drawing bank did not provide a banking service to payee.
Payment and collection of cheques
The Drawer receives a “banking service” from the paying bank
The Payee receives a “banking service” from the collecting bank
If the Drawer wishes to complain about the collecting bank, they would not be able to do so to O even though the collecting bank has certain statutory obligations under the Cheques Act, because collecting bank not providing “banking service” to Drawer.
A third party cheque is a cheque deposited for payment into an account operated by someone other than the Payee.
In these circumstances, the collecting bank is providing a “banking service” to the person who presents the cheque for payment.
The O does not, however, have power to investigate a complaint by the Payee or a person otherwise claiming to be the true owner because the collecting bank did not provide a “banking service” them.
Sometimes, banks advise a customer that a cheque has been dishonoured outside 3 day clearing period but still within clearance rules within banks.
Customers may not have been provided with clear information about steps involved in cheque clearance.
May not be aware of notation on account permitting release of uncleared funds or a commercial decision has been made to permit them access to uncleared funds.
In these situations, O may consider whether bank actions are misleading, deceptive.
O takes the view that where uncleared funds have been released to customer because of human or system error, bank is entitled to recover the money paid under mistake except where customer, in reliance on the payment, changed their position in good faith.
Bank must establish it made a mistake of fact or law, it acted on the mistake in releasing the funds and the recipient has been unjustly enriched. Customer must establish they acted in good faith (actual belief in the security of the receipt), they relied on the mistake and they changed their position. A person can still be foolish, but honest.
Customer must act to their detriment on faith of receipt. Mere expenditure not sufficient-must appear they would have acted differently had they not mistakenly believed they were richer than they were.e.g. not enough to simply spend the money on ordinary living expenses. Must be a genuine change of condition. E.g. making a bad investment that would not otherwise have been made, lending money to a third party that is irrecoverable, taking overseas trip that would not otherwise have been taken.
Mr and Mrs S went to Europe for their honeymoon. They intended to stay for 1 month, but after 2 days, their credit card stopped working. They cut short their holiday and returned to Australia.They lodged a dispute with ABIO, claiming that the bank should compensate them for their loss of enjoyment of their holiday.
When ABIO referred the dispute to the bank for its consideration, it offered an ex-gratia payment of $3,000. Mr and Mrs S did not accept this offer, and it was subsequently withdrawn by the bank.InvestigationThe information provided by the bank did not establish why the credit card had stopped working. However, it was the case manager's view that as the bank represents to customers that the particular type of card can be used in most countries, the bank would be potentially liable for losses resulting from the failure of the card to work.
A Hasty Return Cont. AS4269-1995 or other as approved by ASIC
The case manager then investigated whether, according to the Ombudsman's guidelines for assessing non-financial loss, Mr and Mrs S were entitled to any compensation from the bank.
The case manager noted that:
ResolutionThe case manager concluded that Mr and Mrs S acted with extreme haste. As they had not given the bank an opportunity to resolve the matter, and did not take any reasonable steps to minimise the inconvenience they were suffering, the case manager found that it was not reasonable for Mr and Mrs S to expect to be compensated by the bank.
Mr B and Ms C disputed a large number of ATM withdrawals, totalling $27,000, made from their line-of-credit account over a three-year period with their debit cards. They acknowledged receiving monthly statements, but said they were only concerned with the closing balance. They only made a detailed check when they noticed that the home loan was not reducing as quickly as expected. They provided a detailed list of disputed transactions, but conceded that some of the withdrawals would have been their own. They claimed that access to their account could have been gained internally by the bank, or via a hacker on the internet.
The bank declined to make any refund. It said it was not clear why some transactions were disputed and others were not. It also noted that Mr B and Ms C had not disputed any transactions on their credit card account, yet on some days, valid credit card purchases occurred in the same suburb as disputed debit card withdrawals.
Disputed ATM Withdrawals cont. AS4269-1995 or other as approved by ASIC
Facts that came up during the investigation included that: both debit cards were used, but most of the disputed withdrawals were made with Mr B's card; both cards had bank-generated PINs; on two occasions it seemed that disputed ATM withdrawals had been used to make payments to the credit card account; on one occasion a disputed withdrawal was followed by a valid withdrawal only one minute later; and on at least one occasion there was a disputed cash withdrawal using a debit card on the same day that one of the disputants used a credit card to purchase goods in the same shopping centre.
The case manager found nothing to support the contention that access was gained internally by the bank or via an internet hacker. There was also no information to support a possibility that an unauthorised third party had gained access to the cards and PINs. On the weight of information, the case manager concluded that the most probable explanation for the disputed transactions was that they had been made by the disputants themselves. The bank was not asked to compensate the disputants.
Disputant partnership selling giftware. 1 partner in business since inception. 1 bought share from partner who retired. All documentation signed by retired partner.
A customer frequently telephoned over 5 weeks to order gift hampers. To process, disputants keyed customer card number into EFTPOS terminal. Did not swipe card or obtain signature, nor did customer ever come into shop. By keying “off Line”, disputants by-passed electronic system which prevented transactions over $100 limit if cardholder’s account did not have sufficient funds.
Bank attempted to levy chargebacks because transactions not authorised.
Case manager reviewed merchant agreement. Bank entitled to charge back transactions if not valid or not processed in accordance with relevant procedures.
Found that disputants had contravened procedures by processing “off line” at a time when electronic system functioning, failing to seek authorisation and failing to take reasonable care to detect unauthorised use of the card…given the size, frequency and nature of transactions.
Disputants argued they were not bound because neither had signed. However, after review of partnership agreements and partnership legislation, found original partner bound continuing partner and new partner had assumed equal liability.
Finding was that bank could rely on merchant agreement and charge back all of the transactions.
X had line of credit facility, with card access. Had never used the card in 10 years. Stored it with PIN in a drawer. Stolen 24 November, 2004. Unauthorised withdrawals on 24/11-$2,800 and 25/11-$3,000.
Bank debited him for the lot. Reasons: he failed to protect PIN, failed to notify immediately, daily limit correct. He complained to O.
Investigator found he failed to protect PIN with reasonable methods to prevent unauthorised access, AAPT records showed he rang bank 24/11 and spoke for 8 minutes-did notify bank, limit correct-See EFT Code 5. Liable for $2,800 (amount taken before notification) but not $3,000 (after notification).
An illustration of this was where Y sold investment property with settlement planned for 22 Nov. On 11 Nov, his bank informed him that they had lost the deeds. There followed several anxious days of calls and complaints, an application for a new CT, before the old one was found and settlement effected on 22 Nov as planned. Y claimed his expenses and $15,000 punitive damages for all the stress. The bank offered $300 in compensation. The O policy was that a person must be moderately robust in the way they deal with unexpected problems. O does not award punitive damages and does not award compensation for time spent pursuing a complaint.
March 2008 QB3
As well as by direct questions, knowledge of this module can be examined indirectly.
Questions dealing with other topics can involve use of electronic commerce…e.g.for transactions, banking, payment, formation of contract emails, advertisements or conduct leading to formation of agreements or action by one party.