CONTRACT FORMATION AND MISTAKE IN CYBERSPACE — THE SINGAPORE EXPERIENCE
| Published date | 01 December 2005 |
| Author | Andrew PHANG Boon Leong SC LLB (NUS), LLM, SJD (Harvard); Advocate & Solicitor (Singapore); Professor of Law, Singapore Management University. |
| Date | 01 December 2005 |
| Citation | (2005) 17 SAcLJ 361 |
The present article analyses the many important issues that are raised by what is probably the first case on Internet mistake — the Singapore High Court decision of Chwee Kin Keong v Digilandmall.com Pte Ltd[2004] 2 SLR 594. In addition to the law of (especially, unilateral) mistake, issues relating to the formation of a contract will be considered (including the law relating to offer and acceptance with regard to both website advertisements as well as electronic mail transactions, and the weakness of (and, hence, need to reform) the doctrine of consideration).
1 It should not, perhaps, be surprising that what is probably the first case on Internet mistake has emerged from a jurisdiction which, though small, has always endeavoured to place itself at the forefront of information technology.1 The facts in the Singapore High Court decision of Chwee Kin Keong v Digilandmall.com Pte Ltd2 were extremely
straightforward. However, the issues the case raised were rather more complex, covering a spectrum of very important issues in the law of contract — particularly in the context of cyberspace.3 In addition to the law of mistake, this decision also analysed — in some detail — issues relating to offer and acceptance in relation to both websites as well as electronic mail (“e-mail”) transactions (and, albeit more briefly, the doctrine of consideration). Given the real dearth of cases emanating from any jurisdiction, the Digilandmall case is a path-breaking one. Interestingly, the decision also attempts to integrate the various technical analyses with issues of fairness and justice. This is all the more important in an area where the level of technicality can overwhelm what is, in the final analysis, the true (and perhaps only) purpose of the law — the attainment of justice.
2 The present article will first set out the facts in the Digilandmall case. It will then proceed to analyse the various issues raised in the context of formation of contract. The doctrine of unilateral mistake (itself a vitiating factor going to formation) is then considered. A great many issues arise in this particular context, including the importance of the objective test, especially when viewed in the context of the actual facts of the case concerned; the criteria of fundamentality and knowledge; the possible application of the alternative doctrine of unconscionability; as well as the more general (yet no less important) issues raised with respect to the relationship between common law and equity. I will then proceed to consider, briefly, a problem that has bedevilled the law of mistake and which is raised, once again, by the present case: To what extent is the law of mistake viable if the technique of construction of the contract can be utilised instead? The article will then conclude with a consideration of how the court integrates both theory and practice in order to arrive at a holistic result that is both just and fair.
3 It should be noted that since this article was completed, an appeal was heard. However, the judgment of V K Rajah JC (as he then was) contains (as we shall see) so much perceptive analysis that it deserves an extended treatment in its own right.
4 Let us now proceed to set out, in brief, the facts of the Digilandmall case itself.
5 In summary, the facts of the Digilandmall case were very straightforward. The six plaintiffs, who were friends, placed orders over the Internet for a total of 1,606 Hewlett Packard commercial laser printers on the defendant’s (seller’s) websites — an astonishing number of machines as none of the plaintiffs was apparently in the business of selling such a product. Also significant was the fact that these orders were placed at a price of $66 each, whereas the actual price was $3,854 each. In summary, for a total outlay of $105,996, the plaintiffs had procured laser printers worth a total market value of $6,189,524. This great disparity in price was due to the fact that the defendant had made a mistake in posting the price on its websites on which the printers were advertised,4 which websites operated on an automated system, with confirmation notes being despatched to the plaintiffs within a few minutes. Not surprisingly, on learning of the error, the defendant removed the advertisement forthwith from its websites. It should also be noted that 778 others had placed similar orders on the defendant’s websites: significantly, perhaps, the total number of printers ordered by the 784 persons was 4,086 (of which, as we have just noted, 1,606 were by the six plaintiffs5). The defendant also informed all who had placed these orders that there had been an unfortunate error and that it would therefore not be meeting any of the orders.
6 Not surprisingly, in addition to arguing that there had been no concluded contracts, the defendant argued that it had made a genuine (here, unilateral) mistake which was known (or ought to have been known) to the plaintiffs and that it was therefore not liable to the plaintiffs. The plaintiffs, on the other hand, argued that they had not been aware of the defendant’s mistake when they placed their orders and that they had believed that the defendant’s offer was genuine. They also argued that if the contracts concerned were not enforced because of the application of the doctrine of mistake, undesirable uncertainty would prevail in commercial transactions, especially over the Internet.
7 The learned judge, V K Rajah JC (as he then was), reviewed the facts and evidence with great care and thoroughness.6 This underscores the vital importance of the facts — especially in so far as the law relating to unilateral mistake is concerned. Indeed, we shall “revisit” the relevant facts in more detail later when we consider the court’s consideration of this particular issue.7
8 In summary, Rajah JC held that although there had been concluded contracts between the plaintiffs and the defendant (as ascertained on an objective basis),8 these contracts had nevertheless been vitiated by the doctrine of unilateral mistake. More significantly, and as already mentioned, the learned judge considered (in the process) a number of difficult — even controversial — issues in the law relating to contract formation as well as contractual mistake: all of which will be considered and analysed, in turn, in the present article.
9 There has been not a bit of uncertainty as to the rules relating to formation of contracts in cyberspace. Leaving aside conflict of laws issues, which are both complex and which merit articles or even individual monographs of their own,9 it is still less than clear whether or not the basic rules relating, in the main, to offer and acceptance apply in the context of cyberspace. The present writer has, in a joint essay, suggested that, even on a general level, the basic principles of contract law would continue — in the main, at least — to apply and that the main difference would lie in the sphere of the application of such established principles.10 This observation now has the support of Rajah JC in the present case, where the learned judge stated that:11
There is no real conundrum as to whether contractual principles apply to Internet contracts. Basic principles of contract law continue to prevail in contracts made on the Internet.
10 The learned judge nevertheless proceeded wisely to observe further thus:12
However, not all principles will or can apply in the same manner that they apply to traditional paper-based and oral contracts. It is important not to force into a Procrustean bed principles that have to be modified or discarded when considering novel aspects of the Internet.
This last observation, it is suggested, relates to the sphere of application and, once again, supports the basic proposition set out above.13
11 Rajah JC also confirmed another important point — that whilst the Singapore Electronic Transactions Act14“places Internet contractual dealings on a firmer footing”,15 the Act itself “is essentially permissive”.16 As the present writer has pointed out in a joint article, this is due to the
fact that the Act is based on the UNCITRAL Model Law which attempts to interfere as little as possible with the domestic contract law of countries which have adopted it — and (perhaps more importantly) possibly encourages countries which might be open to adopting it to do so.17 This, however, raises the question as to whether or not such an Act is less than helpful when crucial issues of legal substance arise.18 It is, however, also acknowledged that there is a tension that arises naturally between the need to adopt international legal norms whilst safeguarding the domestic (here, contract) law that has hitherto worked well. There is, of course, no tension where there is a coincidence of interests, but this, unfortunately, will not always be the case. I would suggest that there might be scope for an approach that nevertheless does not lapse into unacceptable compromise. This would involve selecting those areas of the law of contract that are most in need of statutory clarification and then proceeding to effect the necessary amendments to the Electronic Transactions Act. This is no easy task, but it would appear that some clarification with respect to an issue that is crucial in the context of Internet contracts relates to the formation of a contract. This brings naturally to mind not only the doctrines of offer and acceptance, consideration and intention to create legal relations, but also the doctrine of mistake as well, since the latter also concerns the issue of the formation of contract. Significantly, all these areas (barring intention to create legal relations) were involved in the present case. If, however, the area of formation of contract is considered to be too vast an area for substantive reform, more specific...
To continue reading
Request your trial