Older Uniform Acts

Providing for Autonomous Electronic Devices in the Electronic Commerce Act 1999

II Doctrinal Difficulties Associated with Automated Electronic Commerce

Only Legal Persons Can Contract

In order for electronic commerce to skyrocket in the manner predicted by its enthusiasts, human and corporate traders will need to be sure that automated transactions are perceived and understood as contractual in nature. As Fridman and others have pointed out,

Since a contract is an agreement between two or more persons, and involves the idea of consent, only those who have the power to give consent can contract.64

Inextricably tied to the notion of contractual consent is the idea that the consenting person has signified an intention to be bound by the terms of the agreement. As Fridman puts it, “[a] contract can only arise if there is the animus contrahendi between the parties. Without the expressed or implicit intention that a contract should emerge as a result of the language or conduct of the alleged parties, no contractual obligations can be said to exist and be capable of enforcement. Hence the offer that is made must be an offer to contract involving the creation of legal relations.”65

Although the law has extended the scope of juristic personality so as to create limited rights and obligations for human artifacts such as corporations, electronic devices are not legal persons. Since they are not persons, electronic devices do not have the legal power to give consent. Nor can such devices be said in any meaningful legal sense to form the necessary animus contrahendi – the intention to create legal relations. Of course, this does not preclude the possibility that electronic devices might play an instrumental role in the formation of contracts. For example, an electronic device might be used to offer for sale a number of products ranging from candy bars or soda pop to drivers’ licenses and insurance policies. Contracts that arise from such transactions are not generally analyzed as contracts between a machine and the person who plugs in the coins, bills or tokens. In these instances, the contractual offer is understood as a unilateral offer made by the human or corporate owner or operator of that machine. The nature of the offer is the sale of a product at a stipulated price and the offer is thought to be accepted by the conduct of the individual who responds to it by depositing the stipulated quid pro quo into the machine. Although it is true that the human or corporate offeror will not oversee or even be aware of particular transactions when utilizing machines of this sort, it is also true that the offeror will always be said to have intended and consented to the precise terms of the contract and the quantity of the product available for sale (subject, of course, to any malfunction or misuse), since machines of this sort are not sufficiently intelligent or autonomous to alter the terms or generate additional product without further human interaction.

Thus what distinguishes the electronic transactions contemplated above in Part I from a purchase through a vending machine is that the agreements of tomorrow will be generated by the machines, not merely through them. It is only when electronic devices become sufficiently animated that doctrinal difficulties begin to arise. Once electronic devices are able to initiate contractual offers autonomously, there will be situations where it will be disingenuous and perhaps even conceptually disadvantageous to characterize those transactions as unilateral offers made by the human users of those devices. Once electronic devices are no longer mere conduits for commercial transactions, it will become necessary to determine how best to treat those devices. Although some academics have offered the radical suggestion that the electronic devices of the future be included among the category of legal persons – a suggestion which will be subject to investigation in Part III below – it is clear that electronic devices do not currently enjoy the status attributed to legal persons. Consequently, an autonomous electronic device cannot be said to be a party to a contract.

Contractual Capacity

Even if autonomous electronic devices somehow achieved the status of person in law, it is not clear that every such device would be capable of entering into a contract. As stated by Cheshire and Fifoot, “[i]f all of the elements of contract exist between two parties, the agreement may nevertheless lack legal effect if one or both of the parties lack capacity to contract.”66 In other words, prior to giving legal effect to their agreements, the common law has traditionally required of all persons that they are capable of demonstrating a certain degree of intellectual capacity. To take a typical example, there exists a well established distinction in law between the legal treatment of agreements entered into by persons who are minors and agreements entered into by those said to be of a mature age. This distinction has had the effect of limiting the extent to which minors can enter into contracts. A similar rule exists to limit the contractual capacity for those are said not to be of sound mind. As Fridman puts it, “[o]nce a person has been found by a court to be wanting in intellect, then it would seem to follow that such a person lacks contractual capacity. He or she is not able to consent.”67

Before a determination can be made as to whether it is possible for an autonomous electronic device to have the legal capacity to contract, it is important to recognize that the doctrine of contractual capacity serves a function beyond the determination of who is in fact able to consent to an agreement. As Waddams has made clear, one of the central reasons underlying the capacity doctrine is the aim of protecting weaker parties during the bargaining process.68 According to Waddams, “[f]rom the basic desire to protect minors from exploitation arose a general rule that minors’ contracts were voidable at the minor’s option.”69 If Waddams is right to link the issue of contractual capacity to the general desire to protect weaker parties when entering into agreements, this adds a wrinkle to the question about whether an electronic device should be said to have the capacity to contract.70 In any event, even the most intelligent and autonomous of the electronic devices currently utilized in electronic commerce would seem to lack the capacity to contract.

Consensus Ad Idem

The traditional view of contract includes not only an exchange of promises but also a mutual concordance between the parties as to the nature and scope of the rights and obligations that coincide with that exchange of promises.71 That is, the parties must be said to have formed an agreement with each other. The metaphor which has taken hold throughout the common law to describe this phenomenon is the idea of a consensus ad idem – a meeting of the minds. Historically, this metaphor was based on the paradigm of face-to-face interactions between two human beings. Bearing in mind this historical point, it is not difficult to see that automated transactions do not easily fit within this conceptual framework. In what meaningful sense could it be said that electronic devices can exchange promises, or that two devices can reach a meeting of the minds?

It is essential to recognize that the notion of a consensus ad idem does not merely signify the mutual concordance between two parties. The agreement requirement also underscores the voluntary aspect of contract. After all, the traditional understanding of what makes such an exchange of promises special, what makes such an agreement binding both in law and in moral theory, is the underlying idea that the parties to the agreement have each exercised freewill; each person freely chose to make representations about the future that created both trust and reliance in the mind of the other and each person thereby assumed obligations not otherwise existent in law.72 Aside from a few fairly radical computer scientists,73 most of us do not presently conceive of electronic devices as having freewill or as capable of making voluntary undertakings meant to limit future freedom of action.

One potential response to the claim that computers are unable to act voluntarily and are therefore unable to reach a meeting of the minds is that the common law has for centuries been premised on an objective theory of contract. As long ago as 1477, the courts recognized that “the intent of a man cannot be tried, for the Devil himself knows not the intent of a man.”74 As Lord Eldon later realized, it must therefore follow that the proper role of the courts in determining the parties’ private obligations is not “to see that both parties really meant the same precise thing, but only that both gave their assent to that proposition which, be it what it may, de facto arises out of the terms of their correspondence.”75 Perhaps the most famous articulation of the objective theory of contract in Anglo-Canadian law was put forth by Blackburn J. in Smith v. Hughes:

If whatever a man’s real intention may be, he so conducts himself that a reasonable man would believe that he was assenting to the terms proposed by the other party, and that the other party upon that belief enters into a contract with him, the man thus conducting himself would be equally bound as if he had intended to agree to the other party’s terms.76

As Atiyah has argued, this approach can be understood as a manifestation of the reliance theory of contract.77 To construct the intentions of one person by determining the reasonable beliefs of another, the courts have seemed to be less concerned with the fact that someone freely and intentionally chose to bind himself to a particular course of action than with the fact that the other party reasonably relied on the perception that he was conducting himself as such.

If Atiyah is right about this, then it might appear as though the actual internal workings of the electronic device and the question about whether such a device could ever form an actual intent to enter into an agreement (rather than merely communicating a representation that there exists mutual concordance) is unimportant or irrelevant. After all, so long as the relevant legal determination is simply whether a reasonable man would believe that the electronic device was assenting to the terms proposed, all that would seem to matter is the external appearance of an agreement. This might be correct in so far as the transaction is understood as an agreement that is merely mediated by one or more electronic devices. In such case, whatever his real intention may be, the party employing the electronic device would be conducting himself in such a way that a reasonable man would believe that he was assenting to the terms proposed by the other party.

But the above analysis is incorrect in circumstances where an offer can be said to be initiated by the electronic device autonomously, i.e., in a manner unknown or unpredicted by the party employing the electronic device. Here it cannot be said that the party employing the electronic device has conducted himself such that a reasonable person would believe that he was assenting to the terms proposed by the other party. As odd as it may seem to us – given our primitive state of agent technology – there will come a time when an electronic device will appear to conduct itself such that a reasonable person would believe that the device was assenting to the terms proposed by the other party. Still, despite the fact that it is easy to imagine a computer-generated representation causing reliance in the mind of some unknowing human recipient of that communication, it remains difficult to grasp how an electronic device, absent of any human interaction, might be said to create undertakings and thereby bind itself to a representation made about the future in the same way that people bind themselves when making promises. This yields an important point. It is crucial to remember that the objective theory of contract will not allow autonomous electronic devices to escape doctrinal difficulties: sophisticated technologies notwithstanding, electronic devices are not legal persons; they lack the intellectual capacity to intend legal relations and cannot meaningfully be said to enter into agreements voluntarily.78

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