Bread & Kaya 29: Cautionary tales emphasise that your electronic contracts are enforceable Part 2
By Foong Cheng Leong and Mira Marie Wong and Nur Faiqah Nadhra September 21, 2021
- 8 practical tips to ensure that your electronic contracts are enforceable
- Tracking mechanism to track if counterparty accessed terms and conditions
In the second part of our look into how the Malaysian courts have ruled on disputes over contracts and whether hyperlinked contracts or terms are viewed as being as legit as physical copy contracts, we look at one more, lengthy, judgement and then offer readers some useful tips that will prevent heartaches and spiking stress levels should any deal gone sour need to go before a judge for justice.
In MISC Berhad v Cockett Marine Oil (Asia) Pte Ltd  MLJU 563, the plaintiff had invited tenders for the supply of bunkers via email and in the email, the plaintiff had attached their proposal form and terms and conditions (“the Plaintiff’s Terms”).
In the body of the said email under the heading “Important Note”, the plaintiff set out terms and conditions of the purchase attached to the email. The Plaintiff’s Terms stated that the provisions of the agreement shall be subject to, construed, and interpreted in accordance with the laws of Malaysia, and the parties hereto submit to the exclusive jurisdiction of Malaysian courts.
In addition, the Plaintiff’s Terms stated that the Plaintiff’s Terms constitute the entire agreement between the parties and no modification would be effective unless in writing and signed by both parties.
After a series of emails were exchanged between the parties, the tender was awarded to the defendant. The plaintiff contended that the contract was concluded on the Plaintiff’s Terms when the parties agreed on the price. The defendant, on the other hand, contended that the contract was made on its terms as the defendant’s emails carries a hyperlink to the defendant’s website containing the Fuel Supply Terms & Conditions (“the Defendant’s Terms”) at its footer.
The parties made the necessary arrangements to perform the contract to supply bunkers to the plaintiff by the defendant (“Supply Contract”). The supply went into trouble when the bunkers were detained by the Malaysian Maritime Enforcement Agency for potential offences. The plaintiff then terminated the Supply Contract on the grounds that the defendant was in breach of its obligation to deliver the bunkers free of claims and encumbrances.
After the bunkers were released by the Malaysian Maritime Enforcement Agency, the parties’ solicitors had commenced negotiation with reference to the Plaintiff’s Terms. The negotiation failed and the plaintiff initiated proceedings against the defendant in the High Court of Malaysia for damages arising from the defendant's alleged breach of contract. The defendant, however, commenced arbitration proceedings in London and consequently sought a stay order pursuant to section 10 of the Arbitration Act 2005 and challenged the jurisdiction of Malaysia’s High Court. In response, the plaintiff applied for an anti-arbitration injunction on the grounds that the English courts have no jurisdiction over the proceedings based on the terms agreed between both parties in the Supply Contract.
On the issue of whose terms apply, the High Court held that the parties are contracted on the Plaintiff's Terms and therefore, the Malaysian court has jurisdiction to adjudicate the matter. Judicial Commissioner Atan Mustaffa held that the plaintiff had attached their terms during their invitation to tender whereby it clearly states the recipients were invited to tender using the form provided and on the basis that it was the Plaintiff’s Terms that were to apply as found under the heading of “IMPORTANT NOTE”. Although the defendant’s hyperlink to the Defendant’s Terms was stated in the footer of its emails to the plaintiff during negotiation, there was no indication that the defendant’s offer made pursuant to the plaintiff’s invitation was a counter-offer on the Plaintiff’s terms.
In addition, the learned Judicial Commissioner held that the invitation to tender issued by the plaintiff via email was an offer and capable of immediate acceptance and should not be regarded as a mere invitation to treat apart from the specific price made on the forms. The forms included specified time and place of supply, fuel specifications, and terms and conditions therewith, which were already present in the invitation to tender and was not left open for any further discussion.
The learned Judicial Commissioner held that the hyperlink to the Defendant’s Terms was not sufficient to be incorporated into the Supply Contract. There was no step taken by the defendant to draw the attention of the plaintiff to the application of the hyperlink which only appeared in the foot of the defendant’s emails.
The defendant did not make it plain that the Defendant’s Terms were to govern the Supply Contract by giving reasonable notice of the conditions in a visually prominent way. A reference to an inconspicuous hyperlink at the bottom of someone's signature at the footer of the email does not constitute sufficient notice of intention to contract on different terms.
Even though the defendant’s subsequent email referred to additional terms and conditions, such terms and conditions were not incorporated as the contract which was concluded on the Plaintiff’s Terms contained the aforementioned the “entire agreement” and “no modification” clauses. Further, the plaintiff’s acceptance of the delivery of bunkers did not equate to the acceptance of the Defendant’s Terms in writing as the Plaintiff’s Terms express provisions for amendments cannot be overridden by conduct. The defendant did not make it clear that it was seeking to vary the already concluded agreement between the parties by drawing the plaintiff’s attention to the same.
Further, it was held that the defendant’s conduct after the termination of the Supply Contract demonstrated that the defendant knew and accepted that the Supply Contract was on the Plaintiff’s Terms. In this regard, the parties had negotiated a new contract to purchase the bunkers after the bunkers were released. The letter by the plaintiff’s solicitors also made reference to the Plaintiff’s Terms. The defendant’s solicitors’ replies referred specifically to the Plaintiff’s Terms and did not anywhere raise the possibility that the Defendant’s Terms would apply. The learned Judicial Commissioner was of the view that it would be odd if the plaintiff’s invitation to bid on the new agreement was to be transacted on different terms.
Therefore, the Judicial Commissioner held that the defendant failed to demonstrate the existence of an arbitration agreement between the parties and therefore cannot rely on section 10 of the Arbitration Act 2005 to stay the proceedings. As result, the defendant’s application for stay of proceedings (pending arbitration in London) was dismissed, and the Court allowed the plaintiff’s anti-arbitration injunction to restrain the defendant from proceeding in London.
Tips when incorporating hyperlinked terms
Here are some tips that businesses may use when incorporating these hyperlinked terms during the course of negotiations-
- Clarity is the key. You should expressly inform your counterparty that your terms apply and are available on a website. For example, the link is accompanied with a notice stating, “Please click here for our terms and conditions of trade”. Do consider placing your hyperlink at the body of the email. Avoid placing the hyperlink anywhere inconspicuous, such as the footer of the email using very small font size. Also, do ensure that the hyperlink is valid and not broken.
- Insert a date on all your contracts. This is so that you know which version of the terms and conditions you were dealing with in the future.
- Keep your terms and conditions up to date.
- Keep a record of your previous contracts. As disputes may arise any time in the future, you may not know which contract is applicable if you have various versions of the contract. Such previous contracts may be recorded by way of a print screen.
- Employ a tracking mechanism in the system. This could keep track of whether the counterparty had accessed the terms and conditions.
- Verify whether the terms reflect what have been agreed by the parties. In other words, ensure the terms are parallel to what have been discussed or negotiated with the counterparty.
- Check the terms thoroughly. Be extremely attentive to the accuracy and the detail of the terms. Staff should be trained to identify any ambiguous terms that may knock back any rights that you may wish to protect, especially when it involves any onerous provision. The court may hold against you for not examining the provisions stated in the terms and conditions.
- Consider Response Procedure. This is even if you do not have any enquiries regarding the hyperlinked terms provided by the other party. Such response procedure can be in the following manner-
- Open discussion regarding the contract or terms;
- Investigate any problems which may affect your rights;
- Review the terms and decide whether the contracted terms should apply.
Foong Cheng Leong is a lawyer focusing in the areas of Intellectual Property, Information Technology, Franchise, Privacy and Data Protection laws. He is the author of Foong's Malaysia Cyber, Electronic Evidence and Information Technology Law. Mira Marie Wong and Nur Faiqah Nadhra are students from the University of Liverpool and International Islamic University Malaysia respectively. Both of them had commenced internship with the firm of Foong Cheng Leong & Co.