1. Contract law issues (1)

In relation to any online gambling service, the parties must adequately identify themselves to one another, identify the terms and conditions for use of the service and select the jurisdiction of the online contract.

This needs to be read in context of the prohibition in Australia on the provision of prohibited interactive gambling services imposed by the Interactive Gambling Act 2001 and the interplay with State or Territory legislation.

Section 69 of the Interactive Gambling Act 2001 provides that the Act is not intended to exclude or limit the operation of a law of a State or Territory to the extent that the law is capable of operating concurrently with the Act. This means that both the Act and the relevant State or Territory legislation needs to be examined, however, it is important to be aware that:

* if exempt under the Act it may not necessarily be exempt under a State or Territory law; and

* it may be prohibited under the Act even if licensed or authorised under a State or Territory law.

In light of the Act, State or Territory specific internet gaming legislation continues to be of significance but primarily only in so far as it regulates the licensing of Australian-based interactive gaming providers in the provision of interactive gambling services off-shore.

See Online Gambling fact sheet.

2. Age

The Service Provider (SP) should require the player to disclose personal information to confirm the player complies with the SPs terms and conditions of use and to assist the SP in determining the physical location of the player. The SP should guarantee the player it will not misuse the information and will comply with any legislation concerning privacy of the player.

3. Funding

The SP should, in relation to payment card information given by a player:

(a) treat it as sensitive information and state its privacy policy in the terms and conditions of website use;

(b) secure personal payment card information as far as reasonably practicable (eg by encryption);

(c) validate player information by confirming with the issuer of the payment card there is available credit which can be used by the SP;

(d) confirm the payment card issuer will honour the payment if the player places losing bets without winning; and

(e) arrange for payment of winnings direct to the player whose identity has been verified.

4. External factors

In the online world, the SP should identify the extent to which the following external factors impact upon the SPs contractual relations with a player:

(a) any relevant government legislation (eg privacy, gaming, trade practices legislation concerning unconscionable contracts or dealings, currency laws may require off line verification of certain payments deposited into the account of one party by another party). This is particularly of significance in regards to the provision of prohibited interactive gambling services in Australia;

(b) the SP's ISP contract and ISP browser (eg security, operation standards);

(c) the terms of use of the player's payment card; and

(d) the third party payment delivery system used (eg postal service, telegraphic transfer, bank cheque, digital cash, smart card).

5.Reasonable Diligence

The SP should exercise, at least, reasonable diligence in ensuring that players in those jurisdictions where interactive gambling is prohibited are prevented from using the service. According to section 15(3) of the Interactive Gambling Act 2001 the following matters are to be taken into account when ascertaining whether the SP has exercised reasonable diligence:

(a) whether prospective customers were informed that Australian law prohibits the provision of the service to customers who are physically present in Australia;

(b) whether customers were required to enter into contracts that were subject to an express condition that the customer was not to use the service if the customer was physically present in Australia;

(c) whether the person required customers to provide personal details and, if so, whether those details suggested that the customer was not physically present in Australia;

(d) whether the person has network data that indicates that customers were physically present outside Australia:
(i) when the relevant customer account was opened; and
(ii)throughout the period when the service was provided to the customer; and

(e) any other relevant matters.

6. Law of the contract and enforcement

Generally, Australian courts will give effect to an appropriate express choice of law provision in a contract (eg This contract is governed by the law of NSW).

Certain trade practices legislation protecting consumers cannot be contracted out of and may apply regardless of a choice of law provision (see Consumer Protection fact sheet).

Where there is no express choice of law provision, the contract will generally be interpreted in accordance with the law it has the closest connection to. This may involve an analysis of the nature, subject matter and formation of the contract.

In common law countries, gaming contracts are generally invalid as being contrary to public policy unless permitted by law. Even if a licence has been granted to an SP in one jurisdiction, difficulties may exist in recovering the proceeds of bets from parties resident in other jurisdictions. Payment in advance may not affect this outcome in jurisdictions where the player is not required to honour the payment under the relevant local law.

A common licence condition imposed on a gambling SP is to comply with all relevant laws. If a prosecution is brought against the SP in one jurisdiction, it is unclear what effect this has on a licence with the above condition granted in another jurisdiction.

7. Consumer protection

An Australian-based online gambling site should:

(a) use software which prevents participation from persons in unauthorised jurisdictions (including Australia) to avoid potential legal action arising under the gambling laws in the unauthorised jurisdiction;

(b) subject to the prohibitions on the advertising of interactive gambling services, in all advertisements on the internet promoting the site, expressly state the jurisdiction the site is made available to and those it is not (eg the service is not available to persons inside Australia);

(c) establish relationships with providers of payment services (eg credit card, smart card or digital cash companies) and check the standard terms of payment card contracts to validate information provided by a player during registration;

(d) as part of the registration process, require the player to identify whether or not the terms of his or her credit card (or other payment system) prohibit or permit the use of the payment card for online gambling; and

(e) have an express condition that the player is not to use the service if the player is physically present in a country where online gambling is prohibited (eg Australia), and

(f) establish systems during the registration process requiring the player to read and understand the terms and conditions of use and acknowledge agreement or disagreement by separate active clicks.


Other relevant Articles on this site:
Best practice model
Terms and conditions of website
Digital signatures
Secure electronic transactions
Overseas transactions
Trade practices and consumer protection
Contract

Other relevant Fact Sheets:
Consumer Protection
Electronic Payment Systems
Jurisdiction
Keeping Electronic Records
Misleading and Deceptive Conduct
Online Contracts
Online Gambling
Secure Electronic Transactions
Taxation 

End Notes
(1) Material based on the paper presented to the Law Society of NSW by N Santomaggio,"Cyberbets and E bids: The law relating to on-line gambling and on-line auctions in Australia" (2000) CLE Seminar.