E-Commerce Basics

Conducting business and forming a contract online brings into play many of the same requirements and issues that apply to any other contract but as the process by which the contract is concluded is often automated and always takes place without the physical presence of the parties are additional factors which require special consideration.

Examples of issues to consider when conducting business online:

Who is making the offer?

Once a contract is concluded the parties thereto are usually obliged to perform their obligations thereunder or potentially face a claim for damages arising as a result of the breach of contract.

In contracts relating to, for example, the sale of goods that are concluded online this would mean that if the contract is concluded immediately when an order was placed (i.e. the end user accepts the offer made by the vendor) via an automated system even if the price was incorrect or if on further inspection adequate stock was not available, the vendor would be obliged to deliver the goods at the price specified or face being in breach of contract.

An approach that is often adopted to avoid such potential problems is to structure the terms and conditions of the website and the way that the contract is concluded so that it is the customer who makes an offer to buy the goods (which the vendor should acknowledge to comply with the Distance Selling Regulations (see below)) and it is for the vendor to subsequently accept or reject that offer to form a binding contract after they have had the opportunity to review the order and confirm that the relevant stock is held.

What are the terms of a contract concluded online?

Any website used to conduct business should have carefully considered terms and conditions displayed. Such terms should contain similar provisions to any other commercial contract regarding e.g. limitation of liability.

When a contract is concluded on paper the fact that the parties have agreed the terms that are set out on the paper is shown by them signing the document. In an online transaction in order to ensure that the terms will be enforceable in the event of any dispute, a tick box or some other similar mechanism should be incorporated into the ordering process so that the customer cannot at a later date say that they were not aware of the terms on which they are offering to contract.

What terms might be implied into the contract?

In addition to the terms that may in implied into other commercial contracts under, for example, the Sale of Goods Act 1979, there is other legislation that is particularly relevant to the online environment and which in most instances cannot be excluded by the terms of a contract:

Are you selling goods or services online or providing a 'venue' that allows other to do?

When operating a website through which customers will be buying good or services from third parties it is vital that the various contracts that are being entered into are clearly identified. A good example to illustrate this point is to consider an auction website.

In this situation operator of the website should enter into properly prepared terms and conditions with both the party offering items for sale and those proposing to buy such items. Such terms should make it clear that the website operator is a service provider that makes available a venue for the other parties to conclude a contract for the sale of goods, but that the operator of the website is not actually part of the supply chain for the sale of goods. Failure to do so could result in problems for the website operator in the event that a dispute about any goods purchased via the website were to arise.

Are you selling goods or services to people outside the United Kingdom?

Just as a domestic consumer is entitled to rely on the provisions of, for example, the Distance Selling Regulations when entering into a contract online (and bearing in mind that these terms cannot usually be excluded by contract), consumers in other jurisdictions may have rights implied by their local laws which cannot be excluded.

Accordingly, if you are planning to transact business with customers in other jurisdictions you may want to consider seeking advice from a local law firm regarding what, if any, terms might be implied into your contract with such overseas customers.

Website terms and conditions

In addition to setting out the terms on which the parties are contracting which are in the large part very similar to those that would be contained in a paper based contract (and in doing so providing for such things as limits on liability and disclaimers in relation to the information presented on the website) carefully prepared website terms and conditions can help an organisation to comply with the requirements regarding provision of information imposed by the E-Commerce Regulations and the Distance Selling Regulations.

Even when if no money is collected from visitors to a site and no user registration is required to view information presented via the website it is sensible to at least display terms and conditions to make clear quite what licence is being granted to use the materials displayed on the site, to disclaim liability for any actions taken pursuant to information presented via the website and also to present the website owners position on issues such as linking.

The Internet & Data Protection