Forming a contract onlineWhen someone enters into an ecommerce contract, there’s no direct communication between the customer and the retailer. The whole process is automated. This is a crucial difference compared to other forms of electronic contract, such as when an agreement is reached between two people exchanging emails. Without direct communication between the parties, the online retailer must take extra care to ensure that the purchaser has all the information they need to make their buying decision. For example, the retailer must give a full description of the products or services being sold, what forms of payment are accepted and if there are any delivery restrictions. The retailer must also be very clear about the total price the customer has to pay, including any taxes and delivery charges. If the customer is entering into an ongoing contract, for example subscribing to a service, they need to know the length of the minimum term of the agreement and what they have to do to terminate it. Providing all of this information (and more) is an essential part of the contract formation process and starts well before the customer places their order. When the product or service has been properly described and the customer has all the information they need, they still need to decide if the terms on which you are offering them for sale are acceptable. This is because online terms and conditions are non-negotiable. The customer must accept them if they want to make the purchase. To help them decide, the customer must have every opportunity to read the online terms and conditions before they make their purchase. The best way to do this is to provide a clear link to the terms and conditions from the main website pages, and then another link on the order page. (Some people just have a link on the order page.) When the purchaser clicks this link, it should take them directly to the terms and conditions. If they choose to, they should be able to download and print them. Take a look back over some of David’s contracts-related articles:
- How to ensure your electronic contracts are legally binding
- Five essential business contracts every small company needs?
- Does a handshake form a legally binding contract?
- How to resolve common contractual problems
But is this good enough?After all, how many people actually read them? Just think of your own personal experiences when shopping online. You see the product, the price, enter your credit card details and then tick to accept the terms and conditions without giving them a second thought. Some people take the view that retailers should do more to ensure customers read the terms and conditions by making them scroll all the way through to the bottom. However, that’s likely to be off-putting for many customers leading to lost sales for the retailer. My view is that so long as you have done all you can to give people the opportunity to read the terms and conditions before ordering, you should be fine. Some retailers have their system set up so that the terms and conditions are emailed to their customers after making a purchase. Although this is helpful as a record of the contract, from a legal perspective, it’s too late to form a contract because by the time the email arrives, the contract has already been formed.
The terms of the contractEven when proper contract formation procedures are in place, to form a legally binding agreement, all the essential elements you find in every other contract must be there. There must be an offer, acceptance of that offer, consideration, an intention to be legally bound and sufficient clarity over the terms agreed. The trouble is, online retailers often think that having terms and conditions is just a formality, so they put the minimum amount of thought and effort into preparing them. This isnt surprising, given what we have said above about customers rarely reading them. So, in an attempt to save time and money, they copy the terms and conditions of another business. This is a false economy and extremely risky because the law is constantly changing. You have no idea how up to date the terms and conditions are or even whether they were properly prepared in the first place. Also, the terms and conditions must make commercial sense and reflect how you do business. If you have copied them, they may bear no resemblance to the way you work. You may have, for example, a completely different returns policy or offer different guarantees or warranties with your products but are then bound to someone else’s. If you don’t honour their terms, you will be in breach of contract. So, as we can see, if you want to have legally binding online terms and conditions there’s much more to it than simply having someone tick a box to say I agree. If you’re an online retailer and have any questions about your terms and conditions or anything else ecommerce related, please feel free to email me at email@example.com and Ill happily answer them for you. Deal or no deal: What happens when terms and conditions are only signed by one party?
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