Out-Law Guide 8 min. read
30 Mar 2005, 3:23 pm
More people than ever are purchasing goods and services online. As an online business you have to ensure that you protect yourself and your consumers. The following guide contains some 'recommended' best practice techniques to ensure that your sales process is legally correct and contractually enforceable. This guide applies to sales to individual consumers rather than to other businesses, although many of the principles will apply to both. (For more information on the Regulations that apply to online selling and the formation of your online contract, see our guide: Selling on-line: the main regulations.)
An important part of the sales process is to make sure that the contract which is formed with the consumer is both legally correct and also affords the retailer the maximum protection. There are various ways in which the contracting process can be structured to be legally correct, and it is important to balance absolute best practice and a more commercial approach which is still legally correct. Equally, it is remarkably easy to structure the process in a way which is legally incorrect, and which exposes the company to more risk than is necessary.
There are three stages to the contracting process which it is important to make sure are in place:
There are a few things that should be included in every set of terms and conditions of sale:
The terms and conditions of sale are very important, and will vary for every retailer. It is important that the terms and conditions are properly drafted, as poorly drafted terms and conditions will expose the retailer to unnecessary risk.
Once your terms and conditions of sale are drafted we recommend that they appear on two different pages. One page forms an integral part of the e-commerce process; the other exists as a point of reference, to reassure the customer. We will call these The Active Ts&Cs Page and The Inactive Ts&Cs Page. If you have any unusual, or especially onerous terms and conditions, or terms which you are especially keen to make sure are enforceable, we would recommend that, in addition to the approach below you include details of these terms as a part of the main text on web page.
The Inactive Ts&Cs Page will contain a full copy of the terms and conditions, and should be accessible from a link available in the navigation section of every page of the site. At the very least it should be accessible as a link from the homepage. Providing The Inactive Ts&Cs Page is not necessarily required by UK law, but it is good practice. It can reinforce a customer's good impression of your site, and it helps fulfil your obligations under the e-commerce regulations to make the terms available to the buyer "in a way that allows him to store and reproduce them".
The Active Ts&Cs Page will contain only the terms and conditions of sale, and appear during the e-commerce process. What sets it apart from The Inactive Ts&Cs Page is that you don't just rely on the customer finding it. Instead, you make every effort to maximise the chances that the customer sees and reads The Active Ts&Cs Page during the transaction. From a contract law point of view you can only rely on your terms and conditions if you can show that they have been properly incorporated into the contract. This is why simply having an Inactive Ts&Cs Page will not be enough – you should not rely on the fact that the customer can find the terms themselves, you must direct the customer towards them.
The Active Ts&Cs Page should be a page of its own that can be saved or printed by the customer, rather than a pop-up or scrolling window. And make sure the page can be printed without losing words off the end of the page.
During the e-commerce process, the customer may need to submit certain personal information, such as his email address and his delivery details, so remember to include a data protection notice. Do not try to cut corners by combining your data protection notice with the terms and conditions of sale.
Once the customer has selected the goods / services he wishes to purchase, and before he submits his payment details, best practice is for him then to be directed to a page displaying the terms and conditions. By making the customer scroll through the terms and conditions as a compulsory stage of the transaction, and making them click an "Accept" button before they can continue, you maximise the chances that your terms and conditions have been properly incorporated, and that you will be able to rely on them.
However, this is not the most consumer friendly approach, and in some situations the customer will find it peculiar to be presented with a screen of 'small print' in the middle of what was an otherwise normal shopping experience. Therefore a number of on-line retailers adopt a second-best approach of making The Active Ts&Cs Page an optional page for the customer.
By making The Active Ts&Cs Page an optional page you will reduce the number of pages the customer goes through, particularly since the display of the compulsory data protection notice may be required at this point in a customer's visit. However, this approach may not be appropriate for all contract models, and if you have any particular concerns about incorporating your terms and conditions we would recommend that you make The Active Ts&Cs Page compulsory.
To make the page optional, you should include a link on the form on which the customer enters his credit card details. At the foot of this we recommend the following structure: a clear link to the terms and conditions; a warning urging the customer to read and understand the terms and conditions; a check box to indicate that the customer accepts the terms and conditions, which the customer must tick to be able to proceed; and a choice of buttons to proceed or cancel the order.
Your terms and conditions of sale must tell customers how and when the contract is formed. This is where the e-commerce regulations can be used to the seller's advantage. It is possible to sell on-line and take payment by credit card without actually binding the seller into contract at this stage. The solution is to provide that the customer is making an offer on the site and that the contract will be formed only if the customer's order is accepted and that taking payment from the customer's credit card does not indicate acceptance.
On-line merchant accounts provide for making refunds to a customer's credit card. Therefore, the terms should explain that, while the customer's card may be debited before the contract is formed, if the customer's order is ultimately rejected, a refund will be made immediately. Your on-line merchant account may also let you postpone the point at which the card is charged. Therefore, you may be able to synchronise the acceptance of the order and card charging – avoiding the need for refunding a card in the event that an order is rejected.
It is wise to also include a term like the following:
"By completing and submitting the electronic order form you are making an offer to purchase goods which, if accepted by us, will result in a binding contract."
The words, "if accepted by us," are very important. They help to make it clear to the consumer that you are not automatically accepting his offer at this stage. Because of the importance of this statement we would recommend that you go further than just including it in the terms and conditions. Especially where you use an optional Active Ts&Cs Page you should include this statement on the page where the customer submits their payment details – ideally it should be included just above the "Accept" button.
Once the customer's card details are validated provide him with an acknowledgement page and send an acknowledgement email. This should not confirm a contract; it should instead confirm that the order has been received and that the order is being "processed". It is helpful to give the customer an order number at this stage so that he can chase-up any problems. It is good practice, though not legally required, to ask the customer to click a button on a confirmation page to indicate that he has read the confirmation, and also to take them out of the secure web page – e.g. a "Continue" button, linking to the homepage of the site.
Once you receive the order and check that you can fulfil it you should dispatch the goods or provide the services. At this point it would be a good idea to send the customer an email advising them that their order has been accepted, and their goods have been sent. If however you discover an error with the proposed contract, for instance, a typo or technical error mislabelled an item costing £200 at £2 and your customer has ordered 500 of them, you could politely – and legally – refuse the order.