Selling online: structuring
your e-commerce process
This guide is based on UK law. It was last updated in
January 2005.
Introduction
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:
- developing and correctly incorporating the terms and
conditions;
- actively applying the terms and conditions; and
- concluding the contract.
The small print
There are different types of terms and conditions that may
appear on a site. An e-commerce site should obviously display terms
and conditions of sale, and this article will concentrate on these.
There are, however, many other places where terms and conditions
are appropriate. For instance even brochureware sites should have
some basic terms of use, making sure, for example, that the user of
a site knows that all material is protected by copyright [(for
further information see our guide to Copyright)]. Equally, the site may have some
special areas where extra conditions will be appropriate – for
example, dealing with content hosted on message boards [(see our
guide to Online Defamation)].
Terms and Conditions of sale
There are a few things that should be included in every set of
terms and conditions of sale:
- make it clear who is selling the product, together with the
geographical and email address;
- describe clearly what the customer is getting and what it will
cost, including all taxes and delivery costs;
- identify the arrangements for delivery of the product; and
- point out that the consumer has a seven working day period
during which he can return the product for a full refund (this may
not apply in all circumstances, and indeed you may wish to provide
a longer period, but for most sales this is the legal minimum) [For
more information on cancellation periods see our article on the
Distance Selling Regs].
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
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".
This is a good place to include more than just the terms and
conditions of sale: you can also include the web site's copyright
notice and disclaimer, together with links to other pages that may
be of interest, such as the privacy policy. If you update your
terms and conditions then you should use this page to display a
copy of all previous versions, giving the dates during which they
were in force.
The active Ts&Cs page
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.
The e-commerce process
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.
The active Ts&Cs page as an optional page
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.
Concluding the contract
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.
