Every day, retail websites sell products and services to consumers over the internet, ranging from household goods to financial services.
With this in mind, similar to a bricks and mortar outlet, an online store will need to ensure it has the appropriate contracts in place to enforce these sales transactions.
What are online contracts?
Contracts are agreements between two entities (a person or a company) when something valuable is being exchanged, such as money, food or services.
Before customers buy your products or services online, you need to ensure they have agreed to a contract with transparent and understandable terms and conditions. It should be accessible, clearly positioned on your website and easy to download.
Can retail websites enforce online contracts?
In the UK, online contracts are legal and enforceable provided the following conditions are met:
- One party makes an offer to another to buy a product
- The other party accepts this offer
- Both seller and buyer intend to form a contract
- There should be some consideration, such as money or even your email address (e.g., for a subscription)
With online contracts, there is no need to sign a paper agreement. An electronic signature or an implied acceptance will suffice.
You can create a terms-of-use agreement page to define the terms of the sale, your liability and other legal matters.
Customers can click on the “I accept” button or type the words “I accept” (this facility should be provided in the bottom section of your terms-of-use agreement page). Alternatively, you can ask your clients to send an email confirmation.
Key provisions in an online legal agreement
The following provisions usually appear on a terms-of-agreement page:
- Terms of sale – Include information about your product deliveries, returns, refund policies and how customers can decline the terms if they so wish.
- Copyright and trademark notice – Inform visitors about their right to use your site’s materials as well as the limits allowable by law.
- Disclaimer of Responsibility – Even with your best efforts, mistakes are bound to occur. It is therefore vital that you disclaim responsibility for any errors, such as pricing or typographical errors.
- Limit of Liability – While site visitors have the right to claim damages, you can reserve the right to limit the amount payable. For example, you can agree to only pay a certain amount (provided you are complying with the applicable laws).
- Guidelines for visitors’ behaviour – Use this section to warn visitors that posting obscene or libellous materials, or violating your copyright, trademark and proprietary rights, will be a violation of your website’s terms and conditions.
The importance of contracts for online retail websites
Typically, online ads are not formal offers to contract. However, to avoid the possibility of any misinterpretation, you need to be careful when drafting online ads. Once you accept a customer’s proposal, a contract is formed.
The use of contracts is not limited to customers. If you have partners or co-owners, you will need to have a particular contract in place called a shareholder’s agreement. According to this article, this document will act as a safeguard against potentially undesirable scenarios.
What essential details should be included in an online agreement?
- Parties involved – Although it will be clear that you and your customers are the parties involved, you need to ensure that your customers – individuals or companies – can enter into a contract. Ensure you obtain all their relevant information, such as their name and address.
- Terms – There will be no need to worry if a customer purchases one of your products using a one-off payment. However, for recurring payments, you will need to specify how long the contract lasts and what happens after the term has come to an end.
- Payment method – Specify an exact price and what is included. You can offer various payment options, such as credit card, debit card and PayPal.
- Liability and limits – All contracts carry liability risks, including breach of contract, misrepresentation and negligence. You can, however, include a limitation of liability clause or incorporate a monetary compensation cap to avoid paying an exorbitant amount of money.
- Possible amendments or changes – Some situations are beyond your control. An agreed quotation may prove impossible to adhere to in practice. For example, if you have provided a quote for 15 hours of web design work but it actually takes 18 hours to complete, you need to ensure you have included a term in the contract so you get paid for your actual work rather than what you quoted.
- Settling disputes – Some customers may find fault with your products or services. Therefore, you need to be transparent with the terms and the process of addressing complaints. This will help pacify the disgruntled customer quickly and cost-effectively without having to go to court.
If the dispute does end up in court, your lawyer will find it easier to argue your case if your contract has included clear terms and conditions.
Your agreement should outline the options if a customer wishes to cancel their purchase. For example, if you incorporate a notice period before a sale is declared final, this can help you prepare for a client’s departure and give you sufficient time to look for new clients.
E-commerce is making the transfer of goods and services much easier. Geographical locations no longer matter. Products from across the globe can be sold and shipped with just a few clicks of a mouse. However, it is important to remember that cancellations and other disputes are normal in any transaction. It is therefore imperative that online store owners draft appropriate legal terms and conditions that will help them avoid or mitigate potential losses. Furthermore, online sellers and buyers should have access to a legal agreement that will settle any disputes.