Distance selling 01: basic law for a new business selling goods or services
Introduction
There are a number of acts and regulations governing the law on distance selling. They include, but are not limited to: The Distance Selling Regulations 2000, Electronic Commerce Regulations 2002, The Trade Descriptions Act, and the Sale of Goods Act 1979.
This guide is for anyone who will be selling goods, and or services via distance selling. Changes to the Distance Selling Regulations which were discussed by the government in 2004 came into effect on 6th April 2005. These will be discussed in more detail in our article distance selling 02, an update since April 2005.
Advantages and disadvantages of distance selling
The laws on distance selling covers any purchases made:
By telephone;
Using direct mail;
Through a website or using email marketing.
The advantages of distance selling are:
Reduced costs;
No need for a middleman;
Staff numbers kept low.
The disadvantage is that you can’t demonstrate your product and therefore it will be difficult to gain the customer’s trust.
Formation of online contracts
Your terms and conditions should always be set out on the website and be easily downloadable, even where the website is simply used as an advertising tool.
Are online contracts legally binding? Any sort of contract, as everybody knows, compromises four elements, all of which need to be present for the contract to be legally binding and enforceable:
Offer - one party must contract with the other, for example, offer to buy goods;
Acceptance - the other party must expressly accept the offer;
Intention to create legal relations - both parties to the contract must intend the contract to be legally binding;
Consideration - there should be some consideration being exchanged between the parties, for example, money paid for goods.
There is no requirement for contracts to be in writing or for the parties to actually sign a contract.
The Regulations
1.The Consumer Protection (Distance Selling) Regulations apply to businesses that sell to consumers by mail order, phone, fax, over the Internet or on digital TV:
The regulations apply to both goods and services where a contract is made without ‘fact to face’ contact between supplier and consumer;
Certain goods are exempt from the regulations;
The Office of fair trading is the enforcing agency for the United Kingdom.
They require you to:
a.Provide customers with specified information before they order;
b.Send them an order confirmation - for services this should be provided in good time, and before the services finish;
Give them the chance to cancel the contract.
2.The Electronic Commerce Regulations place a number of additional requirements on businesses that sell or advertise products or services to consumers using the Internet, email, interactive digital television or mobile-phone SMS text messages.
For businesses selling via the Internet, mobile phones or digital television many of the rules are similar to those they must comply with under the Distance Selling Regulations.
You must:
Give customers the full name of your business as well as your geographic address and email address;
Give your VAT number, if applicable;
Give a clear indication of prices if you refer to them, together with details of any associated taxes and delivery costs;
Provide details of trade associations, professional bodies or authorisation schemes the business belongs to;
Inform customers of the steps involved in completing a contract;
Acknowledge receipt of orders electronically and without undue delay;
Make sure customers can store and reproduce any terms and conditions you supply - by downloading onto their own computer and printing them off, for example;
Make it easy for customers to check orders and correct errors before they complete the order;
Say whether or not the completed contract will be filed by the seller - either in hard-copy or electronic form - and whether it will be accessible;
Indicate which language can be used to conclude the contract.
3.When selling any goods or services, you must comply with the Sale of Goods Act 1979
The Act requires you to make sure that:
Goods are fit for their purpose and of satisfactory quality;
Services are carried out with reasonable skill, in a reasonable time and at a reasonable price.
4.Additionally, the Trade Descriptions Act requires you to ensure that, Products are exactly as you describe them.
Additionally, the non-broadcast media standards authority covers UK advertising. They set out the rules that all advertisers must comply with. It requires all advertising to be honest, fair and decent.
Where you will be broadcasting over the radio channels, the regulating body is OFCOM. The Trade Descriptions Act 1968 makes it an offence for a trader to apply any false or misleading statements and therefore your advertising ploys must be unambiguous.
You must also comply with data-protection law when processing any personal information about your customers. Please see our articles on Data protection for a consumer, and for business for more information.
Distance Selling Regulations in more detail Businesses that sell to consumers by mail order, phone, and fax, Internet or digital TV must give clear and comprehensible "prior information" to help them decide whether to buy.
Distance selling regulations require you to set out:
Your business name and postal address (when advance payment is required);
A description of the goods or services;
Prices, including all taxes;
Delivery costs;
Payment arrangements;
Arrangements and date for delivery of goods or performance of services - within 30 days of the order if you don't specify a date;
The customer's right to cancel the order and details of who bears the cost of returning the goods if they do;
How long prices remain valid;
The minimum duration of contracts.
You must also specify whether you want to offer substitute goods if those ordered aren't available. You must also make it clear whether or not you will meet the costs if any replacement goods are returned.
The law changed in April 2005 to allow you to deliver written details to customers at any time from when an order is placed to before the service comes to an end, rather than before the contract is agreed as in the past. For more on this, read our information on distance selling 02
The distance selling regulations are not applicable for:
Business to business contracts;
Financial services sold at a distance. These are covered by the Financial Services (Distance Marketing) Regulations 2004;
Contracts for the sale of land – although the regulations do apply to consumer rental agreements;
Products bought from vending machines;
Goods or services bought at an auction with an auctioneer.
Other matters to consider when selling online:
Data Protection Act - you should comply with this legislation, which imposes conditions on both data processors and controllers.
Intellectual property - issues such as copyright and trademarks should be considered, not just for items displayed on your site, but also within any Meta tags;
Consumer protection legislation - legislation such as the Unfair Contract Terms Act 1977, the Unfair Terms and Consumer Contracts Regulations 1999 and the Consumer Protection Act 1987 apply equally to goods sold over the Internet. Some of this protection is also extended to business purchasers;
Security - be aware that selling online will necessitate the passing of sensitive data and payment instructions. An online vendor could be liable for breaches of security on their site;
Exclusions on restricted goods - some types of goods which are legal to sell in one jurisdiction may be prohibited in other jurisdictions;
Specific regulations - specific industries may be regulated. This is particularly the case with premium-rate Internet sites or those aimed at children. There may also be implications as a consequence of competition law. Check each potential market sector carefully;
Access agreement - it is important to have terms and conditions governing the use of your website. These must be set out prior to the customer proceeding to purchase - commonly the customer must click on an "I agree" button to proceed, indicating acceptance of the terms and conditions.
Other Acts which might be relevant
Hallmarking Act 1973
The Act has been amended since 1973 so that it conforms to European standards. This means that identically relevant markings will be used across Europe and any precious metal including platinum, gold and silver can then be sold in the UK without additional hallmarking.
Consumer protection Act 1987
A new updating this act came into force 1st July 2004. It states that the selling price must clearly be displayed on all goods, but does not cover services.
Special rules apply for food and drink, which are especially relevant in pubs, bars and restaurants. If you are selling food and beverages, you must also state where the price differs if you are using different methods of payment. For example, if there is a charge for using a credit card, it must be clearly stated before the purchase. This rule also applies where for example; theatre tickets are being re-sold and especially so in a bureau de change.
The Consumer Protection Act 1987 states that you must not give a misleading price to any customer. This includes prices for goods, services and accommodation or facilities, whether the product is in a television advertisement, the newspaper, on a shelf in a supermarket or if you give the price orally, for example over the telephone.
If by chance you find some error of law or fact in any Net Lawman information page, do please tell us. We should also welcome your suggestions for new subjects for information pages. These notes:
Do not provide a complete or authoritative statement of the law;
Do not constitute legal advice by Net Lawman;
Do not create a contractual relationship;
Do not form part of any other advice, whether paid or free.
