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E-commerce contracts |
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| These notes are provided free of charge for your interest. They do not constitute legal advice. For further help, go to Net Lawman advice |
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| Ecommerce contracts - buying or selling - when are you bound? |
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| These notes are aimed primarily at sellers, but it is just as important that you know your rights when you are a buyer too. |
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| Every trader knows that there is no contract without an offer, an acceptance, and agreement by both parties as to the terms of the offer and acceptance. Ecommerce contracts are no different. The position is reasonably clear when you take goods to a cashier in a shop and pay for them. In other circumstances issues may be clouded by representations (or misrepresentations), advertisements, offers, and unusual payment systems. |
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| If you buy goods or services in the UK with a credit card, the card issuer is responsible rather than the actual seller of the goods. It is as if the issuer stands in the shoes of the seller in every way (although you probably still have similar rights against the actual seller too). Because credit card operators are effectively big banks, who know nothing whatever about the goods or services which are the subject of a transaction, they are at a disadvantage in any claim for a refund. It is therefore comparatively easy to obtain a refund for faulty goods or services bought with a credit card. If you have to issue court proceedings for goods or services bought with a card, remember to claim against the card issuer. |
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| As you would expect however, the banks do not simply lay down and accept the loss. The bank has an agreement with the original seller of the goods. Quite apart from the considerable complexities of obtaining a “merchant service account” with a bank, the bank covers itself fully by simply charging back to its customer (the supplier in the transaction), the amount of any refund. It will also make a charge against the supplier for doing so! If you are the merchant who supplied the goods, you are in a difficult position. Even if the buyer is not in the UK, you may well find that your merchant service provider has given a refund without reference to you. You lose the money, and you may well find it impossible to obtain the return of the goods. The contract for services may have already been fulfilled. |
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| However, just in case you come across someone who thinks they will go on a buying spree on the Internet and then ask for refunds on everything, we will just point out that the banks also have discreet systems of recording default payments and passing this information to the big credit control databases. Because these feed through like a multiple e-mail to a mass of other databases throughout the world, this dishonest person would soon find him / herself unable to obtain credit for anything anywhere! |
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| There are exceptions to these harsh rules, but the purpose of these notes is to make you aware of the importance of identifying the point at which a contract is made in an Internet transaction: |
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- Many web pages are unclear whether they constitute “an invitation to treat”, that is to say a pre-contract enticement, or whether alternatively the web page makes a formal offer. If you are a trader it may be very important for you to know whether or not you are bound by a contract. If you are a buyer you have no choice but to either guess the position yourself, or seek advice, or make clear by your next action that you do or do not consider yourself bound.
- In the local supermarket the acceptance of your cash undoubtedly completes the contract. When you have paid then you have bought the goods. On the Internet this might not be the case. The difficulty arises because there is frequently an intermediary in the money taking process. This intermediary is not the bank merchant service provider, but a secondary “transaction service provider”, either approved by the banks to process Internet transactions, or operating its own business independently of any bank.
- A TSP is not a party to the transaction. Nothing they do can therefore influence the making of a contract. Specifically, the fact that you give your credit card details and receive confirmation of payment from the TSP intermediary, may not create a contract between you and the provider of the goods or services. We say “may not” because the point has not yet been decided by a court.
- Until it goes to one of the higher courts in the land, the issue will always remain somewhat open because each case will depend on its particular circumstances. In general however, you should prefer the proposition first that there is uncertainly, and second that on a balance of probability there is no contract.
- Any communication sent to you by the intermediary and not by the supplier, indicating completion of the transaction, is evidence of the involvement of the TSP intermediary and of what has happened to your money, but it does not form part of the contract between you and the original supplier.
- If the seller sends confirmation, e.g. by e-mail, to the buyer, in terms which indicate that the transaction has been completed, and then there can be little doubt that it has been completed.
- If you purchase a service on the Internet, such as a singles introduction service, and the seller allows you to use the service before your payment has been processed, then the permission to use is likely to be treated by a court as a conditional acceptance of the contract, the condition being that your payment is cleared. If your payment is not cleared, then of course the supplier of the service is perfectly entitled to withhold further use of it.
- No matter how carefully you draw your terms and conditions as a trader, your customer will not be bound by them if you cannot show that he has agreed to them before entering into the contract.
- If your sale is to a person who buys as a consumer (and not in a business), then the conditions under which you sell are further restricted.
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| A correctly drawn terms and conditions document, and proper legal advice as to how to bring it to the attention of your customers, could save many hours of customer disputes and avoid many charge backs by your bank service provider. |
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| If by chance you find any error in this 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. |
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