Making a Contract on the web

There’s no escaping the law just because you’re trading on the Internet. If anything, you need to be more cautious and really understand the rules of contract law so that you don’t make expensive mistakes. Many people have no idea when a contract is actually made. Trouble can come fast on the web when we are (on the face of it) selling to anyone in the world.

When is a contract made?

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A contract is generally made when someone agrees to do something for someone else for a fee. The fee is called the “Consideration”. The problems arise over “offer and acceptance”. If you say to someone “I offer to do x for you” and they say “I accept” then (subject to the fact there was an intention to make a contract) that is a contract. Is the world that simple? We all know it isn’t! Often, of course, someone will reply, “I’ll accept if you do z as well”. That is not an “acceptance”, that is a counter-offer. This is crucially important, because until an offer has been accepted, there is no contract and as such either party can get out of the deal.

Also, when a contract is made, normally you cannot change the details of it without the agreement of the other party so, if you want to put in a disclaimer or other protection for yourself, it MUST get in before any offer is accepted.

When is an offer not an offer?

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One case many years back dealt with an important point on when is an offer an offer. A man put a flick-knife on display in his window with a price tag on it. Was that an offer? You might be surprised to hear the Court decided not. It was merely an invitation to people to offer to buy it. This is a most important case for the web. It means that merely having something on your site might not be an offer. The person who then says they want to buy could then be actually making the offer. Until you accept their offer, you can withdraw from the proposed deal and/or change the details. This gives you an opportunity to check you haven’t gone wrong. However, it is still better to make it clear on your site.

Understand when you’re making a contract and beware automation

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In a famous case, retailer Argos didn’t have a failsafe to check their web contracts were commercially sensible.

Argos posted details on their website of televisions for sale. Instead of a price of £399 per item, they were shown at £3.99 on the website. This constituted an offer to sell to prospective customers, so you might think they were OK because, like the flick-knife case, until they accepted a purchaser’s order and credit card details no contract had been made. Unfortunately, with the wonders of modern technology, such a contract was made. People clicked to buy, they sent credit card details, and of course, to the computer, it all looked good: “1,000 units x £3.99 = £3,990 and that is what they’ve paid” so it sent a confirmation, which constituted an acceptance of the buyers offer and created a contract. When Argos later realised their mistake, it was too late.

A cautionary tale. The lessons are simple – check very carefully the information you put on your website and build in some manual checks to any automated process to make sure errors can be spotted and rectified quickly.

Terms and conditions for Websites

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It’s essential that your website contains the right terms and conditions for your on-line business.

There are 3 main types of terms and conditions —nicked ones, “lawyer’s beauties” and informal. So, what sort of terms of business should you have?

The web is informal and there is a clear resistance to complex documents. That said, there is no point in terms of business which are wrong or inadequate or, as is sometimes the case, illegal.

Many people copy their off-line terms of business, if they have any. This is often dangerous. It does not cater for various things such as a returns policy and the nature of the web, although properly used they might be capable of being supplemented or adapted.

Some use “nicked” ones, in other words those copied from other sites. This can be dangerous from a few angles. How can you be sure they are up to date or suitablefor your business? The site they were taken from might have taken them and so on. And if lawyers have drawn them up, they often put in some deliberate wording to enable them to identify them and you will be liable for major damages if you’re found copying them.

Then there are those that we will call “lawyer’s beauties”. A lawyer will have spent many days, and many of your £s, making sure every possible angle is covered and you will end up with pages and pages of long words, which neither you nor your customers will understand. But you will be well protected. It is a commercial choice for you. But to be honest, the Cousins Business Law view is that, if you feel you need terms and conditions like this, you are probably so averse to risk that you “shouldn’t use the M1”, let alone trade on the Internet.

Making sure the terms and conditions sticks

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You’ve got terms of business that protects you against unreasonable claims, now how do you make sure they “stick” on the other party?

You MUST make sure they are in the paperwork BEFORE the contract is made. It is therefore often best to put them in right at the start. But how do you prove, on the web, that the other person has seen them?

It is thought to be best to have a button whereby people have to click on “Yes” to the statement  “I accept your terms and conditions” with a page containing them. They should not be allowed to go on with an order until they have said “Yes.”

Find out more

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This article only “scratches the surface” of a complex subject. Every business and site is different and it’s important that you have terms and conditions that are right for your business and written to fit in with the design of your site.

Contact Cousins Business Law for advice on this topic. 

Article reviewed November 2011.

For free advice on this topic please call us on 0845 003 5639.