Most companies now trade online so it is important that buyers understand their legal position. Online contracts may be created in a number of ways but generally they are carried out by email exchange or via a supplier’s website.
The first question which may come to mind is whether a contract can be formed electronically without being confirmed in writing. English contract law is flexible in this area in that, save for a few exceptions, there is no requirement for a contract to be in writing and so contracts may be formed electronically. The Electronic Communications Act 2000 allows electronic signatures to be legally admissible as evidence of the reliability of a contract.
Now we know a contract is capable of being created online, a buyer should understand the point at which the contract becomes binding. English law distinguishes between an offer and an "invitation to treat" and the difference can have significant practical implications for the purchasing process. An offer implies an intention that, on acceptance of stated terms and conditions, a binding contract will be created. An invitation to treat, however, such as a display of goods in a shop is an invitation for prospective purchasers to make an offer to purchase. When a customer in a shop takes goods to the checkout the customer is making an offer to purchase the goods and the shopkeeper accepts the offer by selling those goods. The contract is, therefore, made at the checkout. Online transactions may fall into either category and the distinction can only be made by reading the supplier’s terms and conditions and notices on the website. This is important because when a buyer submits a purchase order, this will bind the supplier to the contract if the goods are ‘offered’ for sale but shall not bind the supplier if the goods are displayed as a mere ‘invitation to treat’. Consider the situation where a supplier has advertised goods at an incorrect price i.e. £1.99 instead of £199. Would the purchaser be able to demand those goods at the advertised price? Unless the supplier makes it clear that the goods are not displayed as an offer for sale, and that incorrect prices may be remedied, a buyer would be in strong position to demand the fulfilment of the order.
It is clear then that terms and conditions are important to the purchasing progress. But whose terms apply? The ‘battle of the forms’ which often takes places between contracting parties is less likely to occur online as the process is structured in such a rigid way that a purchaser is not given the opportunity to serve its owns terms and conditions upon the supplier. Such terms and conditions, however, shall only become binding on the purchaser if they have been incorporated into the contract.
To apply to a purchase contract, the terms and conditions must be brought to the buyer’s attention prior to the contract being made. Strictly speaking this is most effectively achieved online by insisting the buyer scrolls through the terms and conditions and clicks on a button marked ‘Accept’ before the buyer is allowed to complete the checkout process. It is too late, therefore, for the terms and conditions to be made available to the buyer following the completed order process.
Generally, the legal framework for contracting online is the same as that for the more traditional methods of contracting, however, legislation relating specifically to online transactions does exist and so buyers should ensure that they are aware of their rights.
The majority of legislation has been enforced to protect consumers but controls are in place in respect of business to business transactions. Under e-commerce regulations all providers of online services must make certain information available to users of their service such as: the supplier’s name, physical address, email address, company registration number and VAT registration number. Having all of these details may not always be so important when the purchasing process is running smoothly but it will be crucial at times of dispute, particularly if the buyer requires legal action to be taken against the supplier. Where contracts are concluded online, the buyer must be given a description of the different steps to follow to conclude the contract, and a description of the means by which the buyer can identify and correct inputting errors before the order is placed.
These are just some of the issues pertinent to online B2B transactions and a great many more obligations exist in relation to contracts with consumers.
Paula James is a solicitor at Pannone LLP specialising in Intellectual Property, IT and E-Commerce.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
