Cyberspace Contract

While selling online is still to take off in a big way, for companies and
entrepreneurs wanting to take the gamble, it is worthwhile to spend time on
designing online agreements.

The terms and conditions contained in an on-line agreement will be not be
negotiated–they will be drafted unilaterally by the merchant for the customer
on a take-it-or-leave-it basis and predominately for the benefit of the
merchant. However, the benefit that the merchant proposes to achieve will not be
possible unless the terms and conditions have been made known to the customer
before the customer places an order. If the merchant’s terms and conditions
were not made known before the contract was concluded, the merchant runs the
risk of finding the terms that it plans to impose on the customer not to be
binding.

In the case of an online agreement, this will probably mean that onerous
terms should be placed on the ordering form itself, as part of the sequence of
placing orders, and not just on the page containing the terms and conditions.
Something startling could also be used, such as flashing icons that the customer
must click through before being able to proceed any further.

Unlike real-world businesses, merchants’ websites have various means of
displaying their terms and conditions to their customers. A few are mentioned
below:

• Reference statement without hyperlink: A reference with a hyperlink to a
  separate page containing the standard terms and conditions of the merchant
  seems to be the most popular method of making known to the customer its
  standard terms and conditions. It does, after all, achieve some kind of
  credibility without substantial disruption of content and the purchasing
  process of the customer.
• Displaying terms and conditions at the bottom of the page: The merchant’s
  standard terms and conditions may be placed on the same page as the order
  form itself. Such a form is usually extremely long and unsightly, but does
  lend greater weight to the legal requirement of giving notice as ascribed in
  the aforementioned cases. However, as the customer may not necessarily
  interact with the terms, it may not be possible to establish that the
  customer has had the opportunity to read the terms and conditions.
• Use of click-wrap agreements or dialogue boxes: This is most likely the
  best available method of ensuring that the customer goes through the terms
  and conditions. These are made part of the ordering sequence, and the
  customer must scroll to the bottom of the box or page before being able to
  press the ‘I accept’ button, agreeing to the merchant’s terms and
  conditions before being able to proceed or to type the words: "I agree
  to the above terms and conditions." Only when the words have been
  correctly typed in, can the customer click the ‘proceed’ button and
  accept the merchant’s terms and conditions.

Although the methods may, in the opinion of the merchant, seem tedious and
troublesome, they are most effective and beneficial to the merchant in cases of
dispute. Because the customer has interacted with the merchant’s standard
terms and conditions, the customer must have realized that it has agreed to be
bound by those terms and conditions irrespective of the fact that the customer
may not have read the contents contained in the click-wrap agreement or dialogue
box. Finally, in the light of the above cases, there is no doubt in the
strengths of click-wrap agreements and that the use of this method ought to be
the way forward.

Naturally, the most ‘unattractive’ method usually affords the best legal
protection and may be designed so that the customer is ‘forced’ to go
through the terms and conditions before being able to make an offer to purchase.
Such design may well be off-putting, in particular to those who are only
purchasing items of low value, which may result in such potential customers
leaving before they even have the opportunity to make an offer to purchase
anything.

The merchant will therefore need to weigh its options and consider whether it
wants the protection or not. Since virtually all on-line contracts require
advance payment before delivery of goods and the probability that the customer
is from a different jurisdiction is high, the chances that a customer will argue
about the legality of the terms and conditions or whether it is bound by them,
may be small, especially when the value is insignificant.

Designing the Web Page

From the above, we have seen what an online merchant has to be wary of when
setting up a website to sell products; how a contract for sale is created; and
what must be done for its standard terms and conditions to be binding on the
customer.

In order for the merchant to reap the rewards of selling on-line, it must
have the purchasing process laid out in synchronicity so that the sequence the
customer must follow will ensure that a valid, binding and enforceable contact
is created together with the proper incorporation of its standard terms and
conditions. In addition, the merchant must also ensure that records recording
each step of the transaction are maintained. Thus an audit trail, which records
customer’s every click, should be maintained and may be used as evidence in
the event of a dispute.

At each of the above stages, it is necessary for the customer to be given the
opportunity to cancel or discontinue the process and that such cancellation
option should be placed prominently. Furthermore, it will be ideal to design the
page so that the ‘proceed’ button is at a different position on each page
and placed near the button so that the customer has to scroll to the bottom of
the page and look for the button. The purpose of this is to increase the
customer’s interactivity with Web pages.

The long, tedious and comprehensive sequence of events leading to the
customer making an offer, together with an audit trail recording the customer’s
actions and pages viewed, will make it hard for the customer to argue afterwards
that it had accidentally pressed the ‘proceed’ buttons at the end of the
transaction and claim that he had no intention of creating a legal relationship
at any time.

A Parting Thought

Designing and creating a successful website for electronic commerce is no
small feat, let alone having to worry about the legal implications of how the
site is set out and designed. There are many pitfalls awaiting the unwary
merchant. Leaving the design and layout purely in the hands of a novice designer
may bring about lawsuits one never contemplated. An entrepreneur hoping to be
successful in a dot-com venture should probably consult his legal adviser first
before consulting his designer!



RODNEY D RYDER, advocate, is a consultant
on trade and technology law. The first part of this series was published in the
October 15, 2003 issue of Dataquest

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