Selling Online and Protecting Your e-Commerce Process

This post was written prior to our January 2017 merger, under our previous firm name, MacPherson Leslie & Tyerman LLP.

More people than ever are purchasing goods and services online. If you are conducting business online, your website’s terms and conditions of sale are critical to protecting your business and reducing the risks associated with selling online. A properly drafted e-commerce website agreement can protect against anything from an unexpected change in the law to a pricing error posted on your webpage.

To ensure full, on-going protection, there are two important concepts that every e-commerce website agreement should include: a right to amend and risk management provisions.

1. The Right to Amend

You want to be able to change a website agreement to keep up with your evolving business needs. However, your online sales process also needs to be legally correct and contractually enforceable. A well-drafted amendment provision will allow you to change your website agreement easily and without risk that your users will not be bound.

A good amendment provision requires attention to detail and it should ensure your customers are aware of changes. An amendment provision should clearly describe how amendments are to be communicated to users (e.g. by posting them on the website or by email). Website agreements should also contain a statement indicating when the agreement was last updated so users know when the agreement changed.

By ensuring that both of these elements have been addressed in the website agreement you can significantly reduce the risks associated with a claim by a user that they are not bound by the new provisions.

2. Mistake Management

What happens when a business makes a pricing mistake? Thousands of individuals can take advantage of what they perceive as a bargain, potentially costing the business a great deal of money.

For example, in 2003, Kodak’s UK website incorrectly advertised a digital camera for £100 when it was intended that the camera be listed for £329. Kodak sent automated acceptance notices to its customers, which may have resulted in Kodak accepting the contract to sell at the incorrect price. Kodak ended up honoring an unknown number of agreements (although it is not clear if Kodak was actually legally bound to honour the automated acceptance notices that were sent in error).

These types of mistakes are not uncommon and online retailers can protect their businesses from the risks associated with these types of occurrences in a number of ways. One method is to have terms and conditions that stipulate when your business becomes legally bound to the customer.

For example you may choose to stipulate that, in the event of a pricing mistake, your company may cancel orders up to the point of shipping. This is a way of helping ensure that you have as much time as possible to detect and correct a pricing error.

Alternatively, if you offer online services your users may want to sign up, pay, and begin to receive the services without delay. This means that you may not have the opportunity to catch a pricing mistake until you start providing the services to the user. In this situation, your agreement should contain wording that allows you to cancel the agreement with a refund and/or, decrease the services that are made available to an amount proportionate to the amount paid.

While these specific approaches may not work for your particular business needs there are many other ways that a properly drafted website agreement can protect your business from the unintended consequences associated with a mistake in the sales process.   Your business will need to determine where mistakes can happen and how these mistakes can be managed without compromising customer service.  The terms and conditions of the website agreement should reflect this process.