What the Law Says When Starting an eCommerce Business (Contracts)

Set your mind back the first time you heard of an ‘Online eCommerce Business’. Were you asking ‘What is online business? How does it work? Is it safe?’ and so on. These days all industries, from retail to travel, logistics to agriculture, are wired one way or another. Take for example the success of Amazon.com. It is a multibillion dollar eCommerce business that started in a garage, selling books, CDs and videos, and now it is leader in the industry. It is all because of the eCommerce revolution (Stewart et al., 1999). The internet has changed the infrastructure of business in a vast way; almost all businesses have their own website to enhance their opportunities for success and popularity. However, doing business online could be risky as in the majority of instances, the supplier and customer never meet. This could result in an unfortunate situation where people have disputes when purchasing products.

To address this issue, the UK held its first conference on internet laws in 1995. It is stated that law-makers are finding it hard to keep pace with rapid development in e-commerce (Holt & Newton 2004). e-Commerce law covers a large area such as e-mails, data protection, copy right and many more. The sector the author will focus on is ‘e-Commerce and contracts’ and will look at the following areas: What a Contract is, Forming Online Contracts, Types of Contracts, Laws that Apply, Jurisdictions (British Law vs International Law) and Taxation (VAT).

What Is A Contract?

Tunkel & York (2000) define a contract as an agreement between two or more parties to do, not do, or promise something. Contracts can come in many forms; they can be written, oral, implied or expressed and, in most cases, are legally enforceable.
A simple form of a contract, an offer is made, the other party accepts the offer, the offer is considered, and then a legal relationship is created (Tunkel & York 2000).
For example, when we buy milk and bread or use public transport, we are making a contract (Fell, 2007). Contracts that have strong creditability are those that have an offer, acceptance, clear terms and conditions and are agreed by all parties involved. Contracts that are agreed verbally are considered to be weak as in cases of disputes would be difficult to prove in a court of law.
A full description of the ‘contract’ term is beyond the scope of this document; however, the author has used definitions from both the Oxford and Cambridge Dictionaries to provide definitions:
‘A written or spoken agreement, especially one concerning employment, sales, or tenancy that is intended to be enforceable by law (Oxford Dictionary n.d.).
Cambridge Dictionary (n.d.) defines it as:
A legal document that states and explains a formal agreement between two different people or groups, or the agreement itself. A contract of employment, a temporary/building contract. They could take legal action against you if you break (the terms of) the contract.
Both these definitions are concerned with the legality of a contract that is enforceable in law.

Forming Online Contracts

In order to form an online contract, certain aspects need to be considered. For example, the business needs to devise the terms and conditions of the policy which can be viewed by all parties. According to the Business Names Act 1985 and Companies Act 1985, corporate information such as details of the company name, address, telephone number, fax and any other relevant information that is necessary must be stated on the website (Singleton 2001). Contracts need to be examined properly by all parties involved (Todd 2005).
There are certain areas which need to be considered when forming contracts such as the date, name and address of those entering the contract, description of the contract, what the supplier is going to do and what you must do for the supplier.
In a recent case, Argos advertised a television set for £2.99 on the website, whereas the real price was £299. There was a rush of orders placed by customers; however Argos refused to sell the products to the customers as it realised that an error had been made. Certain customers sued Argos for failing to fulfil a contract. The case was settled out of court (Carey 2001, Holt & Newton 2004).

To avoid court action, Holt and Newton (2004) suggest that it would be wise for e-businesses to clearly state that no contract is formed unless the supplier has notified the customer it has accepted the offer. Bainbridge (2004) agrees that all terms in a contract should be necessary and effective and must be agreed by both supplier and customer before the contract becomes legally binding.

Types of Contracts

There are ma