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aspects of ecommerce
Legal aspects of ecommerce
There are four common ways to deliver products based on interactions
that take place on the Web. This article discusses common legal
needs related to each one. Because every business situation is
unique and every legal situation dependent on the particular facts
of the case or transaction, you should seek the assistance of
a qualified attorney to review your specific business or legal
situation.
Online delivery
The Internet is an efficient mechanism for delivering electronic
media. For example, one may download an update to a particular
software package that may have been purchased at a local retailer.
This raises the issue of whether the electronic fulfillment satisfies
the vendor's contractual obligations to the customer. For instance,
what if the service becomes unavailable? What are the procedures
for ensuring that compatibility requirements are met? Are there
users in multiple geographic areas who require instructions tailored
to their local language?
Since you have a captive audience, this would be a good time
to remind the customer of the terms of sale. In addition, the
customer should be able to gain access to the terms of use for
the Web site. Are the terms of use and terms of sale consistent
with each other? Consider additional terms that may apply only
to electronic transactions. Depending on how the transaction is
structured, you may have to give the customer an opportunity to
reject the terms and receive a refund.
Issues of return and refund must be addressed. What are the delivery
and return mechanisms (e.g., download, FTP, e-mail)? Are they
secure? Draft your contracts to address faulty delivery or unavailability.
In addition, make provisions for support, be it online, by telephone,
or in person.
Sales, payment processing, and traditional
delivery
The sale of tangible products through the online world of the
Internet is comprised of product selection, product ordering,
and product payment. Tangible products are then shipped using
the traditional ground freight method. The issues here are geographic
availability of the product, channel conflicts, and issues related
to the existence, enforceability, and fulfillment of contracts
entered into online.
To avoid "jurisdictional entanglements," clearly indicate
on your Web site the geographic areas in which customers are eligible
to purchase your product. Eligibility means that a governmental
body has granted permission for consumers or businesses to purchase
a specific product or type of product. Be sure to localize content
to ensure comprehension and enforceability. Finally, do not process
transactions from ineligible locations. To avoid channel conflicts,
compare pricing structures of online and offline distributors/vendors
of your product.
The following basic contract issues arise:
- Contract terms
- Contract acceptance
- Enforceability
- Payment method and security
The terms of an online sale should mirror those of a traditional
sale. Ensure that online terms are consistent with on-the-package
product warranty and limitation-of-liability information. Again,
issues of return and refund must be addressed (see above).
Although there is case law holding that payment, acceptance,
and use of a product purchased online are a form of assent to
the contract terms contained on a Web page, a far better approach
is to have an online customer actively accept or reject the terms
of sale. Additional links to the Web site terms of use and privacy
policy should be available.
Enforceability issues usually involve warranty claims and unsatisfactory
product performance. Examine your warranty and limitation-of-liability
provisions carefully. Check local and statutory laws on consumer
protection.
Payment processing and security are two of the issues most often
asked about in ecommerce. Consult an information technology expert
about your transaction methods and software. Consider alternatives,
such as telephone orders. Ensure that the encryption tools you
are using comply with government regulations. Have policies in
place for addressing fraud and nonpayment issues.
Lastly, ensure that personal data collection policies are clearly
worded and conspicuously posted on your site.
Sales, payment processing, and online delivery
In situations where the entire transaction takes place on the
Web, almost everything that was said above applies, and additional
concerns arise as well. Digital content, whether it is text, music,
or even video, is duplicated, altered, and distributed with ease
and in vast quantities on the Internet today. This makes content
vulnerable to piracy and unauthorized use.
Audit your intellectual property (IP) -- copyrights, trademarks,
and patents -- to determine whether you have done all you
can to protect your IP assets. Make sure you have the right to
duplicate or distribute third-party products.
Verify that the license you are granting indicates the country
or countries to which it applies. Check for channel conflicts
(see above).
Recent efforts at protecting against piracy or unauthorized use
have met with limited success. One should ask whether the material
should be delivered online at all, and what is the value of the
potential risk vs. potential reward. Ask whether there is a suitable
forum to enforce one's rights and remedies.
Dialogue or interactive services
Once the only function of the Internet, communication services
have evolved from machine-to-machine to person-to-person and person-to-community.
Global communities exist and interact online.
Immediately apparent are the issues of geographic availability
of interactive services and communities. Clearly indicate on your
Web site which geographic areas are eligible, and localize content
to ensure comprehension and enforceability, as well as compliance
with local laws. Finally, do not process transactions from ineligible
locations. To avoid channel conflicts, examine pricing structures
between online and offline distributors and/or vendors of your
product.
Related legal articles
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