Author: Christopher Hamel-Smith

As companies begin to engage in e-commerce, we need to create as much certainty as possible about how the commercial risks are to be allocated between the parties involved. To achieve this, we must reduce ambiguity about the rules that apply to each electronic transaction. One important way to achieve greater certainty is to make sure that we effectively incorporate suitable terms and conditions into contracts that we make over the Internet.

For example, a company offering products over the Internet will want to consider the terms and conditions that relate to the extent of the warranties it provides. Of course, there are many other kinds of matters that may be covered by such terms and conditions. Other common examples include terms and conditions that impose limitations on the supplier's liability, specify its policy on refunds and returns and identify dispute resolution mechanisms.

While one has to ensure that the substantive content of these terms and conditions are properly drafted to achieve the parties' commercial objectives, this generally raises the same issues as when one is conducting business through traditional channels. However, when preparing to conduct e-commerce, there are also particular issues to be considered in order to ensure that such terms and conditions are effectively incorporated into contracts that are made over the Internet.

Companies that are in the process of choosing business models and developing systems for e-commerce need to understand these legal issues and how they can affect the choices they make. In particular, when developing a Website for e-commerce, these legal issues need to be factored into the design of its structure and user-interface.

Avoiding E-Fine Print

At the most basic level, a party cannot be said to have agreed to terms and conditions unless he knew what these were before entering into the contract. Consideration must be given to the manner in which information about proposed terms and conditions is presented to users. Fortunately, one will normally only have to prove that a user was given sufficient opportunity to read and consider whether to accept the proposed terms and conditions and not that he actually did so.

If proposed terms and conditions are buried deep in the structure of your Website ("e-fine print", as it were) there is a danger that they will not be incorporated into any contract formed with a user. This means that these terms and conditions -no matter how well drafted they may be- will be of no legal effect.

Depending on the size and value of the e-commerce transaction involved, the criticality of the particular terms and conditions sought to be incorporated and the extent of any risks involved, a prominent link to the proposed terms and conditions may be acceptable.

However, in most cases the better practice will be to design the structure and interface of the Website so as to ensure that the proposed terms and conditions are displayed to the user and to require him to acknowledge that he has read them before he can proceed. This can be achieved by designing the Website so that whenever the user clicks on a button saying "Submit Order" a page is automatically presented containing the relevant terms and conditions as well as another button saying something like "I Accept These Terms".

Implied Terms and Legal Restrictions

Apart from terms and conditions expressly incorporated into a contract made over the Internet, using one or more of the techniques discussed above, certain other terms and conditions may be implied into such contracts as a matter of law. For example, under Trinidadian law (as is the case in many other jurisdictions) certain warranties relating to a product's fitness for its purpose and its quality will be implied by law.

In order to protect consumers and others from the potential abuse of inequality in bargaining power, the law may also impose restrictions on the extent to which parties can agree to restrict their obligations under any such implied warranties or to limit their liabilities. For example, under Trinidadian law, it is not possible to use terms and conditions of a contract to exclude liability for death or personal injury resulting from negligence. And, in relation to other types of loss or damage, terms and conditions that seek to restrict or exclude liability for negligence are usually ineffective unless a Court considers them to be reasonable.

Beyond the Boundary

Of course, the extent of which the laws of different countries imply terms and conditions into contracts and also restrict the freedom of the parties to agree other terms and conditions - such as those excluding liability - varies from country to country. It therefore can be a matter of significance to ascertain which country's laws govern a particular transaction as this may affect how the commercial risks are allocated between the parties involved.

In the context of e-commerce - which will frequently be conducted between parties who are located in different countries - one category of terms and conditions that should never be overlooked are those that specify how disputes are to be resolved. These terms and conditions should identify which country's laws apply. And, they should also address the related question of which country's courts will have the authority to adjudicate on disputes. They may also provide for arbitration or other forms of alternative dispute resolution.

This whole subject of managing the international dimension of e-commerce, and the legal uncertainties and risks associated with it, is so critical that it will be separately examined in the next article in this series.

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.