Online Contracting in the UK

Online contracting in the UK has long been a reality. The same legal elements that are required to form a contract offline apply to contracts online: formation of a contract is preceded by the making of an offer, which is followed by acceptance; the parties must have an intention to enter legal relations; this legal intention presumed in commercial dealings, as opposed to family and social arrangements.

Consideration

In addition to these criteria, there must be some form of consideration, which is a reference to a promise which has value of some sort. It may be a promise to pay money, or to provide a service or a product. Unlike Roman law, where contracts do not require consideration from both parties, contracts of under UK law that do not have this vital element of consideration are gratuities and unenforceable. The exception are deeds, which are which must be in a special written form, and executed in compliance with certain legal formalities.

Offers, Acceptance and Invitations to Treat

In shop sales, an exception to the usual rule of offer and acceptance applies in the interests of public policy. The usual rule applied in shop sales would dictate that a customer, interested that in purchasing a product, would be offered that product by a retailer displaying the prodoct for fixed price. In these circumstances, the rule of law is that the shop offering good and products for sale by placing those items on display, is in an invitiation to treat rather than an offer to sell the goods.

The rationale for the rule of law is that should a shop list products for sale, and a person were to ‘accept’ the ‘offer’ of the retailer by displaying the item, would be bound by contract upon a request by a person to purchase the product. This would potentially place retailer in a difficult position, as they may be out of stock of the particular item, and a request by a customer to purchase the item would place a retailer in breach of contract if they were out of stock, as the retailer would not be in a position to supply under the contract. For this reason, the exception exists to the general rule in retailing whereby it is the customer who makes an offer by requesting to purchase a product, and it is the retailer who accepts the offer to purchase. The display or listing of the item in a retailer then is simply an invitation to treat, that may be progressed to the next stage of the transaction by a potential purchaser making an offer.

Contracting on the Internet

In the context of the Internet and Internet contracting, the same principles apply. Listing of items, goods or services on a web site is also likely to be in the nature of an invitation to treat. It is prudent however to put the matter beyond doubt and confirm indicate in terms of business that an order is accepted when the order is confirmed by way of email or some other communication after the supplier has the opportunity to check whether the order may be fulfilled.

Similarly, contracts may be entered into via SMS, WAP, and any other form of electronic commerce where the fundamental elements of contract are present.

Problems with Acceptance - Shrink Wrap Licences

Early in the age of Internet commence there was doubt whether software licence terms that were included as terms of contract as the terms of the software were not - and could not – be brought to the attention of the purchaser at the time purchase, as the terms were enclosed in the package. The practice of enclosing these terms headed by a notice that upon opening the shrink wrapped software, the terms of licence were deemed to be accepted. To cater for the uncertainties at common law, the Distance Selling Regulations advert to these practices, making it a precondition of a refund for the purchase of software (in addition to music and video DVDs and CDs) that the software be returned with the shrink wrap or other packaging left intact.

The same principles apply to contracting on the Internet and in other digital communications. The customer must be made aware of the terms of contract prior to taking their last step to entering into the contract – that is, accepting terms upon which the goods or services are offered.

In most instances, UK businesses will wish to have the contract governed by the laws of England, Scot;and or Wales, and the jurisdiction of disputes to be similarly defined. Where may be said to be targeting a foreign jurisdiction with their web presence, local courts will usually assert jurisdiction over a dispute in order to protect its own nationals. It is therefore important to be selective in the countries that the business intends to trade.

Regulation of Contracts in the Online Environment

To cater for the inherent uncertainties in online contracting, a number of regulations are in force that are geared to promote visibility and accountability of businesses trading online. These provisions apply over and above the general law of contract. Under the heading consumer protection which businesses will have an interest in complying with, the Distance Selling (Consumer Protection) Regulations and Electronic Commerce (EC Directive) Regulations implement European Union Directive 97/7/EC and the Electronic Commerce (EC Directive Regulations) 21 Aug 2002 respectively.

The effect of these Regulations allow a non-negotiable 7 day inspection period for consumers purchasing products over the Internet or some other distance means of communication. The goods may be returned after that period unconditionally of the customer is not satisfied with them. Exceptions do exist to the rule, for perishable goods, financial services products and goods whose price fluctuate.

The Online Environment

From a legal perspective, there is no distinction between contracting online and offline in the UK . The same legal requirements must be present for the formation of a commercial contract in the online environment as with the offline environment. Certain types of online contracts have a gloss added to them by regulation that is in place for the purposes of consumer protection. Regulations that were originally designed for offline contracts equally apply in the online environment. Businesses should be careful to ensure that they observe the requirements of obligation imposed by regulatory, as the consequences may consistently adverse to business and doubt is resolved in favour of the consumer.