Online Contracts

If you sell goods or services online, you need to give buyers a way to understand and accept your terms and conditions

For centuries, business contracts have been written on paper. Today, however, more and more contracts are formed electronically. The computer is quickly replacing the paper-and-ink world.

Online contracts are enforceable, so long as they meet the usual requirements of contract law. For example, there must be a meeting of the minds. And there must be consideration – legalese for an exchange of things of value, such as money in exchange for goods or services.

If you’re selling goods or services online, how can you help ensure that you and the buyer have a binding contract? Your first task is to come up with a set of contract terms to post on your Web site. Your terms become an offer. If the buyer accepts your terms, you have formed a proper legal contract.

The content of your contract terms will vary, depending on what kinds of goods or services you’re selling. You’ll probably want to state the nature of warranty you’re offering, if any. And you may also want to include some disclaimers to limit your liability. Getting the contract terms in good shape will usually require a lawyer’s help. You can get a head start by checking the terms offered online by businesses similar to yours.

The next step is to post your contract terms online in a way that lets buyers accept them and be bound by them. Although this can get a bit technical, it’s not hard to do. Attorneys Michael Khoury and Sarah Weston have compiled a number of practical suggestions. Here is the essence of their wisdom:

Make your contract terms easy to find. You want the buyer to acknowledge that he or she will be bound by your contract terms. Typically, you’ll do this by having the buyer click on a button that says

“I Agree” to the contract terms, or “I Accept” them.

Arrange for your contract terms to appear automatically on the buyer’s screen before he or she can agree to them. Or require the buyer click on a link to your terms before he or she can accept them. You don’t want the buyer to claim later that your terms were hidden away somewhere on your site.

Don’t rush the buyer. He or she should be able to read the terms at a leisurely pace. It’s a mistake to have the terms disappear after 15 or 30 seconds. Finally, the buyer should be able to easily return to the terms in the future, and to save or print them.

Be sure terms are clear and consistent. See that the contract terms appear clearly on the buyer’s computer screen – and that they can be printed out in legible form if the buyer chooses to do so. And make sure the marketing materials you display on your site don’t contradict the terms you’ve posted. For example, don’t offer a six-month warranty in your contract terms, but promise a one-year warranty elsewhere.

Pay close attention to the assent format. Just before the place where the buyer agrees to your terms, emphasize that this will be a legal contract. You might say, for example: “When you click the ‘I Agree’ button, you’ll be entering into a binding contract.” It’s wise to require the buyer to read – or at least scroll through – the terms before being able to agree. And it makes sense to summarize the contract terms just above the “I Agree” button.

Give the buyer a chance to reject your terms. Offer the buyer a choice of accepting or rejecting your terms. For example, alongside the “I Agree” button, you might have an “I Reject” button. If the buyer rejects your terms, that should be the end of the transaction: You don’t want to provide goods or services to someone who refuses to accept your terms. Make the rejection wording as clear as the acceptance wording. Instead of the words “I Reject,” you might prefer “I Do Not Agree,” or “I Decline.”

Keep good records. You may need to prove someday that you properly informed the buyer of your terms, and that you provided a way to accept or reject them. Keep records of your agreement process, including both the terms you post online and how the process works. Be able to show what steps the buyer had to take to view the terms, and what terms were in effect at the time.

Use caution in changing contract terms. Once you and the buyer have formed a contract, you typically can’t change the terms by yourself. This is especially true when you’re selling services. As with a paper-and-ink contract, you need the buyer’s consent.

Posting a notice of a contract change isn’t good enough. You can’t require the buyer to continually monitor your Web site for possible changes.



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