E-commerce Review - October 2007
Do you sell goods or services online?
If so you need to know this . . .
If you sell goods or services online, there is a raft of legislation governing what you can do, and how you can do it. If you don’t comply, you risk action by Trading Standards and the adverse publicity that inevitably follows. This is a brief guide to the key legal responsibilities of everyone selling online.
Apart from the more familiar legal rules around contracts, there are two very important sets of regulations that apply to online sales: the Distance Selling Regulations (”DSR”), and the Privacy & Electronic Communications Regulations (”ECR”). These aim to protect consumer confidence when buying online. They try to do this by (i) giving online shoppers certain rights and safeguards, and (ii) requiring online sellers to provide certain information during the sale process.
How do these laws apply?
The DSR apply to the:
• sale of goods or supply of services
• to a consumer
• made at a distance
• using a means of distance communication
For this purpose:
A “consumer” is anyone not acting for business purposes. In many cases you won’t be able to tell if your end customer is a business, so it makes sense for your terms of business to be tailored with the consumer in mind.
“Made at a distance” means the buyer and seller are not present in the same place at the time the contract is made.
The contract must be formed at a distance using a “means of distance communication” - in other words, “any means, which without the simultaneous physical presence of the supplier and the consumer, may be used for the conclusion of a contract between those parties.” This was deliberately drafted in vague terms to cover future developments in technology. It includes purchases from a website, by email, fax, telephone and interactive TV.
NB: The DSR do not apply in certain situations.
The ECR apply to both consumers and to businesses.
How do I make sure I comply?
To comply with the DSR and ECR, you must:
• Provide certain information before you make the sale
• Provide certain information “in writing”
• Give the customer a technical means of correcting errors in an order before the order is confirmed
• Give the consumer a right to cancel the contract
Information before the sale
You must provide the following information in a clear and understandable manner before the sale:
• The different technical steps necessary to conclude the contract
• Whether or not you will file the concluded contract and whether it will be accessible
• The technical means for identifying and correcting input errors prior to the placing of the order
• The languages offered for making the contract
• Any codes of conduct you subscribe to, and how those codes can be consulted electronically
• Information about you: name (if you are a company, this will be your full company name), address, contact details, VAT number
• Information about the goods/services (description of the “main characteristics” of the goods or services, price including tax, the period for which the price/offer is valid, delivery costs)
• How the goods will be delivered
• How the services will be performed
• How to pay
• If there is a cost of using the communication medium to make the purchase, the details of this cost unless it is at the “basic rate” (e.g. for a purchase made by returning a form by fax, details of the cost per minute of the fax if the fax number is other than standard local or national rate)
• If the contract is to be performed repeatedly or continuously (e.g. goods to be delivered at regular intervals, or a contract for ongoing services), the minimum duration of contract
• The existence of a right to cancel (if it applies)
You must also tell consumers that:
• If it turns out that the goods/services are not available, you are going to provide substitute goods/services that are of equivalent quality and price
• The cost of returning the substitute goods, if the consumer cancels the contract, will be met by you
Information that you must provide “in writing”
The ECR state that you must (with only limited exceptions) provide certain information in writing or “in another durable medium which is available and accessible to the consumer”. Examples of durable media include (i) email (ii) fax; and (iii) post.
You must provide:
• A description of the “main characteristics” of the goods or services
• Details of the price, including tax
• Delivery costs
• How the goods will be delivered
• How the services will be performed
• How to pay
• The right to cancel the contract including whether return of the goods is a condition of exercising the right to cancel
• The cost of returning the goods, or of you recovering the goods, is to be met by the consumer
• Where the contract is of unspecified duration, or more than 1 year in duration, the conditions for exercising the right to cancel
• The address to which the consumer must address any complaints
• Information about any after-sales service and guarantees
The right to cancel
The DSR give consumers the right to cancel the contract within a stipulated period, which is extended if you the seller do not comply with the DSR.
The right to cancel will be available as follows:
For goods:
• Regulations complied with: lasts for 7 days from date on which goods delivered
• Regulations not complied with: lasts for 3 months and 7 days from the date on which goods delivered
For services:
• Regulations complied with: lasts for 7 days from the date on which services ordered
• Regulations not complied with: lasts for 3 months from the date on which services ordered
Consequences of a consumer using right to cancel
• The contract is treated as if it had not been made
• You must return the price of the goods/service to the consumer
• For goods, if you have to recover the goods from the consumer, you can withhold the direct cost of recovering the goods
• You cannot recover the cost of recovering goods where the goods were substitute goods
• Any credit agreement that the consumer has taken out for the goods/services is cancelled where the credit agreement is (a) granted by you or (b) granted by someone that you have an arrangement with
NB: There are situations where there is no right to cancel
The ECR right to cancel the contract (a separate right)
If you do not provide the means to identify and correct errors in an order before the order is confirmed, your customer has a right to cancel the contract.
There are other implications of the DSR and ECR. We have a detailed guide that is available from our Impact blog at the following link:
http://impact.freethcartwright.
com/2006/09/selling_to_cons.html
The DSR and ECR add up to a very complicated set of rules. We can help you ensure that your online services comply with the law by carrying out “legal health checks” on your site, and:
• reporting on the extent to which your site complies with the law
• recommending steps to take to ensure you are fully compliant
If you would like a health check of your website or online terms, please contact a member of our E-commerce team.
Who we are - the E-Commerce Team
We can help with the full range of legal issues relating to buying and selling goods and services online:
• Distance selling
• Direct marketing
• Website accessibility and The DisabilityDiscrimination Act 1995
Compliance involves more than just putting a few select words into your contracts or emails. We can:
• Give your website a “legal health check”
• Review your marketing and sales processes/procedures
• Deliver tailored training on compliance issues either on site, by videocast or in our dedicated training suite
We can also assist with any disputes arising from the content of your website, including defamation or domain name problems. We also publish a number of legal guides on this subject, which are available from our IMPACT blog at
http://impact.freethcartwright.com
Contact Us:
Compliance
Deryck Houghton - Partner and Head of
E-commerce Team
Direct line: +44 (0)845 070 3810
E-mail: deryck.houghton@freethcartwright.co.uk
Skype: deryck.houghton.fc
Fiona Boswell - Senior Associate
Direct line: +44 (0)845 070 3812
E-mail: fiona.boswell@freethcartwright.co.uk
Skype: fiona.boswell.fc
Alex Newson - Senior Solicitor
Direct line: +44 (0)845 058 0759
E-mail: alex.newson@freethcartwright.co.uk
Skype: alex.newson.fc
Disputes
Ann Critchell-Ward - Senior Associate
Direct line: +44 (0)845 058 0753
E-mail: ann.critchell-ward@freethcartwright.co.uk
Skype: ann.critchell-ward.fc
Kara L. McDonald - Solicitor
Direct Line : +44 (0)845 070 3811
E-mail: kara.l.mcdonald@freethcartwright.co.uk
Skype: kara.l.mcdonald.fc