You have set up your online shop and orders are pouring in. How will your legal obligations and rights differ from physical shop owners? This article explains.
What does a budding e-merchant who has just graduated from bricks-and-mortar to clicks-and-mortar by adding an e-commerce business space need to note legally?
The law of contract, whether in the physical or virtual world, governs the rights and obligations of contracting parties on e-contracts. Under Singapore law, this is recognised by the Electronic Transactions Act (Cap 88).
The contract law's basic position is that contracting parties must be informed of the terms and conditions before entering into a contract.
Most online contracts are regarded in law as 'standard' form contracts because all approaching customers are given the same standard terms and conditions by a company.
Under such contracts, an e-merchant must ensure that a potential e-customer is sufficiently notified of the terms and conditions of a transaction before an order is completed and transmitted to the emerchant. Otherwise, a court may deem the contract as invalid or not binding.
There are many ways of creative Web presentation to design this. In practice, it is convenient to design a scroll-through online interface before an e-customer clicks at the final juncture of 'Submit' and 'I accept all terms and conditions'.
The design of a website should present terms and conditions clearly and make them as accessible as possible. The presentation of the Web page must clearly show the terms as legal terms of an online contract so they cannot visually be mistaken for anything else.
In particular, limitation or exemption terms (which there should be), limiting or exempting an emerchant's liability in certain circumstances, should be highlighted even more clearly to potential ecustomers by way of visual cues, such as having the terms bold in red or in upper case, because these terms are regarded as potentially disadvantageous or detrimental to a customer.
A e-customer must know precisely who they are contracting with. Therefore, the full corporate name of the e-merchant and relevant contact details, such as registered address, address for correspondence, fax numbers and e-mail addresses must be set out clearly.
For an online business, e-customers can come from different parts of the world, so the payment currency is particularly relevant and should be notified to potential e-customers.
As in any sales transaction, customers must know what they are paying for, so the price of their purchase must spell out whether it includes handling/delivery charges, GST, Customs duties and/or insurance charges.
To create a legally binding contract, an e-merchant must also set out clearly online his company's policy and conditions on the method and procedure for accepting an order. If there are any add-on terms, the e-merchant must set out how and when these apply.
There are generally two types of online transactions.
The first is an e-transaction involving the sale of goods or services. The Web, in this case, is just the channel of communication, which is followed up by physical delivery of goods or services. A well-known example would be Amazon bookstore.
The second type of online transaction involves a direct online transfer of information and services. So the Web is both a channel of communication and the medium of delivery. An example would be buying computer software programs online through downloads.
Be clear about the different methods and timing for the delivery of the goods and services. In particular, with the first type of online transaction, issues relating to the passing of the risk of damage or loss if there are any geographical restrictions on the goods and services must be made clear.
For an online business website, copyright, trademark notices and privacy policy have to be included. The copyright and trademark notices highlight that these rights are reserved. Republication or redistribution of your online business content, including by framing or similar means, is prohibited without your business's prior written consent.
A good privacy notice would include how your business takes steps to ensure that the e-customer's details of credit cards/payment instruments and personal information are secured on your Web system.
Since online business transactions transcend territorial borders, in the event of a dispute, the proper applicable law for an e-transaction must be stated outright and it must be made clear which country's court or forum has the authority to hear the case.
Increasingly, arbitration forums have become the preferred option to turn to for speedy, cost-effective business dispute resolution, and in the case of Singapore, there is a specialist intellectual property court as well.
A trademark is any name, word, symbol or device used by a merchant to identify their goods and/or services and distinguish them from those used by other merchants. The main purpose of a trademark is to identify the source of goods and services and thereby prevent consumer confusion.
Online businesses are borderless, so the probability of coming across competitor businesses with a similarity to your business name are increased exponentially.
Thus, trademark disputes can arise. It is, therefore, a priority to come up with a unique identifying name for your business to avoid any potential trademark infringement lawsuits. A thorough online search of your target sector business would be useful.
While the registration of a trade name or trademark is not essential for starting a business, registration of your trademark with the Registry of Trade Marks is advisable if you have a major investment in your brand or business name.
Sometimes, an SME will try to start out by testing the online market first. You may wish to wait until your business is up and running, and you have some gauge of its profitability before incurring further registration expenses.
- The writer is an IT committee member of The Law Society of Singapore. The above legal discussion is in no way a substitute for professional legal advice on individual cases.
- This article first appeared in The Business Times on 25 March 2008 and information is correct at the time of publication.
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