Today the cyber world has revolutionized the manner in which business is performed. Almost any contract can be signed online and all issues regarding the contract can be dealt through the internet. Only a very few areas require the presence of the parties and the actual signing of the contract in the physical form (such as certain financial and real estate contracts). The presence of online contracts has also resulted in a lot of issues developing with relation to the terms and conditions of the contract. In the UK online contracts have changed the manner in which business is conducted. Usually, there is not much difference between the online contracts and the physical contracts.
The same requirements are legally binding on both parties. Over the years, the legal systems are beginning to recognize the ability of the internet to help generate business and develop useful agreements between various parties across the world. The legal system is beginning to trust the internet over security and genuineness issues slowly, as compared to earlier.
However, the legal systems are also concerned about the manner in which these security and genuineness characteristics can be breached by several means, and by several groups of people. Let us now look at the characteristics of online contracts (Out Law, 2008).
A contract is nothing but a formalisation of an agreement between two or more parties keeping in mind a particular subject to work on. The terms of the contract can be vast or can involve a specific area. A contract is enforceable by law, and in case of breach of the contract by either of the parties, legal remedies are available. Some of the areas in which contracts can take place between two or more particulars include employment, supply of logistics, provision of medical services, sale or transfer or real estate, settlement of a dispute, tender fulfilment, ownership of the intellectual property, etc.
In developed countries, it is seen that contracts are being utilized in vast areas, and the terms of the contracts are more and more advanced compared to the developing nations. In developing nations, the chances of using oral contracts are higher. Besides, in developing countries, the legal system may not recognise the use of online strategies in developing effective and foolproof contracts (Out Law, 2008, Hoffman, 2008, Larson, 2003).
A contract is governed by certain statutory laws and by certain common laws. It has been seen that the common laws governing the contract are greater than the statutory laws, as very often new issues arise and courts develop newer strategies to handle these issues. Besides, private laws (created by certain agreements made by both the parties) also influence the contracts. Many private laws may bypass the laws laid by the state and by the court (Out Law, 2008, Hoffman, 2008, Larson, 2003).
There are certain elements a contract needs to fulfil in order to be legally acceptable. These include:-
· Invitation to treat and offers
· The provision of the offer
· Acceptance of the offer
· Consideration of the contract to be binding
· Ensuring that it meets all the statutory requirement and is not banned under certain laws
The three basic steps of the contract include: the invitation to offer, the offer and the acceptance.
It is very important to distinguish between these three stages. In an online contract, these three components also need to be kept in mind. An online website needs to be considered like any other offline showroom. An advertisement should be considered as a form of invitation to treat or offers, and not the offer itself. Once the customer submits his or her order or makes his or her intention to buy the product known to the seller, it would be considered as an offer.
The seller is free to accept or reject the offer. However, if the advertisement is presented as an offer (specifically) and not as an advertisement, then the order placed by the consumer would be considered as an acceptance to the offer, and the seller cannot reject the acceptance made by the buyer. It is very important for the seller to state in the terms and conditions that advertisements placed on the website are merely invitation for offer rather than offers (Out Law, 2008, Larson, 2003).
Invitation to treat and offers – The UK legal system gives a great amount of importance to this element in the contract. A display of an object in a store or mall should not be considered an offer to sell, but rather an invitation to treat. If they are considered to be offers, then the seller would compulsorily have to enter a contract with the buyer and should not refuse to sell the product. This invitation to treat comes necessarily before the contractual process. It suggests that one party would like to enter into a contract with another party (Out Law, 2008, Larson, 2003).
The provision of the offer – In this stage, the individual who would like to enter into the contract with the seller, would go into the seller’s premises and show interest in buying the product. The potential buyer would make a statement to the seller, which is the ‘statement of the offer’. The seller may or may not accept all or part of the offer, but may also bargain with the potential buyer in order to keep their interests focused. The seller can refuse the contract for whatever reason.
This is ensured only if the items displayed are considered to be invitation to offers rather than offers themselves. Both the parties need to have a mutual understanding for the contract to work. They need also to have a close idea of the area in which the contract would be dealing with. For example, if the contract is about selling or buying land, both the parties need to have an idea of the real estate issues (such as the market value of the land, legal issues, etc), for the contract to be successful (Out Law, 2008, Larson, 2003).
Acceptance – Once the offer is placed by one party, it should be accepted by the other party. It is important to remember, that not all offers should be accepted. Some parties may find the terms of the offer as unacceptable and may further want to bargain on the terms and conditions. The other party should be clear with the terms and conditions of the contract and should not find any issue confusing. The acceptance of the offer needs to be communicated to the other party, for the contract to get working (Out Law, 2008, Larson, 2003).
Both the parties would have to ensure that the terms and conditions of the contract (mentioned in the contract document) would be met. Meeting with the terms and conditions is contractually binding. When the dealer is selling his products to the buyer, all the seller’s terms and conditions should be made known to the buyer and agreed upon. In the same way, the buyer would have to make known his terms and conditions to the seller, which have to be agreed by the seller.
During any process, whether online or offline, the terms and conditions would have to be presented as a separate page, and has to be accepted by both the parties either in the form of signature or clicking on the agree button, before the contract is fulfilled. It is also important to remember that a counter-offer presented is not considered as an acceptance to the offer, but as a rejection (Out Law, 2008, Larson, 2003).
To ensure that the online contracts are hassle free, merchants may have a separate process to ensure that the terms and conditions of the contract are known to the buyer and do not create any issue. One way of doing this is to have a link for the terms and conditions. The buyer would have to click on this link in order to view the details of the terms and conditions. During the ordering process, the buyer would have to tick the ‘Agree with terms and conditions’. Once this link is ticked, the customer can go ahead with the contract.
It is important for all the contracts to have the customer aware of the terms and conditions, and at the same time make the terms and conditions available to the customer. Some of the online merchants utilise Java-script validation forms during the order process. If the user has turned off the Java-script on his system, then without clicking the “Agree with terms and conditions’ box, the order would be completed and hence the contract cannot be validated. Even if the user does not tick this box, the order would be completed. Hence, it would legally ideal for the online merchants not to have a Java-script page during the ordering process (Out Law, 2008, Larson, 2003).
During an online contract process, an automated receipt process is usually followed to ensure that the buyer is informed of the acceptance of the contract by the seller. However, if an error has occurred in the pricing or if limited products are made by the seller, then such an automated response process would be causing a lot of inconveniences. The customer has to be specifically informed that the automated response is not acceptance of the contract, but just that the order has been received by the seller.
The automated response should clearly mention to the buyer that the seller would have to check the order before final acceptance has been performed. This entire process need to be clearly mentioned in the terms and conditions (Out Law, 2008,).
Consideration – Each of the party needs to draw certain benefits of the contract for it to be binding on them. This is a clause under the English laws of contracts and not under the Scottish law (each party must be paid for the services or products being provided). The seller would have to provide the goods or services to the buyer, whereas the buyer would have to pay its cash or credit equivalent. The delivery should be completed for the contract to be enforceable (Larson, 2003).
Ensuring that the contract meets with all the statutory requirements – The contracts that has been signed should be done for a purpose which is legal. Contracts are meant to establish a healthy and a working relationship between the buyer and the seller. However, it is important that this relationship is not performed for an illegal purpose. All online contracts are subjected to the same laws as offline contracts.
The terms and conditions of the contract imposed by both the parties have to be ‘reasonable’. If either of the party has an extraordinary term or condition, then it has to be highlighted to the other party to make sure that they are aware of it and is agreed upon during the contractual agreement process. For online contracts, the courts would decide the reasonable nature of the terms and conditions of the contract. Each and every nation would have a set of terms and conditions that would help guide the internet service providers in providing online contracts.
Each and every nation has clearly stated the importance of providing the terms and conditions to the opposite party. For an online service provider, the terms and conditions of various nations would have to be fulfilled so as to ensure that no hassles occur during business. If the terms and conditions of any one nation are not being met, that particular nations should clearly be excluded from business (Larson, 2003).
In the UK, online contract laws came into existence in the since the year 2000. The consumers had to be provided with certain information before and after the contract were signed. Besides, the consumers had to be given a 7-day period during which, they could withdraw from the contract, without assigning any reason. This ensures that the buyers get good quality of products for their purchases. The online contract laws actually came into existence in the year 2002 in the UK. In the year 2004, certain online contract laws came up for financial products and services.
In the US, the FTC has heavily criticised the use of click-wrap process online. The buyer would have to agree to the terms and conditions, but need not have to go through them before actually agreeing to them. Several courts in the US have clearly stated that agreements that do not bring in the special terms of the contract to the buyer, they would not be binding on the buyer. On the other hand, the browse-wrap process would compulsorily need the owner to read through the terms and conditions of the contract. It is a more valid process legally (FTC, 2008, Rambarran, 2006).
It is also important that in international online contracts, the jurisdiction of the court settlements is mentioned and agreed upon by both parties. This is a special requirement under online contracts, as the area where the buyer or the seller is existent is not known. Besides, the area where the contract is actually agreed upon is also not known. Hence, it is very important to mention under which court the issues would be dealt with in case there is an issue. However, if the court is not mentioned, then the court in which the consumer lives would be chosen.
One of the areas of interest recently with regards to online contracts has been online memberships. Many of the websites would be trying to increase the number of subscriptions through advertisements. However, it is also important to keep legal issues in mind. There are certain basic issues to be kept in mind before the contract is enforced:-
Agreements should be made for people above the age of 18 Nature of services that are provided Benefits to be provided to the members The conditions under which the contract can be terminated and whether the remaining amount would be refunded The obligations of the members Restrictions for the members i. Regarding prevention of assignment
ii. Breaking privacy and IP related issues
iii. Not using the membership for commercial purposes, beyond that mentioned in the contract
iv. Not causing inconveniences for the site
Unlike, a click-wrap form in which the user may not activate his Java-script, the browse-wrap form need not have the Java-script activated. All the terms and conditions are reasonable and hence would be binding on both the parties.
The user would have to maintain responsibility of his username and password. In case the user does not safeguard his username and password, then his account could be terminated and the paid amount would be forfeited by the company. This is clearly mentioned in the account details. I do feel that these terms and conditions are reasonable, as the organisation is trying to protect misuse of its accounts and is doing to it to protect other users who are using the site. The terms and conditions are presented in the browse-wrap form, in which he has to click to agree.
On Line Contracts-Pre Contract Issues and Distance Selling
Consumer Protection (Distance Selling) Regulations 2000 are a set of rules and regulations that protect the consumer from online transactions with merchants. It applies to all online contracts, and has a few exceptions. Before the consumer enters into a contract with the seller, a few important points should be made known including:-
· Name and address of the seller
· Description of the price and details of the goods
· The costs of delivery
· The duration the offer would remain valid
· The duration during which the buyer has the right to cancel the order and return the goods
· The duration the contract would remain valid (Halberstam, 2008, Out Law, 2006).
All this information must be made to the buyer and confirmed before the contract is completed. The buyer has the right to question the seller through phone, email or fax. The after sales guarantee should also exist to help protect the consumer. The terms and conditions should be made known to the buyer either in click-wrap or browse-wrap form.
The consumer has the right to cancel the online order and claim full refund during a 7-day duration if he/she is not satisfied with the product. The consumer has the obligation to protect the goods during this 7 day duration. There may be certain issues under which the consumer has no right to cancel the order for the 7 day duration including software, books, periodicals, magazines, videos, perishable goods, etc (Halberstam, 2008, Out Law, 2006).
According to the statutory and regulatory requirements, the user has to protect the username and passwords given to him. He should take sufficient amount of precautions and care in protecting the passwords. In this case, the user has stored his password online and at the same time not protected his computer from use by others. Rob has been using his username and password and has abused other members of the group. Jez may have also created a breach by abusing his office internet policy, by using it for personal purposes.
This may be a separate violation, which needs to be addressed by the Employers. As Jez has not taken sufficient precautions to protect his online account, his account can be cancelled and he cannot claim any refund. Besides, he is also liable to pay for the damages suffered by other members of the internet chat group. T
he consumers can sue the internet chat organisation for damages under the statutory and regulatory requirements. In turn, the organisation would have to sue Jez for violation and claim compensation. The violation created to the employers depends on the network policy of the employer’s organisation. If the organisation has a policy of preventing the employees from using the internet for personal purposes, then Jez has violated his organisation’s internet policy and the internet chat company cannot claim vicarious liability from the employers.
However, if the organisation permits chatting and use of the office computers for personal purposes, then the organisation would be vicariously liable for the online violations. Jez can say that he has been using the office computer for personal purposes, and the organisation has to protect his computer for use from other people. If the company permits chatting and personal browsing on the office network, then JEz has full right to store his username and password on the computer.
The organisation would have to protect the user from other users by providing him with a separate user account to open the office computer. If the office permits use of the computer for personal browsing and chatting, then Jez can hold the organisation vicariously liable for not adequately protecting his computer by use from others (Out Law, 2006).
Today, online auction websites (OAW’s) have become very popular, for people to buy and sell very unique and cheap products. The internet has turned out to be a very useful media to enable sales of such products, across the globe. Online business may connect various groups including consumers to consumers, business organisations to business organisations or business organisations to the consumers. Many of the OAW’s such as E-bay have specifically said that in case of consumer to consumer business, they would be acting as mere venue providers and cannot be held more liable that the role it is playing.
This was inferred in the case Gentry vs. eBay (2005). The Consumer Protection Regulations are meant to protect the consumers from businesses. However, in a customer to customer scenario, there may be no specific legislation or a legal system which can be applied, as both parties do not have many responsibilities as compared to business organisations.
The consumer would be playing the role of a buyer or a seller in a customer to customer scenario. In the past, the consumer protection statutes have been applied in such situations, which may not always be appropriate. In such situations, alternative dispute resolutions seem to be appropriate. One of the largest online business organisation namely ebay has provided an alternative dispute tribunal to help resolve the consumer to consumer cases especially the online auction issues.
This tribunal is known as ‘consolidated dispute console’. In this tribunal, both the buyer and the seller can meet, and all issues can be sorted out. A panel of professionals would be helping the consumers to resolve all disputes. Consumers can also search insurance organisations which would be covering the online auction websites from any risks. In the litigation in courts, the consumers face a lot of disadvantages including:-
High costs Difficulty in acquiring the data Getting information of the opposite party (Gu, 2007, Rogerson, 2003). Several international organisations are trying to make online auctioning not only less risky, but also more pleasurable for the consumers. Online auction frauds are the most reported every year with consumers. Some of the fraudulent issues that can develop include late shipment, no shipment at all, poor quality of goods, goods not promised what they are actually are, bogus payments, etc.
The web site would not be taking any responsibility. However, the consumers should follow the terms and conditions posted on the website. An auction would compulsory mean that the product would be sold to the highest bidder. If the consumer fails to sell the product to the highest bidder, then the very need of auction would not be met. This clearly constitutes online fraud, and is punishable. The user is making the internet a difficult place, by promising to sell the product, but not actually selling it. It is also illegal for the seller to place ‘shall’ bids with the intention of raising the price of the product.
The seller cannot also sell anything that is illegal. The seller has to ship the good within a period of 30 days to the buyer (or the time frame which has been mutually decided). In this case, Sue is bound to follow the terms and conditions of the online auction website. Once the consumer who has bid highest is available, the seller should get into touch with him.
If the seller wishes not to give the product to the higher bidder, then he/she should get in touch with him. The buyer if not provided with the product can approach the alternative dispute means or litigate in court. When the seller is advertising his/her product for online auction, he/she should do so accurately and sincerely. The seller should clearly state whether the product is new, used or a reconditioned product. They should be able to answer all the questions the buyer has about the product or the service.
It would be better to include a photograph of the product to ensure that the buyer has an idea of the product and to prevent any legal dispute from arising. The minimum bid of the product should be clearly stated, and the terms and conditions under which the product would b shipped should also be clearly mentioned. If the highest bidder has followed all the other terms and conditions, then I do not think so that the seller can withdraw from selling the product to the highest bidder. The seller has created a violation under the contract laws as he has agreed to the terms and conditions of the web site. The web site terms and conditions can be considered as the basis for holding the seller liable. Some of the legal remedies that Tara can go in for to sue
Sue and/or the Magazine company for not giving the product includes:-
· Filing a complaint before the attorney general’s office
· Filing a complaint before the consumer protection organisation
· Several trade organisations such as the Federal Trade commission or the Bureau for better Business
· Alternate dispute resolution (such as E-bay’s Consolidated Dispute Console) (Gu, 2007, Rogerson, 2003).
As online trade is another version of auctioneering, the plaintiff and the defendant should examine the offline auctioneering rules to find out who could be liable.
Domain names have become a very important strategy for any online company. Even the offline companies are considering developing a strong online strategy by using an effective domain name. As the internet knows no boundaries and more and more people are logging into the cyber world, domain names are becoming more and more popular and precious. It may be very difficult for a company to choose a right domain name. In certain cases, even if a good domain name can be selected which would be helping a company develop profits; there may be certain disputes with other companies who engage in selling similar or different products.
Such domain name disputes can be solved through several mechanisms including the Internet Corporation of Assigned Names and Number (ICANN) and in extreme case even to the British Courts. The ICANN plays a role in registering domain names by developing certain registration processes. The issues of domain name disputes is usually taken to court, if the plaintiff finds it difficult to prove bad faith on the part of the defendants, or wants to cover up extreme damages.
The party, to whom the case is ruled in favour of, can also claim the costs of litigation. The court can also place injunctions to prevent future misuse of domain names by the opposing party. Courts have to follow a special procedure when dealing with domain name disputes as certain international issues are involved. However, courts do not provide speedy recover as compared to the ICANN process. Usually, the ICANN provides a recover within one or two months and provides its services at $ 1500 for a one-panel jury and $ 3000 for a three-panel jury.
For cases involved the .UK TLD, UK pounds 750 has to be paid as Nominet adjudicator's fees. Another advantage with filing through the ICANN is that jurisdictional issues need not arise, as the ICANN has jurisdiction over the internet in any part of the world. Once a case is filed with the ICANN, both the parties cannot transfer the domain name to any other party unless the issue is completely settled. However, the ICANN has developed rather inconsistent decisions (Out Law, 2008).
Cats United Co Limited has been in the English Market since the year 1962, and has been selling their products which basically include pet cats. On the other hand, catsunited.com is an internet magazine that is using the internet to provide certain services such as online chatting and social networking, sale of products, shopping, auctions, etc, for several years. It has a strong identity as an internet service provider, and no user has been confused between the internet service provider and the pet cats company. There is no tangible link as to show that the internet magazine company is infringing on the trademark of Cats united.
Catsunited.com would not be infringing on the trademark of Cats United Co Limited if it is not dealing with the same products as Cats United Co Limited is dealing with. The Court handling the infringement has to also determine how much well-known the Cats United Co Limited trademark is, in order to demonstrate that the internet magazine is not using a well known trademark to attract people and gain unlawfully. If Cats United Co Limited is trying to use a well-known trademark, they could be held for tarnishing or diluting the pet’s company trademark. In the US, the Lanham’s Act has been utilised to protect well-known trademark by other traders who are trying to dilute or tarnish their name.
It also prevents traders from using similar trademarks wherein the class of product would be completely different. In the Case Habro Vs Intenet Entertainment Group, one of Habro’s trademarks namely ‘candyman’ was misused by an internet company selling pornographic material. The court said that such an infringement would create confusions in the mind of the people and could tarnish the strength of Habro’s trademark. Brazil in the year 1998 came up with certain regulations to protect well-known trademarks. All well-known trademarks are protected by preventing registration of similar or identical trademarks (Forsythe, 2008, Ramakrishna, 2008).
Three issues need to be considered in the trademark and domain name infringements:-
The strength of the trademark of the plaintiff The deception caused between the defendant’s trademark and the plaintiff’s trademark The chances of creating confusion in the mind of people (Ramakrishna, 2008).
The issue of domain name dispute arises specifically when the internet company specifically deals with the same class of products or services. In these cases, Catsunited.com has been involved in the auction of cats. Catsunited.com would not be infringing the trademark of Cats United Co Limited if the company is trying to create a separate identity for itself on the internet and is not using the name of the Pets Company to create confusion in the minds of people. The internet company is dealing with a separate class of products and is involving different people.
The website has been specialised in social networking, shopping and auctioning. Even if a few products of pets are sold across the internet, it would not be infringing upon the trademark of the pet company, provided catsiunited.com does not say that it is dealing with the sale of pets specifically. However, if castunited.com specifically says that it is dealing with the auction of casts over the internet, and makes all arrangements in the sale of pet cats, then it would be infringing upon the trademark of the pet company and could be held liable under trademark or domain name infringement. This was established in the Ozu case, a Spanish search engine titled “Advernet’.
It was registered as a trademark in Spain. A few company staff left the organisation and started another internet domain by name ozu.com in the US. The Spanish court did not permit this, as it was infringing the defendant’s mark. Catsunited.com could completely coexist with Cats United CO limited, provided, they have a separate identity, deal with different classes of products and do not create confusion in the minds of the public.
Catsunited.com has established itself as an internet magazine company and Cats United co limited as a pet providing company. If Cats United Co Limited wishes to use the domain name catsunited.com, it would be infringing upon the internet magazine’s domain name (Forsythe, 2008, Ramakrishna, 2008).
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