"John Hancock" on the . . .
Web Form!
by Arthur L. Smith
Arthur Smith is chairman of the eBusiness Practice Group and a member of the law firm of Husch & Eppenberger, L.L.C. Contact him at (314) 421-4800 or email him at arthur.smith@husch.com
You'd think e-commerce is dead, what with the news of dot.com failures and Silicon Valley lay-offs. But that's far from the truth. Businesses large and small are finding ample opportunities to benefit from the emerging electronic marketplace. On-line procurement of supplies, direct sales to customers and disposition of surplus equipment are just a few examples of how companies are reaping the benefits of B2B and B2C commerce.
Businesses, which participate in this marketplace, should be aware that contracts made electronically are just as binding as the traditional paper contracts that form the basis of most transactions. The U.S. Congress, in legislation popularly known as E-Sign and passed last year, has decreed that, in most situations, an electronic signature is as valid and binding as a signature on paper. An electronic signature can be anything from a click of a button that says "I agree" to the act of filling in a check box on a web form or typing your name into a form field on a web page.
There are some key items that businesses should know when venturing into this brave new world of electronic contracting.
Those lengthy "terms and conditions" which appear on web pages may become part of a binding contract when you click "I agree" whether or not you have read those terms. In a case involving HotMail.com, a court ruled that a binding contract was created when the user electronically indicated acceptance of the terms in order to use the service.
If the electronic transaction you are about to make is important to your business, you had best take the time to read those terms. You may find a forum selection clause which provides that litigation arising out of disputes concerning the transaction must be brought in some distant location, or you may be agreeing to arbitration or to pay the other side's attorney's fees in the litigation. Those terms may also govern (or eliminate) any warranty rights you may have.
If you are offering your own goods or services for sale on the internet, you will want to make sure that you have your own terms and conditions to govern contracts. Those terms may be similar to the standard terms you use in paper contracts, with perhaps some modification to fit the electronic world; in any event, they need to be there. As the operators of Ticketmaster.com discovered, however, terms and conditions must be posted prominently in order to become part of the contract. If they are buried at the bottom of a web page in a fairly obscure link, chances are good the court will find those terms and conditions are not part of the transaction. An ideal design of your e-commerce marketplace requires that the user formally review terms and onditions and acknowledge them in some way in order to make those terms part of your contract.
Whether buying or selling, one of the most important challenges a business faces is record keeping. You have files of your paper purchase orders and contracts, and those are easily retrievable if a dispute arises. In case a dispute arises involving an electronic transaction, businesses need to establish procedures to record the information relevant to transactions, whether as a buyer or seller. Whether you use an electronic filing cabinet to retain copies of relevant terms and conditions or simply print out copies of the relevant pages from the web, it is important to have a procedure so that you have the necessary evidence in case of a dispute.
While the advantages of the electronic transaction of business over the internet are enormous, those advantages can be eroded unless businesses pay just as careful attention to these aspects of the e-transaction as they would in the paper world. As procedures are reshaped to take advantage of the opportunities of e-commerce, they must also be reshaped to avoid the pitfalls of electronic transactions.