A paper by Alex Chapman of Briffa (www.briffa.com), published by NMK in February 2000.

For those not trading on the internet the thought that they might be losing out on a potential goldmine is ever present. Few have reviewed the pros and cons of offering their goods and services on the internet and decided that the plunge is not worth taking.

This article looks at the issues facing business managers when setting up site and points you in the right direction to trouble free trading on the internet. Laws apply in cyberspace as they do on the ground, the trick is to understand where the practicalities of doing business on the internet mean that you need to revise your current practice as set out in your terms and conditions to fit the cyberspace situation.

This article will look at the three areas which have caused the most �legal� excitement and will suggest ways in which you can manage the risks they present.

• Contracting online � how are contracts made and enforced on the internet
• Consumer law
• Branding and other intellectual property issues

Contracting online

The difference between internet and traditional shop buying is that the vendor and purchaser of goods and services are not face-to-face but at opposite end of a computer network. In order to have a binding contract you need to ensure that you have made an offer which has been accepted. In addition there must be consideration, usually money being paid. When the parties are face-to-face these areas can be explored and clarified and there is less risk of something going wrong, in terms of buying something which is not suited to the job you want it to do or not at the price you thought you were getting it for.

Many of these misunderstanding can be avoided by having terms and conditions which are geared to the online situations. If you have used a set of terms and conditions in your business revisit it with a view to what you want to achieve through online trading. In addition to what is said in the terms and conditions you should consider how the terms will be incorporated into the contract. For terms to be valid they have to be brought to the purchasers attention before the transaction is concluded. This means that a purchaser must be shown terms before the purchase is made, s they cannot be hidden on the site, difficult to use or understand or avoidable altogether by the purchaser in a hurry.

By way of example, properly drafted and appropriately accessed terms and conditions could have saved the store Argos a lot of bad PR recently. In this case visitors to the Argos were delighted to find televisions on sale for less than �3.00. Unsurprisingly, Argos had received hundreds of orders wrongly priced at �2.99 � rather than the �299 the company meant to charge. Argos had taken certain precautions. For instance their web site contained a disclaimer that all goods were �subject to availability�. There was also a statement that � all prices are subject to change without notice�. However purchasers had to access the help facility before they found the heading @general Information� under which the conditions were noted. Argos declined to honour the orders placed, claiming that as the orders had not been confirmed, there was no contact with the customer. The case is not yet settled but it highlights that it is worth reviewing your current terms and conditions and adding extra terms to allow for the fact that it is easier to make mistakes where the purchaser and vendor are not face-to-face.

General Law

Just because a service is provided via the internet does not mean it escapes regulation under domestic law. Examples of particular importance are:

English law requires that businesses disclose the full names of partners, or of the Company and an address for service (a company�s registered office) on business documentation. As a matter of good practise this should be applied in respect of websites and in particular sales order forms.

There are also rules regarding the processing of personal information and that includes information relating to employees. A business which puts its employees details, client lists and the like on the website may breach the Data Protection Act.

Branding and Intellectual Property

Intellectual property rights are valuable business assets. The most important in relation to e-commerce are trade marks and domain names by which businesses brand their services and copyright by which they protect their creative work from being copied.

• Copyright exists in artistic, literary and musical works (including computer software); in the shape of a three dimensional work and in works such as films for the life of the author plus (in the UK) up to 75 years;
• Trade marks give 10 yearly renewable monopoly rights in signs which can be represented graphically and can distinguish goods and services;

Whilst the internet increases the size of your potential audience it also increases the risk that you creative work with be taken and used without your consent. Worst still you need to exercise extra caution in respect of material you use on the wen to make sure it doesn�t infringe another rights anywhere in the world as the internet exposes a business to legal action in any territory.

Trade marks can be registered rights which distinguish your goods and services from those of another trader. There is a system of registration but the rights are essentially territorial which means that you need to register for each type of good or service you wish to be covered by the trade mark and in each country. The territorial system of registration causes problems where a business starts to trade over the internet. This is because it is possible that sometime has a better right than you to use the name in a particular country and for a particular class of goods or services. Quite separate from this the domain name or address of the business. Putting your business on the net will infringe those rights. Domain names work in a different way to trade marks in that you can get them whether or not you already have a trading reputation in the domain name. They work on a first come first served basis.

Copyright

Once online, businesses will have other considerations. The content of a website may include some trade mark matters, such as the advertisement of goods. These should not be displayed unless permission from the trademark owner is given. In addition where a business gets its material from and what it makes available may have copyright implications.

A business engaging a third party such as a freelancer or contractor to design and build a website will not own the copyright in the website unless they sign a written document states that it will. The business should ensure that this paperwork exists as it would be disastrous if an employee left a business and took with them all the work the business relied on for the success of its website.

Those building websites might take the opposite view and wish to retain their copyright if not in the finished product, in the code. Here licence agreements are recommended. Joint copyright is not an option since it can prevent one party using the material without the other�s consent.

Copyright in website material is usually infringed in two main ways. One is via the incorporation of a work or a substantial part of the work such as graphics, animation or text belonging to another on the website. The second is where third parties download software, music, video etc from the website. Unless the website controller has obtained permission to do these acts it is likely they are infringing copyright. Further it is undecided whether offering links to other websites or indeed any website that expressly forbids linking, constitutes such copyright infringement.

There is however, no copyright in an idea alone. This can only be effectively protected through confidentiality or recording the idea.

Software is not patentable in Europe. Patents for software exist in other countries, especially the USA, which has recently granted a patent to the inventor of an auction website monopoly rights to it. Any person who now trades on a similar idea may face litigation in the USA for patent infringement provided the service is made available in the USA. The nature of the internet means that if it is available in one country it is available in all.

General Law

The internet may be vast, however it is easy for a business with the right motivation, skills and goods or services to establish itself rapidly. Upon doing so, businesses must be cautious of how they use that position. If a business is seen in any way to be abusing it, for example by imposing dissimilar trading terms in different areas so as to stifle or remove competition, it is likely to face substantial fines.

Contracting Online Concluding contracts online is a problem affecting internet trade. It is hoped that European legislation will help overcome this but businesses will have to wait. In the meantime, businesses must look after themselves i.e. through their �terms and conditions� (T&Cs) and �clicknology�.

The law on contracting on the internet is the similar as at any other time. In order for a contract to be concluded there must first be an offer which is accepted unconditionally. There must also be an intention to create legal relations and the exchange of money or monies worth as consideration for the transaction. The terms of the contract are defined by the terms of the offer and one must therefore ensure that its T&Cs are the ones incorporated into the offer.

On the internet it is uncertain whether the person clicking on an icon or entering credit card details is offering to buy the goods or services on offer or whether that person is accepting an offer by the controller of the web site. If it is the former then the purchaser will conclude a contract at the price advertised whereas if it is the latter the seller will be entitled to turn down the offer. Businesses can to some extent eliminate this uncertainty by putting the correct wording and procedures in place on their website. In its T&Cs a business can stipulate when it considers a contract to be concluded which the customer must acknowledge prior to being in a position to make the contract. This prior acknowledgement is essential and it is important that the T&Cs are not avoided, for example by way of a bookmark or link. It forms an offer of the right to download, use and view software that comprises the next web page. By clicking to acknowledge and accept these T&Cs the user will be undertaking to comply with them in consideration for being allowed to use the new downloaded page. The business may therefore define the point at which the contract is concluded and the terms of that contract.

Alternatively T&Cs may state that the content and prices on the website represent an invitation to offer and not an offer itself but that by making the offer, it is done subject to the T&Cs. Provided that the business exercises some control between receiving the offer and dispatching the goods it will be able to check that what it is contracting to do is what it intends to do and at the right price.

When someone places an order for a business�s goods they will need to send information to the business�s server and take an active step to do so. This may be by way of a click icon with the words �I WISH TO PURCHASE THE GOODS SELECTED FOR THE PRICE STATED.� By clicking �OK� the information is sent to the server and represents an offer.

The business may then send an automatic response which might say �YOU HAVE OFFERED TO BUY 7 WIDGETS AT �3 EACH ON AND SUBJECT TO THE FOLLOWING TERMS AND CONDITIONS IS THIS CORRECT?� Two click icons with the words �YES� and �NO� respectively should accompany the message which represents a request offer again explicitly subject to the T&Cs. If the customer clicks �YES� then it confirms and therefore remakes the offer, at which point the business may send an automatic or manual acceptance.