E-Commerce Law Electronic Contracts 2

The creation of electronic contracts via the Internet. One of the most important ways that e-commerce can be effected is through the Internet. In fact the rise in e-commerce throughout the world has in the most part been due to the increase in the use of the Internet.

E-commerce and the Internet There are numerous online stores, some more famous than others, but all engage in e-commerce. www.funrecords.de www.marksandspencer.co.uk www.amazon.co.uk www.crocus.co.uk

Why trade on the Internet? 1. Virtual shops can be open 24 hours a day, 7 days a week, 52 weeks in the year. There are no public holidays on the Internet. 2. Virtual shops do not experience the problems of location. They are always as close to the consumer as the nearest computer. Virtual shops can take advantage of huge economies. For example, heating, lighting, staffing, staff training and perhaps most importantly High Street rents. 4. A virtual shop can appear as large as the largest department store but be based in a small room.

What is the legal status of a website. When considering trading on the Internet, it is necessary to determine whether a website amounts to an invitation to treat or an offer for sale. Let us look at a real life example.

www.argos.co.uk Late in 1999 the UK’s catalogue shopping company ARGOS started its own web site in order to take advantage of the e-commerce revolution.

www.argos.co.uk On their website, Argos made a pricing error. They misplaced the decimal point and priced a Sony Nicam TV at £2.99 as opposed to £299 – a saving of 99%. Word spread and before the mistake was noticed Argos had received orders for hundred’s of these bargain TV’s. Argos refused to honour the sales.

www.argos.co.uk The legal issue here is: 1. Was the website offering the televisions for sale? Or 2. Was the website merely inviting offers from the public as a whole?

Proposition 1 If the website was offering the televisions for sale, then the orders by the public would amount to acceptance. Argos would be legally obliged to deliver the televisions.

Proposition 2 If the website was an invitation to treat then the customers orders would be offers to buy which Argos would be free to either accept or reject.

? In order to answer the problem we will need to go back to basic principles. There are three cases that are of interest.

Basic Principles In order to determine the answer to this problem we need to consider previous case law and see how it fits in with the current situation.

Is there any case law of relevance? What is an e-commerce website most similar to? Advertisements? Shop?

Adverts v Shops There are some similarities between both of these and therefore 3 cases should spring to mind. Partridge v Crittenden Fisher v Bell Pharmaceutical Society v Boots

Partridge v Crittenden [1968] 2 All ER 421 Facts An advert was placed in a magazine which read: ~ “Bramblefinch Cocks, Bramblefinch Hens, 25s [£1.25] each”

Partridge v Crittenden He was reported to the RSPCA who brought a prosecution against him. He was charged with offering for sale a protected species. He was convicted of this offence.

Partridge v Crittenden On appeal it was held :~ The advert was an invitation to treat and not an offer for sale. The conviction was therefore quashed.

Partridge v Crittenden In this case the Court suggested, albeit obiter, that where a retailer was advertising goods it was likely that this would amount to an invitation to treat as stock would be limited and the retailer may find that he is unable to provide goods to all who want them.

Fisher v Bell [1961] 3 All ER 731 Facts A shop keeper was prosecuted for offering for sale an offensive weapon . The shop keeper had displayed a flick knife in his shop window.

Fisher v Bell Held The display of an article with a price tag in a shop window is an invitation to treat. It is not an offer for sale

Pharmaceutical Society v Boots [1953] 1 All ER 482 Facts This case concerned a self service shop. Customers would pick up their chosen items from shelves and then take them to the checkout where they would be sold.

Pharmaceutical Society v Boots Some of the items on the shelves where deemed poisons and had to be sold in the presence of a pharmacist. A pharmacist was present at the checkout.

Pharmaceutical Society v Boots Held The court decided that goods displayed on shop shelves were invitations to treat. When a customer took the items to the checkout s/he was making an offer to buy the goods. This offer to buy could be rejected or accepted by the checkout operator under the supervision of the pharmacist.

Advert v Shop? In order to decide whether a website is an invitation to treat we need to decided which category a website falls into. Is it an advert or a shop?

What do you think? ADVERT SHOP

Advert v Shop In all likelihood an e-commerce website is likely to be deemed to be a shop. Visitors to the website are greeted with a shop window (the website home page) where perhaps the best bargains the shop has to offer are displayed.

Advert v Shop A shopper can enter the online store by clicking on part of the screen, or by searching for the goods that are required. Once a shopper has found the item that they want they will add it to their virtual shopping cart.

Advert v Shop Customers will then proceed to the virtual checkout. Prior to the checkout, the goods displayed on the virtual shelves will be invitations to treat and the shopper is able to put them into the shopping cart and remove them without entering into any contractual obligations.

Advert v Shop Therefore the law as it stands in Fisher v Bell and Pharmaceutical Society v Boots is likely to be correct and therefore the law that should be applied.

Argos Goods displayed in the virtual shop are merely invitations to treat. Invitations to customers to make an offer, which Argos is free to accept or reject.

Argos This can also be backed up by the obiter statement in Partridge v Crittenden regarding retailers making invitations to treat and manufacturers making offers (as they are able to manufacture extra goods to fulfil orders.)

Is the Argos site an invitation to treat? In this case, Argos eventually rejected them. Therefore on the face of the problem, there would be no contract. Alas this is not the end of the matter.

Argos’ shopping cart Argos employed a virtual shopping cart system. Customers who ordered a £3.00 Sony Nicam TV passed through the checkout without a problem. Customers were told that the order had been accepted.

Argos Customers were emailed thanking them for their orders and their delivery details were confirmed. In some cases, the money was even debited from shoppers’ debit or credit cards – later to be refunded.

The answer is probably yes. Does this mean that Argos were legally bound to deliver the televisions? The answer is probably yes.

Is there a possible defence to this claim? There is the possibility that Argos would claim that the customer was Snatching at the offer? Webster v Cecil (1861) 30 Beav. 62

Other pricing errors Since the Argos problem there have been other similar occurrences. Amazon – HP pocket PC for £7.32 Thai Air – London  Bangkok for TAX Lastminute.com – holiday for £29 million PC World – 100 CDRs for 89p + VAT

What is the legal status of a website? Again there is no authority on this. It would ultimately depend upon intention.