An Internet novice can easily end up the fly, not the spider, when dealing with legal traps in online trading. Willem J A C Reuvecamp of Morrison Kent guides the lay person through basic web site terms and conditions.

Many legal pitfalls await businesses launching into the World Wide Web. Increasingly, businesses operate their own web sites to provide business information, or goods and services to the public or potential customers. Sometimes they do this through a third party web site provider.

Major relevant legal issues about the display of information or the provision of goods and services on a web site relate to:
- The contents of the web site and any links to other sites included in it;
- Protection of the proprietary interest of the business in the content of the information;
- Enforceability of contractual rights and duties created by contractual arrangements entered into with visitors to the web site; and
- Risk management for potential liability for reliance placed on information displayed on the web site or for services and goods provided through the web site.

Whose law?
A web site will generally be subject to the law, including the tax laws, of the country where it is located.

However, since the Internet is an international network, a web site can be accessed from many countries by anyone. The content of the web site may be displayed and downloaded in many countries. This may also mean it will be subject to the laws of those countries. The same may apply to any contract entered into through the web site to provide goods and services to people living in other countries.

Different Laws
In operating a web site it is therefore not only the law of the country where the web site is located that should be considered. In principle, the law of any country where the web site is accessible or actually accessed from may apply and impose restrictions on the information to be accessed on or through the web site. For instance, if the web site contains material that is unlawful or considered offensive in New Zealand (say, expressions of racial hatred), it may also be unlawful or considered offensive in other jurisdictions.

On the other hand, content acceptable in New Zealand (say, a critical analysis of religious belief systems) might not be allowed in other legal systems if it was critical of the locally accepted belief system. The display or downloading of such information, or enabling this to be done, could be an offence in another country.

Similar examples may be given for the supply of goods and services through the web site to people living in another country. The nature of the goods or services may be unacceptable, or a contract to supply may be subject to certain conditions, licences, or other legal requirements in that country. For instance, in many jurisdictions the supply of drugs, medicines, and/or professional advice or services, is regulated, and different consumer protection legislation may apply.

Different Customs
The content of a web site should therefore take into account that people with a different social, cultural, ethnic, or religious background may visit the site, and the possible application of foreign law if they live in another country. Not to do so may cause considerable embarrassment and strongly impact on the reputation of the business, its marketing efforts, and exposure to legal liability.

Importance of Web-site Terms
It is possible to manage the legal risk of the use of a web site to some degree by including carefully drafted web site terms. There is no uniform law that automatically applies to disclosure of information or the provision of goods and services through web sites. There are some international attempts to create uniform codes for entering into contracts for goods and services, but, in the absence of applicable international law, local laws apply. Which national law(s) apply will depend on the law of the relevant state and the interpretation by the Courts of the relevant jurisdictions.

If web site terms are included, they will guide a Court on the intention of the parties. Unless provisions are included that are not acceptable in the relevant legal system, a Court may be expected to generally follow the intention of the parties as set out.

Web site terms may therefore be used to:
- Provide warnings about the contents of the web site to help visitors make an informed decision on whether they wish to access specific parts of the site. This shifts part of the responsibility for an actual or perceived "culture shock" to the visitor;
- Clarify the legal framework within which the information and/or the goods and services are intended to be provided. This will provide guidance to the Courts; and
- Obtain the visitor/customer's agreement to the terms on which the information, goods or services are provided. This will reduce the potential for dispute between the parties.

Company name
New Zealand law requires all company documents issued, and communications sent by or on behalf of a company, to state the name of the company. Not to do so may cause personal liability of the person issuing or sending the relevant document or communication, and constitutes an offence by the company and its directors making each liable to a maximum fine of $5,000. Accordingly, even if the business uses a different trade name, the web site should include the name of the company.

Privacy
Information about the visitor or customer is likely to be subject to legislation protecting his or her privacy. It may, in general, only be collected if agreed to. Collection, use, storage, and distribution of information should therefore not be done without the visitor/customer's express consent, and should be carefully managed and used for the permitted purposes only in accordance with the relevant law and any terms agreed. The web site may summarise its privacy policy.

Any use by a web site of cookies (files from a web site that are downloaded on to a PC and can monitor online habits) should follow privacy laws, and it is advisable to offer the visitor the opportunity to decline the placing of cookies on their computer.

Acceptance of Web-site Terms
The web site terms may identify which legal regime they have been prepared under, and which law should apply to any contract entered into. Those rules may be the local law or the law of a foreign jurisdiction, or the provisions of an international convention. The web site terms may also provide where the contract may be enforced.

To ensure that web site terms are effective, it is important that they are displayed and accepted before any potentially unacceptable information is accessed or goods and services are ordered. If the terms are not displayed timely, the visitor is not confronted with them, they cannot be printed out, or no acknowledgement by the customer is required, a Court may hold that there is insufficient evidence that the visitor/customer understood and agreed to those terms.

Disclaimers
It is, of course, important to ensure that the content of a New Zealand web site complies with New Zealand law. However, this may not be sufficient to offer protection against claims under a foreign law, which may apply if the web site is accessed from another country.

For instance, a disclaimer providing that all liability is excluded runs a considerable risk to be held ineffective in any situation where the party providing the service obtains a benefit. However, a carefully drafted limitation of liability clause, providing specifically the extent liability is limited to, and stated to apply only where no compulsory provision of law provides otherwise, may be effective in many jurisdictions. This would allow for local consumer protection legislation to remain effective.

It is possible to provide that New Zealand law will apply to the contract and that the contract will be enforceable in the New Zealand Courts (or those of another country). But there is no guarantee that a foreign Court will accept the exclusive jurisdiction of the New Zealand Courts or those of another jurisdiction, if it believes its citizens would be disadvantaged.

Industry-related or other agencies may supervise the supply of the goods or services, for instance, for medical or legal services. Clauses that are contrary to the rules or codes of ethics of such agencies in New Zealand or overseas, or attempt to avoid such supervision, are likely to be unacceptable and ineffective in the relevant jurisdiction.

If possible, the contract should comply with the law of other jurisdictions where the web site is most likely to be accessed, or the goods and services are to be provided. This may mean the terms should be scrutinised by legal practitioners in the relevant jurisdictions on their legality and consistency.

Which Terms?
What should be included in the web site terms depends on the nature of the information displayed, or the goods and services offered, and a commercial judgment based on a risk-benefit analysis. It is likely that the following areas should be considered.

Restrictions
Information displayed should not infringe the law or the rights of third parties. This will apply to both the name of the web site and its contents.
It may not be lawful to display certain information, or certain restrictions may apply to the contents, the procedures to be followed for certain information, or the age, location, or category of people to whom the information may be disclosed. For instance, certain explicit material may be classified as pornographic and its display may be subject to age limitations. Disclosure of offers of securities may be subject to strict requirements relating to form, contents, and residency.

Professional rules or privacy laws may further restrict the disclosure of information. Other statements may be considered defamatory.

Intellectual Property of Others
Copyright and other intellectual property rights of third parties, such as trademarks, designs, and patents, should be respected. Consent from the owner may be needed to publish or use the information on the web site. The same applies to "hyperlinking" to other web sites. Permission is often needed to link a web site to another site or enable visitors to one site to use another (automatically or by clicking on the hyperlink). Consent is also needed to include hyperlinks by using symbols, logos, or icons that are the intellectual property of someone else.

Your Own Intellectual Property
If a business wishes to protect its own rights to information on a web site, it should prohibit the use of the information or any hyperlinking to a web site without consent, or require a password.

Disclaimers
It may be a good idea to disclose the purpose for which the information displayed on the web site is provided and whether, or to what extent, it may be relied on. Include the date of its publication and a statement clarifying whether any responsibility is accepted about its correctness or completeness at the date of publication or after that date.

Any disclaimers should be prominently displayed on the web site.

Specific Contractual Terms
Web site terms relating to the supply of goods and services through use of the Internet may apply specific conditions to the contractual relationship. The terms will often include clauses dealing with:
- Emergency situations or where face-to-face contact is required, or where pre-requisites or restrictions relating to the supply, or use of information, goods or services apply; for instance regarding requirements relating to the age or residency or authority of the customer, or the supplier's right, licence, or qualification to supply. Often a right to refuse supply is reserved if other reasons make this desirable.
- The incorporation into the contract of certain general principles of contract law, or specific clauses amending those principles. In those cases it is important to provide that the relevant clauses will only apply to the extent that statute laws such as fair trading and consumer protection legislation permit.
- Procedures to determine when acceptance of an offer is deemed to have taken place and contractual obligations begin, including verification of authority and confirmation of orders.
- Prices, payment, and delivery arrangements, including provisions dealing with liability for GST for New Zealand transactions and indemnities in relation to any foreign taxes.
- Procedures relating to confidentiality, security, and evidence of the transactions.
- Communication and confirmation procedures with the allocation of risk for incomplete, delayed, or interrupted communications.
- Warranties and qualifications for the use of the goods or services or representations made by others.
- Qualifications and indemnities for interruption of continuing access through the Internet or web site or due to force majeure events.
- Remedies available to the parties in the event of default.
- Limitation of liability and the extent of it. This should be done bearing in mind consumer legislation and requirements of other competent bodies or other applicable codes of ethics, qualifying the relevant provisions to ensure the requirements of both local and potentially applicable foreign mandatory provisions of law are met.
- When the contractual obligation will be deemed to have been completed, in particular relating to the provision of on-line services.
- Variation procedures relating to price change, and other terms, and when such changes will take effect.
- Termination of the contractual relationship, in particular where there is an ongoing obligation.
- Dispute resolution or arbitration, taking into account the international aspect of the contractual arrangements.
- The effect of possible invalidity of certain clauses and the continuing binding force of non-affected provisions.
- Which law is to apply, and which Courts may hear the case if dispute resolution procedures are not effective.
- Other customary contractual clauses or provisions of specific relevance to the particular relationship.

International Aspects
The fact that a web site may be accessed from other countries adds an international dimension that, from a commercial viewpoint, may be highly attractive. However, the same aspect means that, from a legal and financial perspective, the web site owner may be exposed to potential liability under foreign laws they may not be aware of, and which could lead to considerable damage to their business reputation and legal costs and exposure to high credit risk. That risk may be considerable depending on the nature of the contents of the web site and any contracts entered into through it.

To manage that risk, legal advice should be sought in the home jurisdiction and in the other jurisdictions most relevant to the web site. Carefully drafted web site terms may reduce the potential risk to commercially acceptable levels.

This is a general summary only and should not be taken as a substitute for specific advice.

Willem J A C Reuvecamp is a partner in the corporate and commercial department of Morrison Kent, Wellington.

Web site: Morrison Kent
E-mail: WillemReuvecamp@wn.moke.co.nz

March 2001