Jan Kelly, Earl Gray and Mike Sage of Simpson Grierson's x-tech group point the e-trader in the right direction

The Internet changes traditional legal boundaries. A suppression order may be useful within New Zealand but, due to the Internet, it can be severely compromised in the digital world. Trading on the web also introduces new issues.

Geographical boundaries define countries. This gives a platform for sovereignty - and the concept of sovereignty entitles nations to set rules over what takes place within the country's boundaries.

Trading on the Internet creates new challenges - it means your e-business is a little more exposed to unpredictability! Doing business on the Internet means that potentially your web customers could be based in hundreds of countries around the world. Will their domestic laws apply to your relationship?

If your e-business site is in New Zealand but your web customers are based in another country, which country's laws apply to the transaction? The answer is - potentially every country! But you can take some steps to help reduce the uncertainty.

The key to contracting on the Internet is to write rules that you want to apply to your web transactions. A clear and reasonable contract will stand a better chance of holding up if a foreign microscope is put on your transactions.

What do you put in your contract? Some suggestions are:
- Make sure your site contains the terms and conditions that apply to your web transactions.
- Make them clear and easy to read.
- Make them easy to access.
- Have a process that requires the customer to accept the terms and conditions, that is, use a "click to confirm" approach, not a "these apply by stealth" approach.
- State that New Zealand law and Courts (or the jurisdiction you want) apply to the transactions.
- If you are forming contracts (for instance, a contract for sale), have rules that show how and when the contract is made. This is very important because Internet transactions can create doubt about what communications are an "offer" and an "acceptance".
- Have clear rules covering privacy, and state what personal information will be collected, and for what it will be used.
- Be clear about the process, timing, and implications of payment.
- Limit your liability (always a good starting point).
- Make sure you can correct publishing errors (there have been some embarrassing retail stories of TVs being offered for $3 instead of $300!).
- Design a process for resolving disputes.
- Give yourself the ability to change the terms and conditions.

All these suggestions are designed to help you form a useful contract with your web customer. The intention is to define the rules for your relationship so that an unknown third party (a government or a Court) does not end up doing it for you!

But, just as in the name suppression case, you may still be subject to risks from the application of laws (or lack of them) in other countries. No matter how hard you try you cannot exclude the possibility that other countries may claim the right to regulate your web transactions.

Do some homework

Several countries (including New Zealand) have laws that "look behind" contracts to do "justice". New Zealand examples are the Fair Trading Act 1986 and the Consumer Guarantees Act 1993. The idea is that consumers need protection, and some standards should apply regardless of the actual terms agreed in contracts. In some countries they may not have codified the law and instead Judges have "case-made" law that enables them to do similar things.

You cannot know the rules in every country, but it may help to get an idea of the rules in the countries of your main web customers. Some examples may be the trade practices legislation in Australia, and the unfair contract law in the United Kingdom. They may have approaches you can factor into the design of your own terms and conditions.

International groups, such as the OECD are gathering other useful information. While some of this material may have an "online shopping" focus, it is likely to have a rub-off effect on business-to-business transactions.

Caveat emptor used to be a maxim applying to trade and the sale of goods - meaning let the buyer beware. Both the Latin and the message belong in the last millennium. When it comes to web transactions the concept can almost be reversed.

The Internet is creating a new world where "the customer rules". Recognising this, e-traders should write web terms and conditions that are clear, fair, and pragmatic. Take the opportunity to communicate with your customers and to remove some of the unpredictability of e-trading across international borders.

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

Jan Kelly, Earl Gray, and Mike Sage are partners in x-tech, Simpson Grierson's specialist technology group.

Web site: X-Tech at Simpson Grierson
Jan Kelly email: jan.kelly@simpsongrierson.com
Earl Gray email: earl.gray@simpsongrierson.com
Mike Sage email: michael.sage@simpsongrierson.com

March 2001