The purchase transaction on a website is one of the simpler processes to perform from a programming perspective thanks to scripts. From a legal point of view, the transaction is a bit more complicated. One of the major issues is what is the best way to bind a customer to the terms and conditions associated with the purchase?
You might not realize it, but the act of somebody purchasing something online is a legal transaction. Ostensibly, it is a form of contract. Let’s assume I’m buying the new Harry Dresden novel off of Amazon.com. I agree to pay the purchase price by entering my credit card, billing data and submitting the transaction. In consideration, Amazon sends the novel to my home or my Kindle via a wireless internet connection.
As with any legal transaction, there needs to be a discussion of the terms of the sale. At this point, most website owners start to groan about the evils of lawyers. While I realize the terms of a legal transaction are probably not high on your list of things to learn, they are crucial and you should at least understand the basics as they apply to your site.
Let’s consider a short, simple list of issues you need to address in the terms. How will refunds be handled? Will your refund policy be similar to Zappos.com in that you take back any product without explanation or will you be little more restrictive? Will you accept PayPal, Google Checkout or both? What if a customer claims they never received the order? These are the types of issues that need to be dealt with, and the place to do so is in your terms and conditions.
Terms and Conditions
The terms and conditions act as a legal contract between you and the people who visit your site. Most site owners and webmasters complain the terms on their sites are excessively long. While an accurate assertion, there is a reason for the length – there are many issues that must be addressed. If they are not, you run the risk of the terms being interpreted against you.
For example, let’s assume that you own a site that sells Halloween costumes. You are located in California. A customer in Pennsylvania orders from you and is unhappy with their order. You believe the customer is acting unreasonable and refuse to issue a refund. They sue you.
Where will the lawsuit take place?
If you have a jurisdiction clause in your terms and conditions, the lawsuit will be heard in California. This requirement alone may keep the unhappy customer from pursuing you because the cost of coming to California will far outweigh the cost of buying a costume from some other site.
However, if there is no jurisdiction clause in the terms, the customer can sue you in Pennsylvania. Now the shoe is on the other foot. Do you spend the money to go to Pennsylvania to fight the action or just settle the damn thing?
Best Way To Display
So what is the best way to present site terms and conditions to a potential online customer? Well, keep in mind that we are talking about a contractual relationship.
The courts have always had difficulty dealing with online contracting issues. The result is a rather vague standard differing from state to state. Given this, lawyers and site owners tend to knock heads a bit over how best to handle the issue.
Lawyers try to protect their clients. Like an overprotective mother, we tend to subscribe to the notion that being as conservative as possible in questionable legal situations is definitely the best course of action.
In the case of terms and conditions, this typically means not only showing the potential customer the terms and conditions in the form of a pop-up, but making sure they actually read it. You have probably run across this approach on various sites, particularly ones selling software. You go to buy the software and the terms pop up. You not only have to check a box indicating you’ve read the terms, but you have to scroll down through the terms to the bottom to get to the checkbox. I’ve even seen setups where a certain amount of time must pass before you can check the box and proceed with the transaction.
Why is all this required? If a dispute occurs, the lawyer can argue the terms should be binding on the customer. Since the customer not only clicked a box indicating they agree with the terms, but also scrolling through the terms makes it very difficult to avoid being bound by the language in the document.
View of Site Owner
Site owners tend not to care for the approach suggested by lawyers. The reason? Conversion rates. Site owners and webmasters believe a person who is forced to scroll through the terms is more likely to abandon the transaction. Is this view correct? Probably, but the extent to which this would occur is unknown.
All in all, most site owners and webmasters would rather go with the time-tested approach of putting the term and conditions on a separate static page and then linking to them at the footer of the site. Millions of sites take this approach…and millions of sites are at risk because of it.
The result is the site owner and lawyer end up compromising on the best method for displaying and getting the customer to agree to the terms and conditions. Some sites can go with a very passive approach while others need a much more proactive approach requiring the potential customer to take affirmative action. It all depends on what is being offered by the site.
If you are wrestling with this issue, feel free to contact me for a no-obligation consultation.
Richard A. Chapo, Esq.