Doing Business via e-commerce in South Africa? Is Your Business at Risk?

Doing Business via ecommerce in South Africa

The arrival of new technologies such as the internet has changed the business world forever and the trading processes in e-business require more certainty.  Business transactions take place at the speed of light and businesses and the law must keep up with these rapid changes.

Business has changed dramatically over the last few years and one does not get many companies that do not have websites and or trade on their websites.

E-commerce contracts are contracts that are performed and ratified by software. Contracts are not conducted between people in person and they do not as such have the option to negotiate and agree to the material terms of the contract in person.

People use e-commerce to transact from all corners of the world. You can be in South Africa and purchase goods or services in India or England. All kinds of questions arise when the Parties are involved in a dispute. It can be anything from which Courts have jurisdiction to hear a matter, or to what particular law applies to a transaction. Sellers offer services and goods to the public on their websites as a matter of course.

The biggest issues when one transacts via e-commerce is the question of when the contract came into being – i.e. the terms of the contract have been communicated, the terms were accepted and that acceptance has been communicated.

If a valid contract is to come into place it is essential under South African law that there must be a valid offer and acceptance of the offer – i.e a ‘meeting of minds’.

It is wonderful for businesses that they can set the terms of the transaction and they are not exposed to negotiations with buyers. However, this can be a risk in South Africa as supplier contracts must be unfair, reasonable and just, in terms of the Consumer Protection Act. If the Seller sets all the terms of the contract can one say that the contract is fair, reasonable and just?

Case law from the UK and Australia held that some e-commerce transactions are unenforceable as there is no mutual agreement between the seller and the buyer when a purchase is made on a website. We can expect the same type of decisions in South Africa.

When you use your website to sell services or products you need to ensure that mutual assent remains the basis of the contract.

We get two types of internet contracts, click wrap and browse-wrap.

A click wrap agreement is a type of contract that is widely used with software licenses and online transactions in which a user must agree to terms and conditions prior to using the product or service.

Browse-wrap is a term used in Internet law to refer to a contract or license agreement covering access to or use of materials on a web site or downloadable product. In a browse-wrap agreement, the terms and conditions of use for a website or other downloadable product are posted on the website, typically as a hyperlink at the bottom of the screen.

One also gets Shrink Wrap contracts which are boilerplate contracts packaged with products; usage of the product is deemed acceptance of the contract. Shrink-wrap agreements arelicence terms that are contained on or inside a software box and again, negotiation, or even discussion of the terms.

Because the terms of the contract are solely drafted by the seller, the contract will likely be interpreted against the seller if there is a dispute regarding the contract.

Businesses can protect themselves and enforce their contracts by, amongst other things, making sure that the terms and conditions are conspicuous on the website when the buyer enters into the transaction. The Buyer’s attention must be drawn to the Terms and Conditions, and reasonable measures must be taken to bring the content under the attention of the buyer. Further to this unusual or unexpected terms must be highlighted to the buyer.

This is because the Courts will look at the e-commerce contract in the same way as a ‘standard’ contract. This will include factors such as whether or not the agreement was presented in a clear and unambiguous manner and if the agreement was reasonably assented to. If the Court finds that this is not the case the Court will likely rule against the seller.

It is not only the businesses website that has contractual significance, but similarly websites that also hyperlink to them.

Additional Online Contracts include:

·           Sale of goods;

·           Supply of Digital products;

·           Supply of services and facilities.

A summary of problem areas of e-commerce contracts:

·           Method and procedure of acceptance;

·           Duration of offer and conditions attached to the offer;

·           Method of delivery, determination of acceptance / receipt of conditions attached to the offer;

·           Passing of risk;

·           Means and or method of payment acceptance to supplier and currency;

·           Exclusions of liability.

It is therefore important for businesses to obtain assistance from their Attorneys when developing websites as websites become more and more important in our society and major losses can be suffered by businesses if they do not manage and mitigate their risks in this regard.

 

Martin Vermaak

Practising Attorney