Wednesday, August 15, 2018

Contracts Online, with Who?

Contracts online are formed every day without any thought to their import.  They may be enforceable or not.  Many parents allow their minors to use their parents’ credits cards or the debt card given to them by their parents to shop online, for say, school clothes. That mad rush for tax free holiday prior to the start of school brought a tremendous amount of online sales for retailers.  Many retailers did not know that the buyers they sold to via their ecommerce site, was not of legal age. Wow!

Ecommerce is here to stay, and so will the online contract for the purchase of the sale of goods.  These transactions are all too common now.  This is evidence by the reduction of brick-n-mortar stores around the country.  While principles of contract require a meeting of the minds between the seller and the buyer, many buyers do not care to read the terms of what they are agreeing to buy.  Making the purchase is of utmost importance and the buyer will not allow anything to stand in the way of the purchase of those hot sneakers or a t-shirt.

Many sales are taking place between states across state lines. While on the paper contract the parties know each other, that is not the case online. One thing for sure that distinguishes the in-person contract from the online contract, there is no room for a bargain.  The dance of the bargain is gone when buying online. The only option the buyer has is to shop around for a comparable item at a lower price from another online vendor.

So, the electronic age has brought upon the electronic contract.  Where the buyer must agree to the terms of the sale and the agreement.  The buyer must affirm acceptance of the terms of the sale and the buyer must express that he or she understands the terms of the sale.  The Uniform Electronic Transactions Act (UETA) was specifically passed by Congress to recognize and validate the electronic transaction process.  The importance of this Act is that the electronic record of the transaction  can then be used to affirm the existence of a contract.

While the UETA does not provide for authenticating the signature of the buyer  as a form of electronic signatures, the E-Sign Act does (Electronic Signatures in Global and National Commerce Act).  State laws that differ are preempted.

While contracts online do not change the principles of contracts, the online contracts change the landscape of contracting. It is crucial for the seller to know who they are selling to and if they are of legal age to contract.  The Children’s Online Privacy Protection Act (COPPA) was intended to protect children while online. The online process for authentication would required collecting of private information.  If the buyer does not have contractual capacity, then there is a problem with the contract’s enforceability.  What information is the merchant actually getting when a minor is seeking to buy online? The merchant does not know who its and if it is a minor, if there is parental supervision over the transaction, for example for anti-depressant pills from another country.

There are ways that merchants are trying to solve this conundrum.  Email point of verifications are being used by merchants and asking the buyer to set up an email and identification criteria in hopes of future sales and to verify authenticity and identification of the buyer.  Text and instant messages are also used by merchants to provide and additional layer of identification.

While contracts have gone digital the basis of a contract remain the same with a few wrinkles to consider, from a merchant’s perspective. From a parent’s perspective, “what are you doing?” It is not a good idea to allow your minor to use your credit card and passing themselves on as if they are you in making a purchase online.

While this piece touched upon online contracts, it did not cover the online contracts for business, merchants, distributers, and manufacturers, i.e. the end-user license contracts.  This type of contract online does allow for the seller to get the identify the buyer/licensee of the product.  So, as digital contracts are formed daily in the hundreds of thousands, loading up cloud storage databases throughout the country, digital transactions are crossing state lines, and contracts may or may not be enforceable.  The world of ecommerce has also brought upon entrepreneurs who are also under age and are entering into online contracts.  Who is to tell? Wow!

#contracts #ecommerce #internet #sales #business  copyright 2018

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