Structuring the contractual process The next stage is to structure the contractual process in a way which protects you

from potential pricing errors. It is entirely possible to sell on-line and take payment by credit card without actually concluding the contract on-line . The important factor is to make it clear that by placing an order the customer is making an offer on the site and that the contract will be formed only if the customer's order is accepted by the seller. It must be clear that taking payment from the customer's credit card does not indicate acceptance. This may, at first glance, seem unfair on the customer. It is not, and it is entirely legal, but only if the site is up-front about it, to avoid misleading the customer. On-line merchant accounts provide for making refunds to a customer's credit card. Therefore the terms should explain that, while the customer's card may be debited before the contract is formed, if the customer's order is ultimately rejected, a full refund will be made immediately. Online terms and conditions might therefore include the following provision: "By clicking the 'Accept' button you agree to these terms and conditions. By completing and submitting the electronic order form (or proceeding through the 'checkout process') you are making an offer to purchase goods which, if accepted by us, will result in a binding contract. Neither submitting an electronic order form or completing the checkout process constitutes our acceptance of your order." The words, "if accepted by us," are very important. If your terms and conditions appear as a separate page during the order process, then make sure the page has fully loaded and the user has scrolled to the bottom of the page before being able to click his acceptance of the terms. Alternatively, if you only provide a link to the terms and conditions during the order process, you should include a checkbox which the user ticks to confirm that they accept the terms and conditions, before continuing. The checkbox should appear to the left of, and next to, the acceptance wording; you should avoid relying on client-side validation to confirm whether the user has ticked the checkbox. For more information see our guide on On-line Contract Formation. When you get to the stage of taking the customer's money, the page should make it clear that acceptance of payment does not mean you are accepting the contract. A payment page could state: "Your card will be debited with the sum of 200 when you click the Submit button. This will be refunded if your offer is refused." If your payment provider allows it, allow the customer the choice of "submit", "clear" and "cancel" buttons.

When the card details are validated, give the customer a confirmation page. This should not confirm a completed contract, so avoid using phrases like "Your goods will be dispatched within 24 hours", as this will suggest that the offer has been accepted. Instead, this page should confirm that the order has been received and that the order is being "processed". This makes it clear that you have not yet accepted the order. It might be helpful to give the customer an order number at this stage so that he or she can chase-up any problems. It is good practice, though not legally required, to ask the user to click a button on this confirmation page to indicate that he has read the confirmation e.g. a "Continue" button, linking to the homepage of the site, and taking the user out of the secure area of the site. Many sites at this stage will automatically generate an email confirming the customer's order. If you are going to do this it should only really contain the information contained in the confirmation page, and again avoid any language which suggests that the contract is completed. Once you have reviewed the order and are happy with it, you can dispatch the goods. This will be enough to signify your acceptance of the customer's order, but if you wish you can email the customer to confirm that you have accepted their order and their goods have been dispatched. In any event at this stage additional information should be provided to any customers who are consumers, to comply with the Distance Selling Regulations . This largely repeats the information described above. If before dispatching the goods you discover an error on the site you can legally refuse to fulfil the order.

Invitations to treat and offers

UK and US lawyers break down the process of contract formation into three stages: an invitation to treat, an offer and an acceptance. The distinction between the three stages is not always immediately obvious. When you see an item for sale in a shop window, you may think that the shopkeeper is offering to sell it to you. However, in legal terms the display of an object is not usually an offer to sell that object, rather it is an 'invitation to treat'. An invitation to treat comes before the offer in the contractual process, and is an indication by the seller that they may be prepared to enter into a contract. The second stage the 'offer' only takes place when you go into the shop and say that you'd like to buy the item in the window. Your statement is an offer to purchase the item and, in the normal course, the shopkeeper 'accepts' that offer by taking your money and handing you the item in question. However, the shopkeeper could refuse to sell it to you for any reason whatsoever. This distinction is important: if the item in the window was considered an offer, which the buyer accepts, then the shopkeeper would be bound to the contract as soon as the buyer asks to buy the item. The three stage analysis is critical to the question of how contracts are formed on the web. It is likely that websites will be treated as being similar to a shop window and that the advertisement of an item for sale on a site will amount to an invitation to treat. If so, an offer will only be made when a customer gives notice of his intention to buy an item from the site (i.e. submits an order) at which point the seller will still be free to accept or reject that offer. The significance of this analysis was dramatically illustrated in the UK when an online retailer mistakenly advertised televisions for sale on his site at 2.99 rather than 299. If the advert was an offer (and an order was acceptance) then the retailer was bound to sell for 2.99; if the advert was an invitation to treat (and the Customer's order was an offer), the supplier could refuse to accept the offer. While it is likely that the websites will be treated like shop windows, the application of the three-stage analysis to the web has not been tested by the UK courts. Online traders should therefore specifically state in their terms and conditions that the display of items for sale on a website is only an invitation to treat.

Acceptance
With the online business process being automated there may be confusion as to when an offer is accepted. The basic rule is that for acceptance to be effective it must be communicated. However, as the law currently stands it is not clear when an online acceptance is communicated. For example, if the seller processes the customer's order through the website, but acceptance is made by email, is it communicated when the seller presses the 'Send' button, when it leaves the seller's email system, when it leaves the seller's ISP's mail server, when it hits the buyer's ISP's mail server, when it enters the buyer's email system or when the buyer reads it (or indeed any stage in between)? There are a number of initiatives which are intended to address this position see our guide on EU and UK

Regulations but the safest course is to state, in the terms and conditions themselves, when acceptance will be deemed to have taken place. One point to consider with an automated e-commerce process is the use of an automated receipt of order. Where there are a limited number of goods or where a serious pricing error has occurred, an automated acceptance could be disastrous, potentially binding the seller to contracts it cannot fulfill. In order to protect the seller any automated receipt should make it clear that it is simply a receipt of order and not an acceptance. The receipt should make it clear that the acceptance will follow later (when the seller has had a chance to check the order).The manner in which the content is formed and the point at which acceptance of order occurring should be made clear in the terms and conditions of sale.

Consideration
Under English law, there must be a consideration for a contract to be binding each party must obtain a benefit from the contract. In commercial contracts (and therefore most online selling scenarios), consideration is rarely an issue the buyer receives the goods or services and the seller receives the price but there are rare occasions on which it becomes important (for example, guarantees and non-disclosure agreements which are more one-sided in their nature). Consideration is not a requirement of Scots law. See our guide Security Aspects of E-business.

Incorporation of terms
The terms and conditions on which the parties are contracting must be agreed by both parties and incorporated into the contract between them. Simply placing terms and conditions on a website is not enough to incorporate them into a contract: the parties must agree that they contract on the stated terms, and they must do so before (or at the same time as) becoming contractually bound. When dealing with customers of a website the seller must ensure that the ordering process requires the customers to read and agree to the seller's terms and conditions. Best practice to ensure this is to include the terms and conditions as a separate page in the sales process and requiring the customer to acknowledge he has read and agreed them (for example, by clicking an 'Agree' button) before proceeding to place an order. However, to reduce the number of pages in the purchasing process, many websites use a different process, by placing a link to the terms and conditions from a page during the sales process, and requiring users to tick a checkbox to confirm that they are accepting those terms and conditions. Without ticking the checkbox users should not be able to proceed with the purchase. Underneath the checkbox users should then be offered buttons to click to proceed with the sale (for example 'Purchase' or 'Buy Now'), but alongside this must be a button allowing them to withdraw from the sale (for example 'Cancel').

You should avoid using words like 'I have read, understand and accept the terms and conditions' next to the checkbox. In the opinion of the Office of Fair Trading, you are then encouraging users to make undertakings that could be untrue (users can check the box without actually reading or understanding the conditions). Instead place a notice above the checkbox warning users that it is important to read and understand the terms before placing their order, and then use words such as "I accept the terms and conditions" beside the checkbox. The words 'Terms and conditions' next to the checkbox should be an obvious link to the terms themselves. At the bottom of the linked page you will need to put a link that takes the user back to the purchasing process. You should avoid relying on JavaScript based client-side validation to confirm whether the user has ticked the checkbox. This may now work with some browsers or where the user has turned JavaScript off meaning that the user doesn't have to check the box, and your terms and conditions aren't incorporated. The use of 'browse-wrap' agreements has been heavily criticised by the courts and the Federal Trade Commission in the United States. A 'browse-wrap' agreement gives the purchaser the opportunity to follow a link to the supplier's terms and conditions before placing an order, but does not require the purchaser to read the terms before ordering. A court in New York determined that as such agreements do not bring the relevant terms to the attention of the purchaser before the contract is made they are not binding on the purchaser. One of the most important terms to incorporate is a choice of law and jurisdiction clause - a statement that, for example, the contract will be made under English law and subject to the jurisdiction of the courts of England & Wales. Such a clause may prove essential in online contracts because of the uncertainty as to where in cyberspace a contract is made, although be aware that consumers will always have certain rights to sue in the country in which they live see our guide on Jurisdiction.

Overriding laws
While you can try and control the relationship between buyers and sellers in the contract, it is important to bear in mind that contracts made online are also subject to the same laws as contracts made off-line. So, for example, contracts which are unenforceable off-line (such as certain contracts with children) will also be unenforceable online, and exclusions of liability contained in an English contract made on a supplier's standard web-published terms can be subject to a test to make sure that the terms are 'reasonable'. Where a contract is made with a consumer, a raft of additional provisions apply see, for the UK, our guide on Dealing With Consumers. These provisions vary from country to country, emphasising the importance of clearly stating the law which is to apply to your contract. However, even a clear choice of law clause will not prevent national courts from asserting jurisdiction if they feel that their consumers are being targeted by your website see our guide on Jurisdiction and the safest practice

is to comply with the laws of all countries which are important markets for your products and to exclude orders from countries which are not. See also our guide on Internet Advertising. There are also a number of regulations which specifically control contracts which are formed online. The 'distance selling' regulations came into force in 2000 and protect consumers involved in 'distance contracts' (including contracts concluded online) by requiring the supply of certain information to the consumer before and after the contract is entered into. They also give the consumer a seven day cooling off period during which he can change his mind and withdraw from the contract. The ecommerce regulations came into force in 2002, and also require a range of information is provided to consumers before they enter into the contract. For further information, see our guide on EU and UK Regulations, and our article, The Distance Selling Regulations An Overview. The distance selling regulations do not apply to financial services products, although similar regulations came into effect in October 2004.