Legal issues in buying and selling

online
Posted on April 10, 2013
Amicus
THROUGH THE last several years, online sales have become more Curiae
common and acceptable. Advertisements in social networking sites, Elyrhey
mobile phone applications and online classified ads have enticed Cesar R.
consumers to shop online. Vasig
With the ease of Web surfing -- whether by a click of a mouse or button or tap on a
mobile screen, specifications of a certain item could be studied, selling prices of
different sellers could be compared, and purchases could easily be made. Modes of
payment vary from the use of credit cards, online payment facilities, and cash on
delivery schemes. With such convenience, it is almost effortless for consumers to complete their
transactions. An added benefit is the considerably lesser amount of time needed. Also, another
attraction to online shopping is the cost. Usually, items sold online are cheaper because of the lower
overhead expenses of online sellers. It is also possible that taxes for these items are not inputted in
the selling price.

Do our present laws safeguard the rights of consumers when they enter into these online
transactions?

There is one view that our conventional laws on sales and consumer protection apply to online sales
because what distinguishes online sales from ordinary sales is the electronic means used. These laws
include Articles 1458 to 1637 of the Civil Code on sales and Republic Act No. 7394, otherwise known
as The Consumer Act of the Philippines, on consumer protection.

There is another view that said laws are insufficient. Thus, in 2000, Republic Act No. 8792, also known
as the Electronic Commerce Act or e-Commerce Act, was enacted. This law serves to facilitate
domestic and international transactions and agreements through the utilization of electronic and
similar medium. This law was also enacted to promote the universal use of electronic transactions in
the government and by the general public. By virtue of the e-Commerce Act, electronic data
messages, electronic documents and electronic signatures attained legal recognition. “Information
shall not be denied validity or enforceability solely on the ground that it is in the form of an electronic
data message or electronic document... Electronic data messages or electronic documents shall have
the legal effect, validity or enforceability as any other document or legal writing.” (Sec. 7,
Implementing Rules and Regulations of the e-Commerce Act)

Clearly, documents in electronic form are treated as the legal and functional equivalent of paper-based
documents. Thus, despite the absence of a paper-based document evidencing the sale, the online
exchange is sufficient to evidence an online transaction. Giving legal recognition to electronic
documents means that online transactions produce legal consequences.

However, there is still room to argue that the e-Commerce Act or any other law or rule does not
sufficiently cover all aspects of online transactions. Certain matters are still left to the parties, or the
sellers and buyers, to negotiate the terms of their contract. Or in some cases, buyers are confronted
with a lengthy and verbose “terms and conditions” that they may either accept or reject without any
opportunity to negotiate.

There are certain areas that warrant further study and clarification, such as:

• The formation of the agreement or contract. When is the sale consummated or considered binding?
Under Article 1319 of the Civil Code, a contract is generally constituted upon the acceptance by the
buyer of the offer to sell. However, there are nuances in online sales transactions; for example, the
advertised product may not automatically constitute as an offer and may be qualified by a statement
that the purchase is still subject to the seller’s confirmation.

• The required information. Often times in online sales, the buyer does not have the luxury of actually
meeting the seller. There is no means for the buyer to verify the credibility of the seller. As such, the
buyer, without any protection or assurance, might be transacting with a fly-by-night seller; thus,
exposing him to risks of fraud and misrepresentations. For example, while the Consumer Act provides
guidelines to ensure safe and good quality health products, there are certain advertised products in
the Internet that do not bear the approval of the appropriate government agency, such as the Food
and Drug Administration for health products. Accordingly, other countries require sellers to supply
relevant information, including the identity of the seller, information about the goods, the price and
terms of payment, arrangement for delivery, return and exchange policies.

• Privacy and security issues. Usually, in online transactions, the buyer is required to provide highly
confidential personal and financial information. For regular online sales, credit card/account details are
usually being requested. The buyer must be assured that his disclosures are securely kept, made
confidential and utilized only for the particular transaction.

• Third-party liability. One way for the buyer to confirm the legitimacy of the seller is to buy only
through a known service provider. In other countries, service providers have defined rights and
obligations as well as liabilities. By regulating service providers, a standard can be implemented to
refuse dubious sellers from offering their products through service providers. Such regulations can
also curb the increase of fly-by-night sellers.

• Jurisdictional and conflicts of laws issues. Online sales are no longer limited to domestic
transactions. Easily, transactions are consummated between parties located within and outside the
Philippines. In such cases, will the foreign seller be considered to be doing business in the Philippines?
For example, in a civil case for breach of warranties, should Philippine law apply? Will the foreign
entity be considered to be doing business in the Philippines so that a Philippine court can acquire and
exercise jurisdiction over it?

• Taxation of online purchases. Since online sales transactions face little to no governmental
regulation, often times the sale is untaxed. The online market place, however, has already
considerably expanded that the government can no longer afford to ignore the substantial amount of
uncollected taxes.

These are issues that need to be addressed. With the proliferation of online sales transactions, there
might be a necessity to revisit existing laws and discover ways to reinforce these laws. It might be
high time for the government to consider means of extending added security and protection to the
rising number of online consumers. Countries, like the United States, Canada, United Kingdom and
China, have already enacted rules addressing these concerns. While the e-Commerce Act is a very
significant piece of legislation, it lacks regulatory measures to ensure the protection of e-commerce
consumers.

Elyrhey Cesar R. Vasig is an associate of Angara Abello Concepcion Regala & Cruz Law Offices
(ACCRALAW). He can be contacted at Tel. No. 830.8000 or through e-mail
address: ervasig@accralaw.com.