M'Learned Web: The trouble with e-commerce...

The only way you can buy and sell things on the Internet, as anywhere else, is with a contract of sale

These are governed by contract law which is a tad older than the Internet, going back centuries. It was not designed with e-commerce in mind, rather for two men standing in a barn preparing to sell cows to one another.

In English law you can't have a contract without offer and acceptance. OK, that sounds simple but it is complicated by the fact it is not always clear what is and what is not an offer. There is the concept of an 'invitation to treat', which is something that appears to be an offer but isn't.

Still with me?

This is best illustrated with an example from the real world. You travel the aisles of Tesco and you see goods with prices on. That is not an offer but an invitation to treat. You put things in your trolley and take them to the check-out. That is the offer. The check-out girl may grunt at you... her grunt is the acceptance. The contract is concluded when and where the acceptance is communicated, in this case probably jammed in between two Tesco checkouts.

This is easy to understand using the two men and their cows or indeed Tesco's with its grunting checkout lady, but more complicated when contracts are concluded at a distance.

This applies to the Internet but also to contracts made by post. The courts developed a variation on the first rule -- the cow rule -- to deal with postal contracts and says acceptance comes into effect when the letter accepting the offer is posted.

So what's the problem?

Well we now have to adapt these rules for e-commerce, and nobody actually knows what the rule is for offer and acceptance on the Internet because it has not been around long enough for there to be decided cases on the point. It probably won't be a variation on the postal rule: the cow remains firm favourite.

Take another example.

First thing in the morning you go to your computer and you dial up one of the book-selling sites and, your mind still fogged with dreams from the previous evening, you order a copy of Geri Halliwell's autobiography. You then turn off the machine and go to work.

In the cold light of day you decide, along with Chris Evans, that Gerry wasn't such a good idea after all. The book store hasn't yet communicated with you so there's no contract. You cancel it. That is going to be a surprise to the book store. They will have sent you an e-mail accepting your offer. They will probably have sent you the book.

The draft European directive on e-commerce attempts to clarify this issue. As it stands, it doesn't. It does say a couple of interesting things, one unhelpful and one not so helpful.

The first says that in order to have a valid contract you need not only an email from the buyer to the seller, and the email back from the seller to the buyer, but a third email from the buyer acknowledging the seller's acknowledgement. Frankly, this just isn't going to happen and if that wording survives into the final text the majority of e-sales will not be sales at all. Goods and money will be refundable at will and the expensively drafted small print will be just so much verbiage.

The second, more helpful point is that, where one party is to communicate with the other, it is sufficient to have communication as far as a server, in such a way that the message can be accessed by the other party, whether or not it has been. So when the book store sends you an email saying your Geri Halliwell book is on the way that will be enough, even if you are at work and you don't open your in-box to find out.

It matters whether the contract comes into effect, but it also matters where and when, for two reasons.

The first is that the point at which the contract is entered into is the point at which it's too late to cancel it. It's the point at which Argos , for example, can say that, although they priced the television set at £2.99 when they meant £299, it's not too late to pull out.

The second is that, unless you fix it in the small print, the time and place where the contract comes into effect determines the law that governs it. So if you are selling overseas you may find yourself stuck with sales governed by a multiplicity of foreign laws, common law, Roman, Dutch, Islamic, barbarous, even French.

Much can be fixed by having the contractual steps set out clearly (as Argos didn't), and effective terms and conditions. All of this however, is child's play compared to on-line auctions which I'll deal with next time.

Robin Bynoe is a partner of the Charles Russell law firm in London. If you want to respond to this article tell the mailroom .