From individual drop shippers to large multinational corporations like Amazon, e-commerce is a rapidly growing industry that is changing the way people shop for goods and services. Because of the complex nature of the business, e-commerce businesses have to manage many different e-commerce contracts.
Ecommerce (electronic commerce) is the buying and selling of goods or services via the internet. While e-commerce usually refers to the online sale of physical goods, it can include any kind of commercial transaction that occurs using the internet.
Several types of e-commerce models facilitate transactions between consumers and businesses, like:
Ecommerce businesses can take on many different forms. The two major ways they vary are the relationship between the business and consumers and the type of good or service on offer. Some examples of e-commerce businesses include:
With the rapid growth of online shopping, some of the world’s largest companies are e-commerce companies. Amazon, eBay, and Shopify are all e-commerce businesses.
As internet-based businesses, e-commerce businesses face many potential legal issues related to their web presence. It might be something relating to their website, or an agreement with a service provider. In addition, because they sell goods and services through the internet, these businesses must also address payment and delivery terms or warranties.
Because of the various activities performed by e-commerce businesses, your business must use the appropriate e-commerce contracts. These agreements provide your company with protections and limit liabilities, which is especially important for businesses with high volumes. Read on to learn about the most common types of eCommerce contracts that require contract management .
Terms of service agreements are the most common contract that you’ll need to manage. They cover a wide variety of issues related to the relationship between your company and its users. The terms of service govern user conduct on the website. They also outline what users might expect when they use the site, including the services your business will be providing and any user permissions or limitations.
You should ensure that your company’s terms of service address the specific issues associated with your e-commerce website. Some important provisions to cover in these contracts include:
When creating terms of service, you should also make sure to avoid the following three common pitfalls:
A privacy policy is a document that states how your e-commerce business will gather, use, and manage customers’ data. It needs to explain which personal information is collected, how it’s used, and how it’s protected.
Every website that collects personal information from visitors is required by privacy regulations like the European Union’s General Data Protection Regulation (GDPR) to have a privacy policy. These contracts may provide some liability protection in the event of a dispute over the way your business handles personal information. Privacy policies are a helpful tool for promoting trust and transparency between your business and its customers.
A user agreement is any contract between a website user and the site’s owner or operator. These e-commerce contracts can be end-user license agreements (EULAs), terms of service/terms and conditions, or privacy policies. They outline the rights and obligations of both parties. User agreements provide the conditions under which a user may use your website. This limits your company’s legal obligations and explains the circumstances required for termination.
Customers will inevitably return purchased products, so your e-commerce business needs a return policy. There is no legal obligation for e-commerce companies to accept returns, which means a return policy is discretional. Nevertheless, it’s a good idea to offer returns. It means you can account for defective products and build trust between buyers and sellers.
Because it isn’t a legal document like a privacy policy or terms of service, a return policy can be relatively simple. It should address the following issues:
If your e-commerce business is subscription-based, you will also need to create and manage a subscription agreement that addresses the purchasing and delivery of goods. While these provisions can be incorporated into the terms of service, it’s best to keep them in a separate e-commerce contract.
A subscription agreement should cover the specific issues that can occur with your company’s sale of its products or services. Some provisions to consider covering include:
Many e-commerce businesses use independent contractors. If you do, you should have NDAs in place. A non-disclosure agreement is a contract that prohibits the sharing of confidential information. It prevents proprietary information about your business from being leaked to the public.
Vendor agreements are the contracts made between your e-commerce business and your suppliers. These contracts are the foundation of your business. They facilitate the sale and purchase of your company’s goods or services.
Some common elements of a vendor contract include:
Your e-commerce business will need a web host and software service providers. For that, you’ll need to negotiate and manage service-level agreements .
A service-level agreement will:
A master service agreement is a contract between two parties that lists the terms that will govern future agreements and transactions.
In the case of e-commerce, your business would need an MSA if you would like to have a long-term business relationship with web hosts or software service providers. The SLAs that you sign with these companies can be included in an MSA. This can streamline the negotiation process, while still allowing for modifications should there be a change in circumstances.
A warranty can help you attract customers. Warranties help make shoppers feel comfortable and confident about purchasing your products.
Warranties address four issues that are important to consumers:
Using clickwrap agreements to present your e-commerce contracts can be the difference between repeat customers and cart abandoners.
Clickwrap agreements are agreements that users agree to by clicking a box or checking a button that says, “I agree.” Most e-commerce and online businesses use clickwrap agreements to present their Terms of Service or other e-commerce contracts to users. Comprehensive clickwrap solutions ensure that the agreements are presented conspicuously to users (so that they know they are agreeing to a contract) and collect back-end records to prove which user agreed to which contract, and when.
The design of clickwrap agreements is especially important to e-commerce businesses that want to ensure their user terms are enforceable and successfully mitigate risk.
Ecommerce businesses are growing rapidly, especially in the age of digital- and remote-first transactions. Companies like Amazon and Wayfair do high volumes of business, and have e-commerce contracts in place to help mitigate the risk of such a high transaction volume. Contracts like Terms of Service, Vendor Agreements, MSAs, and others are common in the e-commerce industry, and tend to have clauses that cater to the specifically online nature of their business.
Using clickwrap agreements to present e-commerce contracts is a common practice for innovative businesses. A robust clickwrap solution follows best practices for screen design and recordkeeping, ensuring that the contracts do their job of protecting the business.
To learn more about how to manage your e-commerce contracting, request a demo of the only contract management solution that has clickwrap, too!
Ironclad is not a law firm, and this post does not constitute or contain legal advice. To evaluate the accuracy, sufficiency, or reliability of the ideas and guidance reflected here, or the applicability of these materials to your business, you should consult with a licensed attorney. Use of and access to any of the resources contained within Ironclad’s site do not create an attorney-client relationship between the user and Ironclad.
Want more content like this? Sign up for our monthly newsletter.
