Online contracts: formation and terms

If you allow customers to place orders online, you must ensure that the terms and conditions of the contract are set out on the website and can be accessed and downloaded. Even where the website is simply used as an advertising tool, it is advisable to set out your terms and conditions clearly.

Are online contracts legally binding?

Contracts that are formed on the internet are legally binding and enforceable when the following conditions are satisfied:

• Offer: One party must make a clear offer to enter a contract with the other.  For example, a consumer offers to buy goods by placing an order.
• Acceptance: The other party must clearly accept the offer, e.g., a trader accepting the order by sending a confirmation email or dispatching goods. 
• Intention to create legal relations: Both parties must intend the contract to be legally binding.
• Consideration: There should be some form of exchange between the parties, e.g., money paid for goods.

It's not necessary for contracts to be in writing or signed by both parties to be legally binding. However, having written evidence can be helpful in case of disputes.

When is the contract formed?

Generally, an online advertisement will not constitute a formal offer to contract (although care should still be taken when creating an advertisement). Instead, a contract is formed when a customer places an order and the seller accepts it.

To avoid misunderstanding, the terms and conditions about when the contract is formed should be clear. For example, indicating that the contract is formed when the trader sends a confirmation email can help prevent issues if circumstances change.

Be cautious of automatically generated order confirmations. These can sometimes cause confusion about when the contract is formed. Ensure that the wording of these confirmations is clear that it is not a legal acceptance of a customer's offer.