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Online stores and terms and conditions – consumer law obligations and risks

Regardless of whether your online store has its own terms and conditions, your business will be governed by, the Australian Consumer Law (ACL). However the ACL is heavily weighted in favour of the consumer and  offers far more protection to your customers than it does to you as the business selling.  Therefore it is advisable to see your lawyer about drafting individually tailored terms and conditions for your particular business, to safeguard your business operation and regulate the relationship between you and your customers.

Online businesses and the ACL:

The ACL applies to online businesses operating in Australia and overseas in relation to purchases made in Australia in the same way it applies to bricks and mortar retailers (although sometimes it is difficult to enforce the consumer protection rules on overseas online businesses). The ACL does not apply to private sellers outside the normal course of commerce, or when products are sold through auction on a site such as eBay (however the ACL does apply when selling fixed price products on sites such as eBay.)

Your consumer law obligations:

There are some consumer protections that you cannot contract yourself out of in your online store terms and conditions. Your online business must ensure its products and services meet Australian safety regulations, are not advertised in a misleading or deceptive way, that it competes fairly, and that the customer retains the right to ask for a repair, replacement, refund, cancellation or compensation if there is a problem with your product or service. Compensation will only apply in limited circumstances, if your product has caused damage or loss to the consumer, that was reasonably foreseeable as a result of the problem with the goods or service you sold.

The products you sell must be of acceptable quality – they must be safe, durable and free from  faults; products must look acceptable; and must do all the things a reasonable person would expect them to do. ‘Acceptable quality’ takes into account what would normally be expected of the type of product, together with  the relevant cost of that product or service. Obviously the standard that applies to an expensive designer jacket would not apply to one that cost $20, for example.

Terms and conditions to protect your online store:

You must have robust  terms and conditions that protect your business against non-payment, liability (to the extent allowed under the ACL) and faulty goods. Include in your business terms that payment is required upon placement of an order, and that orders will not be dispatched until payment is cleared. You also need to include delivery and shipping terms that state your delivery costs, and explain how they are calculated, and say that you cannot guarantee the quality of the delivery service of any third party service providers.

Your online store also needs to have a set of website terms of use. These are completely different from your store terms and conditions, and set out the terms that apply to visitors of your website (rather than terms that apply to consumers of your product or service). These terms need to cover customer privacy, copyright and prohibited uses of your website together with a disclaimer stating that use of your website is at the visitor’s own risk.

An essential requirement of your online store website is that your customers accept your business terms and conditions before transacting with you. To achieve this firstly; provide a clear link on your webpage to your terms and conditions, and secondly; at the point of checkout require customers to confirm acceptance of the terms and conditions before allowing any transaction to occur.

This is general advice only. Liability limited by a scheme approved under Professional Standards Legislation. 

Published Sep 25, 2017

Jessica Kerr is the Director of Sinclair + May, a female-led, boutique commercial law firm based in Melbourne’s inner north.  Sinclair + May work with small businesses to ensure their legals are in order. Book a free 15-min chat here to talk with one of our solicitors.