These days opening an online store is extremely appealing. It’s easier than ever given the many platforms to choose from and the easy technical support you can get for your store. And everyone has an idea for something they’d like to sell if they could only reach enough people.
If you’re going to open that online store, make sure you’re on solid legal ground. There may be a host of legal considerations that haven’t occurred to you, and you need to make sure you don’t doom yourself to failure before you even start. Protect yourself and your business by following these tips:
Check with the Government
For many small business questions both general and unique to your geographical area you should check with these governmental authorities:
- the Internal Revenue Service (IRS)
- the Small Business Administration (SBA)
- the Federal Trade Commission (FTC)
- your local Chamber of Commerce which you can find here
They can tell you things like what specific elements your site should include, what kinds of business structures you can use, how to register them, and many other things you’ll need to know. These agencies help thousands of people just like you open online stores every day, so for the most part their information is easy to access and streamlined for use.
Terms and Conditions
A set of terms and conditions, either on one page of your website, used in language throughout your online store, or both, creates a contract between you and your customers. It lets your customers know how you will treat certain issues that can arise in commerce generally and in online commerce specifically. When you have terms and conditions for your online store that are well thought out and carefully drafted, you have the upper hand in the resolution of conflicts, the protection of your intellectual property, and the best shot at limiting your liability as you run your business your way. Which terms and conditions do you need to include specifically? At a minimum, these:
- The Basics: General terms and conditions include shipping information including costs and times, how returns are handled, what happens when things are out-of-stock, your policies concerning coupons, special programs or rebates, and any other issues your customers should know about your online store.
- Billing Policies: You should describe anything a customer could potentially be billed for including shipping, taxes and any other fees should in the terms and conditions. Just posting billing policies isn’t enough, as the Overstock.com case showed. You should also use a link and some kind of affirmative agreement (like a box you have to check accepting the billing terms in order to proceed) during the payment segment.
- Choice of Law and Dispute Resolution: Your dispute clause should state how (alternative dispute resolution or traditional litigation) and where (almost always where you are located is best) you intend to resolve any conflicts that arise. You must state the jurisdiction of the court here so you don’t have to fight a claim in another state, states, or even internationally.
- Intellectual Property: You will probably want and ask customers to comment on the products you sell in your online store, right? Well, anything written on a website by a customer is automatically the intellectual property of the author. Therefore, for you to be able to use it, the terms and conditions need to grant a license that allows you to use it. If customers register to use your online store, make agreement to this term part of their registration. Also, keep on the right side of the law by never using product photos without express permission—just because you’re selling their products doesn’t mean you have that. Most images you find on the Internet are protected by copyright, and if you use them illegally you risk expensive litigation, penalties, and more. Instead, check with the manufacturer of your product which photos and descriptions you can use.
- Limitation of Liability: You need clearly-written language that limits your liability because it protects your business from any liability that extends beyond the sale. It also expressly limits representations and warranties on the products. You need to clearly define any warranty you provide, if you provide one at all. Because implied warranties such as fitness for intended purpose can be claimed, you must disclaim all warranties not provided.
Don’t forget to review and update your terms and conditions often, and on a periodic schedule. Your customer could try to use your terms against you and it is your responsibility to keep them current. You should also try to update your customers about these changes either via your online store website or email (also known as “reasonable steps”). Obviously unless you yourself are 100% sure about limiting your liability with your terms, it might pay to consult a lawyer specializing in e commerce.
Refund or Return Policy
Requirements for and restrictions on return and refund policies are one area that depend greatly on both the kind of items you sell and your local laws. You must make your policy clear to customers and you must ensure that you are adhering to local law.
These simple guidelines will help you stay in the clear as you open your online store. Remember, seek guidance and drafting assistance as needed.