The courts have also provided useful guidance in the e-commerce legal area, setting out, for instance, how offer and acceptance-the core building blocks of contract formation law-should work in an Internet environment. As we'll see next month, this process is ongoing, but so far in Canada, the good news is that the judiciary have generally risen well to the challenges presented by cyberspace to traditional contract and evidence law doctrines. Indeed, we now have a sufficient jurisprudence dealing with online legal issues, that the early part of 2004 would be a good time for entities doing business over the Internet-whether in a fully interactive, e-commerce mode, or merely for marketing purposes-to review the legal strategy and mechanics for their online experience to ensure they take into account the latest legislative developments and judicial pronouncements.
In conducting such a review, companies that sell online to consumers (consumers being individuals acting for personal, family or household purposes and not for a business purpose) must also take into account recent initiatives in online consumer protection. Given the dramatic rise in Internet-based consumer sales over the past decade, and the scope for misunderstanding to creep into these transactions, it is no surprise that governments in many jurisdictions have studied what sorts of changes should be instituted in consumer protection legal regimes for the online world. The OECD and the Canadian federal government have proposed guidelines in this area. Most importantly, in May 2001 the federal and provincial ministers responsible for consumer affairs adopted a template for consumer protection legislation in Canada governing Internet sales contracts.
Ontario's New Changes
Ontario is in the process of enacting into legislation and regulation the May 2001 Internet sales template as part of the current process underway to revamp the provinces consumer protection laws. This process started with the passage, in December 2002, of the new Consumer Protection Act, 2002 (CPA 2002). This new law overhauls various existing consumer protection legal regimes and brings them under one roof for consistency and ease of administration. There are also some important extensions of the law in favour of consumers.
A new implied warranty, for example, has been created, namely that services supplied under a consumer agreement must be of "a reasonably acceptable quality" (and the implied warranties in the Sale of Goods Act are now extended to goods that are leased or traded). Another important change is a provision that prohibits contracting out of the class action proceedings regime. This was done to counteract the practice of some suppliers providing for arbitration as the contractually stipulated dispute resolution mechanism, precisely to avoid a class action scenario (this practice will no longer work once the CPA 2002 is proclaimed in force).
Another change in the previous law effected by the CPA 2002 is to require suppliers to obtain fairly explicit consent of consumers to any proposed material changes in the consumer agreement proposed by the supplier. For instance, in a case a couple of years ago a court held that a supplier could amend its terms and conditions merely by posting the amended provisions on its website, and that it was reasonable to expect consumers to be required to monitor the website for such changes.
The Ontario government takes a very different-and dim-view of this practice and believes "it is unrealistic and onerous to expect that consumers continually visit the websites of suppliers to review agreements in order to decipher and consider changes." Accordingly, the CPA 2002 includes provisions requiring either "explicit" consent of the consumer to the new change or a very detailed proposal of a previously agreed to type of change; in the former scenario an updated version of the new text must highlight all the changes proposed from the existing agreement. In short, the CPA 2002 effects very fundamental change in this area.
Internet Agreements
The changes noted above will greatly impact suppliers selling goods or services to Ontario residents over the Internet. But that's not all. In addition, the CPA 2002 contains an entire set of contract formation rules for what it terms "Internet Agreements," which are consumer agreements formed by text-based Internet communications.
The CPA 2002 requires the supplier to provide the consumer with fairly extensive information before concluding an Internet Agreement. The draft regulations under the CPA 2002 stipulate 15 pieces of information in particular, including: details about the supplier (such as name, telephone number and physical address); description of the goods and services (including relevant technical specifications); pricing details (including taxes and shipping charges); details of additional charges (such as customs duties or brokerage fees); delivery date; delivery arrangements; the supplier's refund policy (if any); and any other conditions that may apply. And if credit is extended for the purchase additional extensive consumer credit disclosure requirements under the CPA 2002 come into play.
The CPA 2002 requires that all this information be disclosed to the prospective consumer in a manner that is "clear, comprehensible and prominent." As well, the new legislation stipulates that this disclosure shall be "accessible" and available in a manner that "ensures" that the consumer has accessed the information and is then able to retain and print the information. This standard of disclosure presents some real compliance challenges, though website technical and navigational mechanisms will be extremely valuable in effecting compliance with the new law.
Confirmatory Screens
One design device that will be helpful is the "confirmation screen" that "replays" for the consumer his or her various purchase details just before the conclusion of the online purchase process, and then requires a confirmatory click to signify that all the data is in order. Responsible e-tailers have been using such a screen for some time, but the CPA 2002 will now make it mandatory. As well, the new law requires that the consumer be presented with an express opportunity to accept or decline the Internet Agreement. Again, the use of express click consent arrangements (rather than merely implied "web wrap" approaches) will likely predominate in the business to consumer (B2C) environment in order to ensure compliance with these new rules.
A final step in the contract formation process mandated by the CPA 2002 is that the supplier must provide a copy of the Internet Agreement to the consumer within 15 days after the consumer enters into it. Helpfully, the draft regulations under the CPA 2002 go on to provide that delivery may be effected by e-mail (among other means), which presumably will become the mechanism of choice for e-tailers.
These new rules for Internet Agreements, which will come into effect when the related regulations are promulgated, will raise the compliance bar for companies selling online to consumers physically resident in Ontario. Nonetheless, with some advance planning and technical design rework of the consumer's online experience, they can be made to work.
The result should be an increased level of confidence in e-commerce on the part of consumers, which should help further boost online sales.