Before selling goods online, you must ensure you have the correct contractual and legal documents. This protects you as the business owner, provides your customers are aligned with the laws and company policies, and removes any uncertainty with your new customer.
This guide will cover everything you need on e-commerce business contract documents if you plan to sell online. It will cover some of the laws requiring these legal agreements, legal risks to think about, and all you need to know about selling on a third website operator, online marketplace, or through a drop-shipping model.
It will also showcase the legal agreements you should use when acquiring international customers as your brand scales for physical and digital content and products.
Legal Documents For Online Selling
As your business grows, you may need an Employment Contract for your first few hires, Affiliate Network Agreements, and contracts with a logistic service provider if you sell physical goods and desire fulfillment by a third party.
This document describes how you gather, store, use, and share website user and personal data. The policy also informs users of their rights to this information.
You should also include:
- How and what you do with personal data
- What do you do with the information collected
- Which third parties and service providers do you share information with
- What (and for how long) do you keep the data you collect?
- How do you protect the data you collect
- Contact information
Terms and Conditions Agreement
As a legal practitioner, the one thing that annoys me is the absence of Terms and Conditions or poorly drafted T&Cs.
Typically, Terms and Conditions should include information about the following:
- Consent to electronic communications
- Copyright Information
- Giving users a license for a limited time to use your software
- Disclaimer of Warranties
- Limitation of Liability, informing the user that they are not responsible for damages incurred by their transactions with you
- Contacts to be made if there is a disagreement
- The law that governs
- Let users know you can cancel their account for any reason.
- Information on Payment
- You may also need other consent from users to purchase your products through the app
A good friend of mine and a practicing Lawyer in the UK discussed the importance of T&Cs during a video we filmed. This was shot two years ago, but it is still relevant today.
Once you have found a suitable template, redrafted it so it is tailored to your business, or asked a legal practitioner to draft a document for you. All you need to do is create a new page on your website or implement a section in the footer of your site.
Here's an example from the website Terms of Service of a popular e-commerce fashion shop, Fashionnova.com:
Return and Refund Policy
Return and Refund Policy
The Return and Refund Policy describes how customers can return products and receive a refund. You can include your Return and Refund Policy in the Terms and Conditions or as a separate document on your website page.
You should include the following in your return and refund policy:
- Time limit conditions on returning a product and requesting a refund
- Return or refund acceptance criteria
- Which type of items are Returnable and eligible for returns (due to hygiene, most companies that operate in swimwear, and hair care, for example do not allow returns)
- Address to send return items back to
- Fees for returned items
Here is an example from DJI. DJI sells camera goods and drones. Their Return policy explains in detail that returns and refunds must be done within 14 calendar days of receiving a product, how to go about processing a return. It has extensive information on return instructions via the “My Orders” dashboard.
As companies grow, creating or adding plug-ins to manage returns, refunds, and manufacturer warranty issues could be a good step to make operations run more streamlined for the business. DJI seems to do this really well, with their My Orders dashboard for users.
Your Shipping Policy page will be one of your frequently visited sections on your site. Literally, every shopper wants their items like yesterday. The details of the shipping policy must include shipping timelines, fees shoppers should be aware of, information on the courier provider and ideally how to track for items.
Laws, Regulations and Good Practice
It's exciting to start your business, but you should be familiar with the laws and regulations applicable to your business. Understanding the laws and regulations can help you avoid future legal and liability issues, complaints and matters that can distract you from revenue generating tasks.
These are some of the laws you need to be mindful of. If you have the budget, I definitely would recommend a 45 minute conversation with a lawyer too.
1. Consumer Protection Laws
Consumer Protection laws protect customers from unfair practices and ensure they are treated fairly. These laws include regulations governing product safety, marketing, and advertising. You need to be open and transparent with your pricing, shipping, and product details as an owner of an ecommerce company. Your ecommerce website should be secure, and you should have a clear return and refund policy.
2. Payment Card Industry Data Standards (PCI DSS).
If you accept credit cards for payments in your online business, then you need to comply with PCI DSS. This is a set of internet security standards that protects customer credit card payment information only. Your website should be secure, and you should have security measures in place that protect the customer's data.
3. Sales Tax Laws
The sales tax laws vary state-to-state and can be complicated. You are generally required to collect sales taxes on all purchases made by your customers in the states where you have a physical presence. You should be aware of the laws governing the collection of sales tax in every state in which you operate and keep up with any changes to the law.
4. Intellectual Property Laws
Intellectual Property laws protect you from others infringing on your brand, content of your website, or products. If applicable, you should make sure that any trademarks or copyrights are secured. Be careful not to violate the intellectual property rights of others.
5. Privacy Laws
Privacy law protects the personal information about your employees and customers. It is important to have policies in place that protect data and proprietary information of your customers and comply with the data protection regulations like the GDPR or CCPA.
6. Federal Trade Commission (FTC Regulations)
The FTC regulates advertising and marketing online to ensure that they are truthful and fair. You should make sure that you do not use false or misleading statements in your marketing and advertising practices.
7. Shipping and Fulfillment Rules
You must adhere to regulations relating to packaging, labeling and shipping products. This includes hazardous materials and customs requirements, if you are shipping internationally. Understanding the shipping requirements in every state and country you operate is important.
It can be difficult to navigate the legal landscape of an ecommerce company, but it is important to understand all the laws and regulations that apply to your business. Consult with a lawyer to make sure you comply with any applicable laws or regulations. You can avoid legal issues and concentrate on growing your online business.
Selling Through E-Commerce Store
If you sell via an ecommerce platform like Shopify or another platform like Wix or Squarespace, you will need to have in place a various set of documents as we covered above. A legal document to work on before you even add a product should be your Terms and Conditions and then, secondly, your policies. Once you have these drafted, create a page for both your website and app (if you have one).
It is common and best practice to include these in the footer of your e-commerce website. Online shoppers are familiar with looking for important links in this section, so it makes sense to put them here. Here is an example of a footer:
Selling Through Online Marketplace like Etsy & StockX
Online marketplaces are websites or apps like Etsy or StockX where consumers can find and make purchases from a variety of different vendors and services, all centralized on one platform.
Suppose you sell products via an online marketplace. In that case, you will want to ensure that you have marketplace-relevant legal agreements, such as Privacy Policies, Terms and Conditions agreements, Return and Refund Policies, and Shipping Policies.
While most websites and online marketplaces will have their own legal agreements, it's essential to make sure that you maintain your own policies as well.
Your policies must include marketplace specific-clauses about what steps you take to comply with applicable refund, privacy, and customer data protection law laws. It's also a good idea to take a look at the marketplace's policies and make sure that your legal agreements meet their requirements.
Selling Through a Mobile App
Suppose you are selling via a mobile app. In that case, you should get a specific template and edit it to suit a Mobile App Terms and Conditions Agreement that includes the following clauses if you plan to sell on an application you have developed.
- What devices is your app compatible with?
- A restrictions section that outlines prohibited uses for your app. For example, tampering or sub-licensing it, or attempting to override its security settings.
- An Intellectual Property provision that informs users that your app's content is yours and that they do not have any exclusive or licence rights to it.
- A licensing provision grants users a temporary licence to use your app for a particular purpose.
- You can use a disclaimer to let users know you're not responsible for the behaviour of their app.
- Fee information to inform the user that he/she is responsible for any fees associated with purchases made through your app. This includes recurring subscription fees.
Suppose your mobile app provides users with a subscription option. In that case, you will need to ensure that your Terms and Conditions user agreement includes a clause describing how long the subscription lasts, how to cancel, and what other associated fees the user is responsible for.
Selling Through Dropshipping
Dropshipping is a business model that enables you to sell products without keeping an inventory of stock. When a customer purchases from your online store, your designated manufacturer or supplier of the goods would then fulfill the order directly and mask their identity.
While the manufacturer is responsible for shipping the items to the customer, you will still need to ensure that you have appropriate legal agreements.
As with selling via online marketplaces, if you're using Shopify as an ecommerce platform for your dropshipping store, you should make sure that your policies are congruent with the platform's policies, and that both you and the manufacturer handle customers' personal information in a way that complies with any applicable laws.
Scaling Your Business Internationally
When you decide to start scaling your Shopify business, you need to consider costs for shipping in new markets. In the U.S and similar to the UK, shipping nationwide is easy and the costs do not change much from city to city or state to state.
Because of this, your U.S.-based, U.S.-sales-only ecommerce store's legal agreements will be able to be of a one-size-fits-all-states nature.
However, things change a little when you get into selling internationally:
- Shipping: International shipping is more costly, takes longer, and may involve required forms, documents and other legalities.
- Returns: Returns from international locations will be more expensive to make. Will your Refund Policy change for international buyers versus domestic buyers?
- Payments: You'll need to consider costs of tariffs, taxes, customs, and other fees. Will you work with one main currency, or accept other forms?
Because each of these points are addressed in standard legal agreements, your legal agreements will need to be altered a little to reflect international selling practices.
You don't necessarily need to have two separate sets of agreements (one for local sales, one for worldwide or international sales), but you may find yourself having a “domestic” section as well as an “international” section within your legal agreements.
At minimum, you should make sure that your policies include clauses about international sales.
These clauses should explain differences in international shipping costs and shipping times, any fees associated with international returns, what kinds of currency and payment forms you accept, liability limitations and how you handle international legal disputes.
When it comes to shipping, you can include shipping rates for each country if you ship to many of them:
Consider using creative ways to divide information between domestic and international sections, to make life easier and give shoppers clarity.
Your return requirements will likely be different for domestic versus international customers due to costs associated with returns; you should display this information in a Return and Refund Policy, or as part of your Terms and Conditions agreement also.
Luckily, due to the global nature of most ecommerce businesses, taking payments from people around the world will usually not be an issue. Payment service companies such as Stripe and PayPal will convert currency automatically and even provide safeguards for you and your customers.
However, some forms of payment may understandably not be accepted when making an online purchase, especially an international one.
Tip: Let shoppers know what forms of payment are accepted and which forms and credit card details are not accepted.
Once you have the right legal documents and your agreement covers the information necessary to protect your customers and yourself as the business owner, it's happy days and time to focus on sales and marketing. Legal contract documents are essential for any ecommerce website as they establish trust and a clear and binding agreement between the website owner and the customer.