In today’s business environment, it is very common to conduct business online on a website, or via an online marketplace such as Lazada, Taobao, Shopee, etc. For transactions that take place online, the business owner can expect to contract with its users electronically, via the website terms and conditions (“T&Cs”).
In Malaysia, contracts for supply of goods or services can be formed electronically under the Electronic Commerce Act 2006. We have discussed in our previous article whether the various types of electronic contracts formed online are enforceable and what are some of the best practices when you have an electronic contract. In this article, we discuss the matters that you need to address in the content of your website T&Cs.
What should be in the website T&Cs?
A business that supply goods or services via a website or online marketplace must disclose the following information on the website, as specifically required under the Consumer Protection (Electronic Trade Transactions) Regulations 2012:
- The name of the person who operates the business, or the name of the business, or the name of the company;
- The registration number of the business or company, if applicable;
- The e-mail address and telephone number, or address of the person who operates the business;
- A description of the main characteristics of the goods or services;
- The full price of the goods or services including transportation costs, taxes and any other costs (i.e, ‘hidden charges’ are prohibited);
- The method of payment;
- The terms and conditions (i.e, specific terms that govern the transactions and usage of the website); and
- The estimated time of delivery of the goods or services to the buyer.
Generally speaking, your website T&Cs should also:
- avoid lengthy, complicated and confusing legalese, and make the language as simple and straightforward as possible. The goal is to be user-friendly, and hence website T&Cs should be easy to read for the users.
- be displayed prominently and easily accessible. Any updates or revisions to the website T&Cs should be displayed clearly on the website and notified to the users promptly. This can be done by way of sending a separate email to the user to notify them that the website T&Cs have been amended, to mitigate the risk that the users are unaware of the revised terms.
- address matters such as the process of placing an order, how payment and delivery is made, the refund and exchange policy, suspension and termination of the user’s membership in the website (if applicable), how complaints or disputes are resolved between the customer and the business owner, jurisdiction of governing law, etc.
- be compliant with the Personal Data Protection Act 2010, especially if the transactions will involve collection of the user’s personal data. In such instances, a Privacy Notice has to be put in place to ensure compliance with the law.
What should not be in the website T&Cs?
Given that the website T&Cs are set out by the business owner, the question then turns to whether a business owner can put in one-sided or unfair terms in the contract. At this juncture, it is pertinent to note that the Consumer Protection Act 1999 (“CPA”) which applies to supply of goods or services from manufacturer or supplier to the consumer (i.e. B2C model) cannot be contracted out of.
An “unfair term” in a consumer contract means a term which causes a significant imbalance in the rights and obligations of the parties to the detriment of the consumer.
For example, the CPA provides for implied guarantees that goods supplied to consumer must be fit for purpose, safe and durable, and a business owner cannot disclaim any guarantees as to the fitness and quality of the product as such clauses will be contradictory to the CPA.
Further, a business owner should avoid putting unfair, unjust and unreasonable terms in the website T&Cs as such terms may be struck out by the court or held to be unenforceable. These “unfair” business terms are typically found in very broad and one-sided clauses relating to exclusions & limitations of liabilities and indemnities of an electronic contract, especially when business owners seek to disclaim almost all liabilities resulting from the contract so formed. Again, ‘one-sided’ exclusion clause may not be enforceable, especially if it contradicts the CPA. Read more about enforceability of exclusion clauses here.
Some examples of types of terms that could possibly be challenged as being unfair, either procedurally or substantively, include:
- The business not having to perform its legal or contractual obligations.
- Consumers unreasonably losing deposits, prepayments or credits, or consumers being subject to disproportionate penalties or sanctions.
- Varying or changing terms especially after they have been agreed, for example, to change to a different product or raise the prices.
- Consumers not being able to lodge a complaint or seek redress from the business if things go wrong.
- Consumers being tied to unreasonably long contractual terms.
Conclusion: As much as business owners face temptation to set their own T&Cs to secure maximum protection and favourable terms for themselves, be mindful of the laws pertaining to contracts and consumer protection in Malaysia that regulate such Website terms.
This article was written by Shawn Ho and Ee Lyne Chong. Shawn leads the corporate practice group of Donovan & Ho, and has been recognised as a Notable Practitioner, whilst the firm has been recognised as a Notable Firm for Corporate and M&A by Asialaw Profiles 2020. We are also ranked a Recommended Firm by IFLR1000 for 2020.
Our corporate practice group advises on corporate acquisitions, restructuring exercises, joint venture arrangements, shareholder agreements, employee share options and franchise businesses, Malaysia start-up founders and can assist with venture capital funds in Seed, Series A & B funding rounds. Feel free to contact us if you have any queries.