Shopping on Trade Me and the law of contract

by The FindLaw Team

Many New Zealand shoppers have cottoned on to the fact that looking for gifts and doing personal shopping online is, in some cases, the most cost effective option. From groceries to clothing and toys, it’s so easy nowadays for consumers to purchase goods online and have them delivered straight to their door. The use of the internet for shopping is growing fast. As a consequence, it’s important for people to understand who the contracting parties are on sites like Trade Me and eBay.

Online ‘auction’ site not an ‘auctioneer’

One of the interesting aspects of websites sites such as Trade Me and eBay, is that although they are popularly referred to as ‘auction’ websites conducting ‘online auctions’, they are not auctioneers in the traditional or legal sense of the term.

The Auctioneers Act 1928 (NZ) describes an auctioneer as a person who is licensed under that Act to carry on business as an auctioneer, and where the context requires, includes a person authorised by a licence under that Act to conduct sales by auction. However as Trade Me and eBay are not true auction sites, and do not involve registered auctioneers, the Auctioneers Act will not apply to their type of e-commerce.

Clause 2.1 of the Trade Me terms and conditions outlines the demarcation between the site and that of an auctioneer:

"2.1 The Services: Trade Me provides a venue to introduce members who want to buy and sell items or to advertise and find jobs and Member Services. Trade Me does not take any part in the sale of items other than by providing our Website as a venue for members. If a bid is accepted by a seller, a contract of sale will be formed between the buyer and the seller directly. We do not act as agent for either party and do not participate in any sale or transaction between you and other members, including where you use the credit card service. If you use the credit card service, we simply pass on payments made by one member to another. As a result, even though some of the Services are being referred to as an auction, Trade Me is not an auctioneer (whether under the Auctioneers Act 1928 or otherwise). Trade Me also provides a Services Category venue where members can be connected with trades people and service providers. Restrictions for using the Services Category are outlined in the Member Services Category Policy.”

eBay has a similar clause in its User Agreement at 3.1.

An Australian case called Smythe v Thomas [2007] NSWSC 844, examined the effect clause 3.1 of eBay’s user agreement had on a purchaser. Rein AJ observed that because eBay does not have a human agent in the form of an auctioneer, the manner in which transactions are conducted in a physical auction, will differ from transactions conducted via the site – with one such example being that a seller is able to withdraw their goods from sale before the hammer is lowered. His Honour noted: “There is no human agent and eBay by its terms and conditions eschews any role as auctioneer: see clause 3.1 of the eBay terms and conditions, nor does eBay have authority to execute a contract. There does not appear to be any provision for withdrawal of the goods from sale at the auction.”

How are online contracts created?

For the most part, the general principles in the formation of a contractual relationship regarding online purchases are as follows:

  • invitation to treat: the displaying of goods for sale on an e-commerce site is generally seen as an invitation to treat, rather than an offer, which is similar in vain to a traditional brick and mortar store. The offer is instead fulfilled by the actions of the customer visiting the site, rather than the seller;
  • customer communicates their offer: because the advertising of goods or services on a website is not an offer, the impetus is then on the purchaser to make an offer, and a customer will communicate an offer electronically – which can be done within the website – offering to purchase the advertised product;
  • the vendor accepts the offer: once an offer has been made by a customer, it is then up to the vendor to accept the offer unequivocally and unconditionally by communicating their acceptance to the customer.

Upon the acceptance from the vendor of a customer’s offer, a contractual relationship has now been established.

This article is only a general introduction to the area of online contracts. If you have any issues relating to an online transaction or any other related consumer inquiry, please seek the help of a lawyer who will be able to assist with any questions you may have.

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