Online selling can get complicated
- By Rich Kellett
- Jun 22, 2000
Federal WebMasters Forum
Because the federal government increasingly uses the World Wide Web to conduct
transactions, it would be useful to review the issues involved in creating
a binding contract when agencies sell products or services to the public.
The Federal Acquisition Regulation guides agencies when buying from the
public, but no similar, singular guidance exists for agencies when selling
to the public.
Federal sales to the public amount to billions of dollars, and the government
has many methods of selling. For instance, it operates department stores
(base or post exchanges) and grocery stores (commissaries), conducts auctions
of surplus or seized property and licenses land for different uses.
Use of the Internet introduces yet another marketplace.
The first and crucial step is to determine the types of contracts that will
be executed via the Internet. Start with simple and small-dollar transactions
that offer the most immediate payback. Also, be conservative in taking on
contracting via the Web because there a surprising number of complexities
and costs involved in working directly with the public.
The next step is to clearly identify who has the authority to create binding
contracts via the Internet with the public. It is unclear to me whether
a warranted contracting officer must be vested with this responsibility.
The FAR states that a warranted contracting officer is the only person who
can procure goods and services for the federal government. But it is unclear
if that includes circumstances when the government is selling goods and
At a minimum, it would appear that the responsible program office should
be "vested" with the authority, accountability and responsibility for the
contracts to sell goods and services to the public. I would recommend taking
a business course in contract law if you are assuming this responsibility.
Any Web site conducting transactions to sell goods and services to the public
should have a button labeled something like "Contracting Terms and Conditions."
Clicking on this button should lead to a list of key contracting terms and
conditions, such as how an offer is made and how an acceptance is communicated.
I recommend forming a team that includes the Webmaster, your program officer
and your legal counsel to develop a standard contract. The standard contract
should be tailored to the products and services your organization provides.
This is not a case where one size fits all. Some legal terminology must
be included (several legal terms must be used when disclaiming warranties),
but most of your standard contract can be written to make it easy to read
by the public.
The next step in forming binding contracts via the Internet is to define
who is making the offer and who is accepting it. When you sell your home,
you are not making an offer. You are asking for offers. The buyer makes
the offer and the seller decides to accept the offer.
I recommend that agencies follow a similar methodology by posting in their
"Contracting Terms and Conditions" that the Web site is inviting offers,
not making offers. This allows the agency to conduct a series of operations
before committing to the contract. Such operations might include checking
the order, verifying inventory, looking for mistakes (or signs of hacking)
in the catalog, verifying identity and conducting a credit check. The acceptance
is made by the agency generally through a confirming e-mail. Contract formation
is complete once the confirming e-mail is received (not necessarily read).
The button on your Web site linking to the standard contract should be highly
visible, with strong wording recommending that the public read it. My opinion
is that you do not need to require clicking on the button to create a binding
contract. Based on general contracting principles, if the button is highly
visible and has strong wording recommending reading, then the contract will
be binding on the parties. Your standard contract should specify that binding
contracts only can be formed as specified through the Web site. This is
necessary to avoid any misunderstandings with the public if there are attempts
to change the terms and conditions through the use of e-mails.
Other key terms and conditions to be included in your standard contract
might include some of the following listed below. This is not an exhaustive
list, and your legal counsel will be quite versed in writing contracts for
your agency. It is a business decision of your agency's program office,
Webmaster and legal counsel to determine what is most appropriate for your
programs and customer base.
* The offer and method for communicating an offer.
* Acceptance and method for communicating an acceptance.
* Confirming e-mail.
* Authority to contract.
* Warranties and damages.
* Capacity to contract (age, etc.).
* Jurisdiction for disputes.
* Digital signatures.
* Mistakes in transmission (when the transmission is garbled).
* Privacy, including release of privacy rights for credit checks.
* Payment (and what process occurs for the lack thereof).
* Acts of God.
* What happens when either party introduces a virus or other malicious software?
—Kellett is founder of the Federal Web Business Council, co-chairman
of the Federal WebMasters Forum and is director of GSA's Emerging IT Policies