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How to manage legal risks when your business has a website

If you manage or run a website you should consider any legal implications and risks that may arise from users accessing and using your website. The type and purpose of a website affects the types of issues and risks that need to be managed.

website legalGenerally the more a website interacts with a user, the more types of issues will be raised. A good example of a type of website that interacts with a user is a transaction-based website. A transaction-based website is a website that is based around the sale of goods and services – users can order goods and services and pay through the website.

This type of website gives rise to several matters that need to be considered, such as:

  1. The certainty of the contract between the buyer and the seller
  2. The enforceability of the contract
  3. Security of payment
  4. Warranty and liability issues
  5. Delivery of goods or services
  6. The requirements of the Privacy Act 1995 (Commonwealth) in relation to the collection of information

Some of these issues can be managed by putting processes and policies in place, and some of them can be managed by having effective terms of use. Ideally most risks can be managed by a combination of these two strategies.

A majority of websites have terms of use. The question to ask however is “these terms are effective”. There is no one-size fits all solution when it comes to drafting terms of use, and having suitable terms of use, specific for your website will greatly increase the efficiency of the terms of use.

Just having a comprehensive set of terms of use does not make it effective nor does it resolve the issues raised by the website. There is no point in having a comprehensive set of terms of use if the users do not know that it exists, or if it is hidden from the general public. Having a visible or hard-to ignore set of terms of use prevents users from claiming that they did not know of the terms of use.

Terms of use need to be integrated into the way the website operates and must work together with other policies or processes to reduce or manage risk. In addition to this you must be aware that resolving one issue may give rise to another issue.

For example, in relation to tackling an issue in relation to certainty of the contract, one of the matters that should be dealt with is the identity of the parties.

This can be resolved by requiring that only users who are registered can purchase goods or services from the website. The terms of use can be made effective by specifying that a user must accept the terms of use before they are able to register with the website. However, as you are gathering information that can identify a person, you must be aware of your obligations under the Privacy Act. You must then make sure that you have processes and policies in place in relation to the collection of information, the storage of information, and the retrieval of this information, that comply with the Privacy Act.

If you run a website you should consider all matters and issues that arise from your operation of the website and how it affects users of your website. Having proper policies, processes, and terms of use in place will help manage risks that arise from the operation of your website. You should always consider these questions, as it is always better to manage and minimise risk than deal with a problem once it arises.

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Kenneth Ti

Kenneth Ti

Kenneth Ti is an Associate Solicitor with Phang Legal (http://www.phanglegal.com.au). He has a background in financial services and insurance, and is focused on commercial and intellectual property matters. Kenneth is a strong believer in small business, the community, and pro bono work. Follow Kenneth Ti at @kennethti and Phang Legal at @phanglegal.

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