Law Times

Law Times • June 6, 2011 FOCUS Online contracts a challenge Lawyers discuss complexities as e-commerce grows BY DARYL-LYNN CARLSON For Law Times be a complex task for lawyers. Th at's because there are A usually many parties involved in an online business ranging from the web site developer to suppliers. As a result, law- yers have to ensure they have a comprehensive understand- ing of the scope of the clients' business and are able to dif- ferentiate their responsibilities and requisite disclaimers from those of the other parties who have a stake. Warren Ragoonanan of Gardiner Miller Arnold LLP in Toronto practises business law and has assisted many cli- ents with contracts for the on- line pieces of their businesses. "Before you sit down and start drafting details, you need to know all of the details of your client's business because a contract will be very diff erent for a product versus a service and the biggest challenge is the language in the contract," he says. "Th e easiest scenario is if you have a retail store and the client delivers goods online, so you just need to address how the cli- ent intends to get the product to the customer and how the customer will pay for it." For retail stores that provide customers with the option of placing orders online for ship- ment to a home or business address, delivery would be via mail or courier and payment would be made online by en- tering a credit card number or through PayPal. In such cases, the contract must specify all privacy and security measures the business has undertaken to protect customers from any security breaches and comply with Canada's Personal Infor- mation Protection and Elec- tronic Documents Act, Ragoo- nanan says. "If you're providing an ap- plication by a remote server, where are your customers' data going? Th e data can be hosted anywhere in the world, but as a Canadian business, if you're taking your clients' data, you are responsible for it and are subject to PIPEDA no mat- ter where the data is stored. You'd want the contract to set out an expressed consent from the customer and also specify that the site complies with PIPEDA in terms of its secu- rity compliance." Th e contract should also ad- dress any customers in foreign jurisdictions who may fi nd the business' web site and want to order a product. Still, Ragoo- nanan notes that not all coun- tries will recognize Canada's laws pertaining to contracts and clauses. "If you're doing business in a foreign jurisdiction, you Untitled-4 1 ssisting clients with con- tracts related to their online businesses can could be subject to the law in that jurisdiction. So you have to hope that jurisdiction recognizes your clause in your contract," Ragoonanan says. "What I tell my small- business clients is if there's an opportunity to earn money from anywhere in the world, of course you want to take advan- tage. So you have to strengthen your disclaimers, your agree- ments online to ensure you have strong governing law clauses unless you're prepared to program your site where no people outside of Canada can buy products. Otherwise, the client must address this." Rob Hyndman of Hynd- man Law Professional Corp. in Toronto agrees that the area of preparing contracts for the on- line aspects of a client's business can be rife with complexities. "Th ere are a lot of types of contracts for online busi- nesses," he says. "It could be a contract to sell the business, a contract to buy content for the business or to resell services of- fered by the business. And as well, there are many diff erent kinds of online businesses, so what you need to do is under- stand what the legal risks that are inherent in the customer's business are and understand the nature of the contract that they're entering into." Hyndman notes it can be benefi cial for any online busi- ness to have customer relations software that enables it to track engagement and contact with every customer in order to minimize liability. "I'm a big believer in the philosophy that law is too complicated for the average person, so it's important to ex- plain each party's obligations Specifying data protection measures is key to contracts for online businesses, says Warren Ragoonanan. in the contract as narrowly and as simply as possible." Mark Hayes of Hayes eLaw LLP says that with the various types of contracts involved, it's important that the lawyer have a thorough understanding of the client's business. "Th ere are licence agreements, fi nanc- ing agreements, joint-venture agreements, and many other types of contracts. As for on- line businesses, there is always a lot of collaboration with out- side parties. So it can be diffi - cult for lawyers who don't work in this area often." As a result, Hayes says law- yers need to understand how to limit a client's liabilities in foreign jurisdictions. "Canadi- an businesses often have only a North American market," he says, adding that if the cli- ent's online business is target- ing an international market, there could be limitations or additional liabilities in certain countries that lawyers would have to address. PAGE 9 BRILLIANT. A PREMIUM COLLECTION OF FINELY-CRAFTED LEGAL MEMORANDA – NOW AVAILABLE ON WESTLAW® CANADA* What better place to start your research than an illuminating analysis of your legal issue? Our new legal memoranda collection defines research excellence. Current, clear and concise, every memorandum cuts straight to the heart of a legal issue in one of ten practice areas. And each one is designed to give you perfect transparency – you start with a free summary page that shows you the author's name, drafting date, issue discussed and other critical details of the memo. You'll always be confident you're working with up-to-date analysis from the finest names in law. Classified by issue and linked to relevant case law, statutes and commentary, every memorandum offers a shining start to polished, finished research. Jump start your research with legal memoranda that provides thorough legal analyses and conclusions that help you make critical decisions, create compelling arguments, and achieve better results for your clients. Excellent legal research starts here. Legal Memorandums on Westlaw® Canada Call 1-866-609-5811 or visit westlawcanada.ca * Available as an add-on to an existing Westlaw Canada subscription or on a pay-per-view basis. www.lawtimesnews.com 6/1/11 9:52:38 AM

• Cover
• Return To Practice
• SCC Expose?
• Focus On Internet/E-Commerce Law