ASSIGNMENT
Discuss the legal issues raised in the following scenario. You will be expected to use appropriate authority to support your conclusions. (Ignore the provisions of the Electronic Commerce Directive and any subsequent UK regulations for the purposes of this assignment.)
When it is announced that the well known actor Jonathan Watson is to be appearing in
‘Volpone’, James, a big fan of Watson, asks his mother, Helena, if she can get tickets. As it’s James’ birthday during the Christmas holidays, and the only time he’s ever asked to go to theatre, she decides to try for tickets during the London run of the show. Demand for tickets is phenomenal as tickets for the provincial run have been changing hands on eBay for £500 a pair.
The London theatre decides that tickets will be made available in three ways only. First via the internet, second by phone and finally, a small number of tickets will be available on the day of performance. Booking opens on the internet and by phone on 4th October 2008 at 10am. Helena starts by hitting the theatre’s website booking pages at 10.02am. These load extremely slowly owing to the volume of people attempting to buy tickets. While waiting for the page to load she dials the phone booking line. She only gets the engaged signal.
Finally the computer accesses the booking system. It takes some time but eventually Helena works through the various menus of dates and seats until she gets to the booking confirmation page. It shows that she has been allocated two tickets on the date she requested. All she now needs to do is enter her details so that tickets can be sent to her and a valid credit card. Helena completes this form and presses the return button. The page clearly states not to press ‘return’ again in case the system charges the card twice for the tickets. She does not read the terms and conditions of booking as it had taken an extremely long time to load the pages and she didn’t want to risk losing the tickets.
She waits for the booking to be confirmed, but nothing happens. After waiting for twenty minutes she starts phoning the box office number to find out whether they have received the booking. She still can’t get through. She finds another number on the website and manages to get through on that line. Her details are taken and she is told that the seats are under reservation but as they are ‘Internet tickets’ she cannot pay for them over the phone. Further, the line she has got through on is not a booking line for this production so will not accept her booking. While on the line the box office assistant tells Helena that the reservation on her seats has expired and she needs to go through the booking process from the start. Helena protests this as she can identify the seats and offers her card number again. This is refused and the call is ended.
Unsurprisingly, by the time Helena works her way back through all the levels of menu, she is greeted by a message that all tickets have now sold out. It is 11.58 am. Helena is infuriated by the failure to process the booking. As far as she is concerned she did all that she could to buy the tickets and it was a system failure that prevented a confirmation email from being sent.
Advise her whether a binding contract has been formed for the tickets.
Helena decides to try once more and checks the website for further contact details. There is now a message stating that limited tickets will be available on the day. This is not a practical option for Helena. She emails the theatre manager and explains her predicament. He contacts her and offers her tickets at a higher price and for a different performance than she originally applied for. The offer is limited until close of business the following day. Helena asks if she can think about it as the tickets are twice as much as she planned to pay and is told she can leave a message. She does phone back first thing the next day but only gets through to the theatre manager’s voicemail. The manager does not check his messages until after close of business.
Does he still have to sell the tickets to Helena?
Simon sees two tickets for the show for sale on eBay. ‘Bids’ to start at £500 for the pair. He bids successfully, but the seller is subsequently unable to supply the tickets as they have been cancelled by the theatre on the grounds that resale for profits is contrary to clause 6 of the terms and conditions of booking.
Does Simon have any recourse against the seller?
Please also ensure that you read the two appendices.
Appendix 1
Excerpt from terms and conditions of sale of the theatre tickets:
“Clause 6: If tickets are resold or transferred for profit or commercial gain by anyone other than the Venue Management, Producer or one of their authorised agents, then they will become void and the holder may be refused entry or ejected from the venue. “
NB: There is no reference in the terms and conditions to the method by which the tickets can be sold or what happens in the event of a technical failure such as the Internet crashing.
Appendix 2
Excerpt from terms and conditions of sale of eBay.
“You will not hold eBay responsible for any loss you may incur as a result of eBay taking any of the actions described in the Abusing eBaysection above nor for other users’ actions or inactions, including things they post. You acknowledge that we are not a traditional auctioneer. Instead, our sites are a venue to allow anyone to offer, sell, and buy just about anything, at anytime, from anywhere, in a variety of pricing formats and venues, such as stores, fixed price formats and auction-style formats. At no point do we have possession of anything listed or sold through eBay.
We do not review users’ listings or content and are not involved in the actual transaction between buyers and sellers. We have no control over and do not guarantee the quality, safety or legality of items advertised, the truth or accuracy of listings, the truth or accuracy of feedback or other content posted by users on our sites, the ability of sellers to sell items, the ability of buyers to pay for items, or that a buyer or seller will actually complete a transaction.
Please do not assume that the offer, sale, purchase, export or import of any item is valid and legal simply because it is listed on one of our sites.
You accept sole responsibility for the legality of your actions under laws applying to you and the legality of any items you list on any of our sites.”
ANSWER
Introduction
This scenario brings to the fore many legal issues. Firstly, there is a need therefore to focus upon the legal issues which have arisen in terms of the Electronic Commerce Directive and the subsequent UK regulations. A number of points should be noted therefore prior to proceeding with a legal analysis.
It has been stated that the tickets are available on eBay at 500 pounds a pair. However it seems that only the London Theatre has the mandate to sell these tickets through either direct sale in-house (on the day of performance) or via the internet or over the telephone. This is confirmed by Clause 6 of the conditions which the ticket buyers are subjected to, which states thus: “If tickets are resold or transferred for profit or commercial gain by anyone other than the Venue Management, Producer or one of their authorized agents, then they will become void and the holder may be refused entry or ejected from the venue.’
The question also states that the purported terms and conditions have no reference to the method by which the tickets can be sold or what happens in the event of a technical failure such as the Internet crashing. Since both the scenarios involve the use of telephone and the Internet this calls for the discussion of the E-commerce directive and the DSD (distance selling Directive) and regulations.
Before a discussion of the solution to this scenario it would be useful to discuss the applicable law.
Status of E-bay Internet auctions
This is in reference to Simon’s purchase of E bay tickets for the London Theatre show. The traditional auction serves as platform where buyers and sellers meet and bid on different items with the result that the higher bidder has the opportunity to buy the item in question. There has been much academic debate as to whether online auctions like the one at hand where Simon bought tickets are in fact real auctions.[1] Section 57 (2) of the Sale of Goods Act 1979 provides that ‘a sale by auction is complete when the auctioneer announces its completion by the fall of the hammer, or in other customary manner’. Therefore, it may be said in the light of this definition that (minus the gavel) technically the Internet auction (with all the bidding involved) actually does qualify to be classed as an auction.
It should be noted that the Distance Selling Directive will not help Simon here. This is because as far as liability in business to consumer (B2C) contracts is concerned the Distance Selling Directive[2] excludes contracts concluded at auctions completely from the scope of the Directive. This exclusion has been implemented by the Distance Selling Regulation 5 (1)(f)[3]. Auctions are not however excluded from the scope of the E-commerce Directive 2000/31/EC and therefore the applicable law here will be the E-Commerce Directive in Simon’s situation.[4]
Simon will also be protected by the Sale of Goods Act 1979, since based on the above an internet auction may be regarded as an ‘auction’, so that the consumer protection provisions apply to business sellers in internet auctions.[5] The effect of this definition is that sellers of goods have to comply with the implied terms in sections 12 (title), 13 (sale by description), 14 (implied terms about quality and fitness) and 15 (sale by sample). It would seem that the Ebay seller is in breach of section 12 where he may not have a valid or good title to pass on to Simon. Many issues arise in this context, for example whether the provider of an auction platform that is E Bay is liable for the goods sold on his platform if they are not of proper title in case Simon is unable to locate the seller of the tickets? Here Regulation 19 of the Electronic Commerce (EC Directive) Regulations 2002 would apply if the online provider like E-Bay merely hosted the website and would be immune to criminal liability where they had no actual knowledge that the goods being sold on his website were not of proper title. E bay would also be immune against civil liability where the auction provider does not have actual knowledge of the unlawful activities or information. So, for instance, an auction provider would not be liable for damages for goods which were defective in title unless he had actual or constructive knowledge of this problem. However, the position would change if the Auction service provider had received sufficiently precise notice about the defective titled goods and does not stop advertising them.[6] Also where a business seller engages in unfair commercial practices on an auction platform towards consumer sellers, Regulation 19 would not stop the Office of Fair Trading from taking enforcement action against E-Bay. Also it should be noted that by stating the exclusion of liability clause in their terms and conditions [7] E bay will not be able to avoid being subject to the Unfair Contract Terms Act 1977 and the Unfair Terms in Consumer Contracts Regulations 1999. This means that they cannot impose unreasonable terms on their users and exclude liability for personal injury or loss of property. This would undoubtedly give Simon an advantage over the seller because section 12 of the SGA 1979 does apply to both business-to-consumer and consumer-to-consumer transactions. Of course, the advent of online bidding has increased the complications caused by such transactions. For example the EBay system, which is currently being discussed, has blurred the difference between sellers and buyers with its simplified selling arrangement.
The UK Consumer Protection (Distance Selling Regulations (2000)
This is in reference to the Internet and telephone transactions Helena has tried to conclude. The UK Consumer Protection (Distance Selling) Regulations came into force on 31 October 2000 and implemented the Distance Selling Directive. There has also been an amendment in the form of Consumer Protection (Distance Selling) (Amendment) Regulations 2005.
These regulations lay down the law as to the time and type of information online businesses must give to their consumers: key information in a written or otherwise durable form[8]. If the contract is for online services then this information can be provided before or during the performance of the contract.[9]Other salient features of the Regulations in relation to online contracts are briefly discussed below.
- The goods or services must be furnished within thirty days (otherwise subject to contract.)
- Consumers are able to withdraw from these contracts with in seven days of the making it.[10] In such a case the time for refund will be within 30 days.
- These regulations do not apply to business-to-business contracts, financial services sold at distance[11] and particularly goods or services bought at an auction.
Therefore whenever a contract is concluded online, through a web page or over the telephone, the transaction is labelled as a “distance sale” and not only do the implied terms of the Sale of Goods Act 1979 apply, the Distance Selling Regulations provide extra protection in case of fraudulent use of your credit card. There has been criticism that when the consumer decides to cancel the goods it is unfair that they are not required to pay for sending the goods back but merely make them available for collection[12]. This provision seems to be harsh upon small businesses operating from far off areas[13]. But in the case of the Ticket theatre this was for the sale of tickets so Helena is the one who is suffering financial loss here. However, the Regulations do permit the supplier to include in the contract a term requiring the consumer to return the goods to the supplier at their own cost, unless there has been a statutory breach of contract. Defective goods will give the consumers the cancel the contract unconditionally. Here there has been a total failure to actually give Helena the tickets, despite her taking all the steps necessary for the performance of the contract.
Last but not the least, if the goods or services do not arrive with in whatever time is agreed, the consumer is entitled to cancel this contract and receive a full refund[14]. In the case of the UK, under the law Helena will be able to claim costs from their bank if they have used a credit card for a price of over £100.The seller remains liable under the regulations until the goods arrive.[15]
One of the main criticisms of the Distance Selling Directive was that it presupposed arrangements in member states for the out of court settlement of disputes. Now in the UK, the Regulations do provide that the Office of Fair Trading and the Local Authority Trading Standards have a duty to consider complaints and these authorities can get injunctive orders against offending suppliers[16]. However, it is subject to debate if anyone buying a small, cheap item would go through the hassle of complaining etc. But if Helena has had her credit card charged she can even apply online for the small claims settlement which charges a fee of 35 pounds, which is later refunded.
The original draft of the UK Regulations actually provided for criminal sanctions[17] for fraud by a seller like the London Theatre, which was later omitted because of protests from the industry (except inertia selling). The positive side to these regulations is that, since the enforcement of consumer rights generally results in a large number of small value claims, where each individual consumer is unable or sufficiently motivated to pursue an individual claim for damages or other remedy, the Directive actually gives locus standi to the competent administrative authorities for public consumer bodies, consumer organisations and professional organisations with a legitimate interest in acting (Article 11(2)). Therefore, now the consumers who made contracts online and suffered losses and were unable to afford legal aid can always contact the OFT or their local consumer association so they can bring their grievances and any ill will on the behalf of the online traders to the notice of the legal authorities[18]. Thus, I would advise Helena to make a complaint against the London theatre to the OFT if she feels she is unable to afford the costs of a proper legal claim. The only issue here is that we have not been told whether her card was charged but for the sake of this scenario we will proceed on the assumption that there was a charge on the card.
Discussion of the law
Reg. 25(5) of the UK’s Consumer Protection (Distance Selling Regulations) 2000 (“the DSR”) is relevant here. Since the contract has a close connection with the UK, reg. 25(5) makes the DSR, which are mandatory consumer protection rules, applicable to the contract even if the sellers try to state that that Non EU law applies – especially in the case of the E-bay seller who sold tickets to Simon. By virtue of the E commerce Directive and the DSR provision, the theatre’s contract to sell Helena the tickets is subject to a number of obligations under the DSR as well as under the (UK) Regulations implementing the EU’s E-Commerce Directive 2000 (“ECD”) and The London Theatre is in breach of the following of these obligations:
- They should have given Helena proper notice under the DSR, prior to concluding the ticket contract – information as to its identity and address, the price of the tickets (including all taxes, delivery costs) and her right to cancel the contract (reg. 7(1)(a)(i), (iii) & (vi); and either before or after contracting and by the time of delivery of the tickets, the same information in written form or in another durable medium (eg. by email). It is arguable that those terms and conditions displayed before she had to press the return button furnished ample notice, but then again they also failed to specify and address the issue of technical errors within their purported terms and conditions.
- In addition, under the ECD (E commerce Directive), London Theatre failed to explain to Freddie, before taking his order, the technical steps or possibilities of errors in concluding their contract and for identifying and correcting input errors (Art. 10(1)(a) & (c)). The Theatre also breached its duty to actually provide these means relating to errors and to acknowledge receipt of Helena’s order by electronic means promptly (Art. 11(1)). Arguably these various breaches are responsible for the failure to deliver the tickets and The London Theatre is in any event liable in a claim for damages for breach of statutory duty for the loss suffered by Helena as a result of the breaches.
One option would therefore be for Helena to sue The London Theatre in the UK courts on this basis. In theory, an injunction to remedy the breaches could also be sought by complaining to the Director of Fair Trading or a UK consumer body though this would not get Helena’s money back if her card was charged. Further, the difficulty with suing for damages is again that the time, energy and, especially, the costs of such litigation is disproportionate to the sum to be recovered.
A more practical option, perhaps, would be for Helena to exercise her right to cancel the contract with the London Theatre under reg. 10 of the DSR[19]. She may do this without giving reasons by sending a notice, eg. by email, to the London Theatre’s last known business address, (no doubt available on the website), and because the Theatre has not complied with the above information requirements, she has 3 months and 7 days from the delivery of the tickets (if it eventually happens) to do so (reg. 11(3) & (4). As a result of the cancellation, the credit agreement arising form Helena will also be cancelled (reg. 15) and she will be entitled to be reimbursed any sums paid on her behalf by the bank (reg. 14 & 15(3)(a)) if this is the case. However, it is stated that the Theatre alleges that the reservation expired. But since Helena has paid and if she can show her card was charged, there will be a legally binding contract which would mean that under reg. 15 of the UK’s Regulations implementing the ECD, she would have a right to rescind the contract because the Theatre did not meet its duty to give the means of identifying itself and for correcting input errors. On the other hand she can claim a charge back under the very useful s. 75 of the Consumer Credit Act 1974 which, in certain cases, makes a credit card company jointly liable with a supplier for repaying monies paid on behalf of its customer for the supply[20].
There is little she can do in case of the telephonic contract as she was the one who delayed acceptance of the offer and thus the use of the instantaneous modes of communication would mean that her acceptance never got through. She could, of course, have tried emailing her acceptance but this does not seem to be an option here. A final option for redress would be for Helena to try a suitable form of Online Dispute Resolution with The Theatre through the OFT as this should make the costs more reasonable for her. (The situation for Simon has already been discussed above in the section about online auctions so there is no rationale to repeat the analysis here).
Bibliography
- Todd, Paul (2005) E-commerce law / Paul Todd, London; Portland, or. : Cavendish Pub. 2005.
- Reed (2007) Internet Law, Text and Materials, 2nd Edition, Series: Law in Context, Chris Reed, Queen Mary, University of London
- Reed and Angel (2003) Electronic Commerce (Co-author with G. Sutter) in C.Reed and J. Angel (Editors), Computer Law, 5ed, Oxford: Oxford University Press, 2003,
- Liability of On-line Information Providers: Towards a Global Solution [2003] 17(3) International Review of Law, Computing & Technology
- G. Finocchiaro, “European Law and Consumer Protection in the Information Age” (2003) 12 Information & Communication Technology Law (No.12) 117.
- S. Van Der Hof, “European Conflict Rules Concerning International Online Consumer Contracts” (2003) 12 Information & Communication Technology Law, No.2, p.165.
- N. Rosner, “International Jurisdiction in European E-Commerce Contracts” www.llrx.com/features/eu_ecom.htm, access on July 5, 2004, p.13.
- J. Hornle, “Private International Law and E-Finance: The European Perspective” (2001) 8 The EDI Law Review 219.
[1] For example if you look at the ‘Buy-It Now’ facility on EBay it becomes obvious that it is not an auction, due to the lack of successive bids with the highest bidder winning.
[2] 1997/7/EC Article 3 (1),
[3] Article 2 (1) definition of distance contract. Also many academics have formed the opinion that since internet auctions are not really auctions like the ones mentioned in the Distance Selling Directive it follows that the information requirements (Articles 4 and 5 of the Directive), the cancellation right (Article 6) and the provisions on performance (Article 7) and card protection (Article 8) apply to suppliers, as long as the supplier is a business, i.e. acting in a commercial or professional capacity and as long as the supplier is acting under an ‘organised distance sale scheme’
[4] Therefore the information requirements contained in Article 5 and the other consumer protection provisions in that Directive (such as the requirement to provide the consumer with means to correct input errors, or the requirement that the steps to conclude the contract must be clearly explained)
[5] Section 57 of the Sale of Goods Act contains provisions for auctions and in particular provides that if the seller (or someone else on his behalf) wishes to bid at an auction, the seller must expressly notify this reservation of the right to bid. If the seller does not comply with this notification, the buyer may treat this as a fraudulent action and rescind the contract and claim damages.
[6] This raises the question of what amounts to sufficiently precise notice. Regulation 22 states that this depends on all the relevant circumstances but the courts must take into account whether the notice was sent to email or other contact details given for that purpose and whether the person giving notice included his or her name and address, where the location is stored and why the information is unlawful. In the context of an online auction this should include the category of sale, the identifier of the seller and why the information is unlawful.
[7] APPENDIX 2-You will not hold eBay responsible for any loss you may incur as a result of eBay taking any of the actions described in the Abusing eBay section above nor for other users’ actions or inactions, including things they post. You acknowledge that we are not a traditional auctioneer. Instead, our sites are a venue to allow anyone to offer, sell, and buy just about anything, at anytime, from anywhere, in a variety of pricing formats and venues, such as stores, fixed price formats and auction-style formats. At no point do we have possession of anything listed or sold through eBay.
We do not review users’ listings or content and are not involved in the actual transaction between buyers and sellers. We have no control over and do not guarantee the quality, safety or legality of items advertised, the truth or accuracy of listings, the truth or accuracy of feedback or other content posted by users on our sites, the ability of sellers to sell items, the ability of buyers to pay for items, or that a buyer or seller will actually complete a transaction.
Please do not assume that the offer, sale, purchase, export or import of any item is valid and legal simply because it is listed on one of our sites.
You accept sole responsibility for the legality of your actions under laws applying to you and the legality of any items you list on any of our sites.”
[8] Liability of On-line Information Providers: Towards a Global Solution [2003] 17(3) International Review of Law, Computing & Technology
[9] Therefore the Distance Selling Regulations apply to both goods and services, where the contract is made without any face-to-face contact between the supplier and consumer
[10] In the case of goods, it ends seven working days after the day of receipt of the goods. In the case of services, it ends seven working days after the day the order was made. If the consumer agrees to the service beginning within the seven days, the right to cancel ends when the service starts.
[11] These are covered by the Financial Services (Distance Marketing) Regulations.
[12] Liability of On-line Information Providers: Towards a Global Solution [2003] 17(3) International Review of Law, Computing & Technology
[13] Ibid
[14] Todd, Paul (2005) and Reed (2007)
[15] Ibid
[16] Ibid
[17] S. Van Der Hof, “ (2003) and N. Rosner (2004)
[18] Reed and Angel (2003) and G. Finocchiaro (2003)
[19] J. Hornle (2001)
[20] Reed and Angel (2003) and G. Finocchiaro (2003)