Don't get tangled in the web

In the heady days of 2000 when the e-commerce boom was at its peak, it was widely stated that online procurement would be the answer to many of the cost and difficulties of supply-chain management. It was believed that such applications would drive the "black art" out of procurement and lead to greater transparency, wider competitiveness and improved delivery.

This is still the case; the cynics will undoubtedly be proved wrong in the medium term. In the meantime, the use of e-commerce applications will continue to grow alongside the improvement in procurement processes. As is now recognised, these applications are facilitators rather than deliverers of change.

Online procurement applications support fairly simple transactions such as the purchase of materials from a supplier's website or, following a more complex model, involves a portal and a business-to-business relationship with the provider of that portal.

In each case, there are two forms of contractual relationship. First, there is the contract between the user of the procurement service and its supplier. Second, there is the contract between the seller and buyer of the product. In the case of the simple transaction, the parties will be the same, but this is not necessarily the case with a business-to-business exchange. In either case, the use of the website is likely to be governed by the service provider's standard terms.

In the UK, almost all types of sale of goods contracts can be made online and similar legal issues arise as in a paper-based environment. The same requirements have to be fulfilled in order to make the contract legally binding: there must be an agreed set of terms and both parties must intend to form a binding legal relationship between themselves. Under English law there must also be some form of consideration or value passing between the parties, in the absence of a deed.

Websites can be treated as analogous to supermarkets – the display of an item for sale on a site will not amount to an offer, the acceptance of which will lead to a legally binding contract. An offer will only be made when a customer gives notice of their intention to buy by submitting an order – at which point the seller is free to accept or reject the offer.

With the automation of online procurement processes, there may be confusion as to when an offer is accepted. The basic rule is that for an acceptance to be effective, it must be communicated but, as the law stands, it is not clear when an online acceptance is communicated. For example, if it is by email, is it communicated when the seller presses the "send" button, when it leaves the seller's email system, when it leaves the seller's internet service provider's mail server or when it hits the buyer's service provider's mail server? The safest course is always to state in the contract when acceptance will be deemed to have taken place.

Simply placing terms and conditions on a website is not enough to incorporate them into a contract. The parties must agree that they contract on the stated terms, and they must do so before or at the same time as becoming contractually bound. When dealing with customers of a website, a seller must ensure that the ordering process requires the customers to read and agree to the seller's terms and conditions. This is normally done by presenting the terms in a window and requiring the customer to acknowledge they have read and accepted them by, for example, clicking a button before proceeding to place an order.

The procurement vision is one of a world market where goods are sourced according to best price and value. In this type of environment where disputes are likely to arise, the governing law of the contract and the particular jurisdiction can be critical.

National laws differ considerably and this can affect terms in the contract or may mean the contract is simply not enforceable. It may also be expensive and inconvenient for a party to sue abroad. The construction and engineering sector is heavily regulated and practices that are legal in one jurisdiction may not be in another.

If the parties agree to submit to a particular jurisdiction, then in most cases, the courts will not interfere unless the agreement is with a consumer. A simple jurisdiction clause to the effect that a contract will be governed by and construed in accordance with the laws of, for example, England and Wales and that the parties agree to submit to the exclusive jurisdiction of the High Court will suffice.

Online procurement may take another three years to take off but its growth looks inexorable.