You will have a product (used here to cover goods and/or services) and probably have a business track record in UK; now you want to test the water overseas. This may be just over the channel in continental Europe or it may be further abroad. It may be in an English-speaking territory, or with English-speaking buyers, but that does not mean that English practices and business attitudes will apply. And once you sell your product abroad the laws of other countries may come into play. For example, where consumer rights or protection are concerned, even if you have sold B2B via a business customer, the laws of the country in which the consumer resides will probably prevail. The good news here is that, although there are still major differences, there is increasing harmonisation of commercial law across the world, especially within the European Union and between UK, USA and Commonwealth countries.
This can still sound as daunting as setting out on a perilous voyage but, as with any journey, there are some sensible precautions you can take that will help your chances of success.
Ecommerce is a vast subject, so that only some snippets can be offered to those contemplating taking the leap. Ecommerce is essentially a method of putting your products out onto the market and having a methodology to deal with enquiries and order-processing electronically, normally via email and/or a website. One thing to bear in mind from the start: once you’ve put your products out on the internet you should not discriminate between potential buyers except on proper business grounds. So you can refuse to sell if the buyer won’t pay your price or for genuine credit reasons, but you should take care if you want to charge different prices in different countries where there may be common market areas unless the difference relates to quantity discounts, fair delivery, currency conversion costs or similar pure business issues.
Charging different prices to customers in different counties within the European Union and European Economic Area, for example, breaches the fundamental principles of European competition law and may be a criminal offence.
So if your website is accessible outside UK, which it probably will be, you should anticipate orders from outside UK and make sure you can handle those orders on a prescribed, legal and cost-effective basis. This overseas dimension means that your way of doing business is likely to be more challenged than in your home country, and even more so where custom and language are different. To pursue the nautical image, your contract is the ship your business sails in and needs to be watertight before you start, and also when you land abroad. You may think that set of terms and conditions culled from another precedent works well, but experience suggests that many businesses use forms of contract and conditions that just don’t work. Often this is because they are incomplete or because they are inconsistent with how that business actually operates. If your contract doesn’t work in the UK, it is even less likely to work abroad.
Under English law, and the law of many other countries, sales and purchases can be agreed without a written contract. Fine, you might think, but people rarely if ever remember things the same way, which can lead to disputes about what was agreed and ultimately frustrate your ability to get paid for what you’ve supplied.
So the first recommendation is to have a concluded written agreement with all the basics set out. Think of it as a chart, agreed by all involved, showing where you want to go, how you are going to get there and how much it will cost, so that when you arrive, you are where you want to be, when you expect to be and without any extra charges.
A written contract does not need to be a formal document, and indeed an exchange of emails defining the product and the price without pre-conditions can evidence a legal agreement. Likewise a contract can be made by simply clicking on an acceptance box in a website to agree to go ahead with the purchase of a specific product, followed by suitable payment arrangements. From the seller’s point of view, the product must be clearly set out, with all relevant details to minimise the risk of confusion and any options the subject of clear order and payment choices. This can work well when what you offer is certain and standard, but ceases to be as effective when more variables are added and certainly if non-standard services are being ordered. Whichever way your contract works, once the order is made and accepted , neither side can go back and change it without the consent of the other. So you need to ensure you have all the relevant terms and conditions (including any limitations and disclaimers) included before you press the commitment button. By the same token you need the same clear commitment button for your buyer abroad to press so that they are agreeing to buy exactly what you are agreeing to sell, at the price and on the terms you have negotiated.
You want to know that the deal is clear in all material terms and the buyer is committed before you supply – or start to supply – your product.
Ideally all this will be contained within your website terms and conditions, which you should have carefully checked before you launch, and your processes will require or encourage electronic acceptance of these. But beware of going off course as there are many rocks just below the surface.
One short cut is to use an established third party ‘market’-based website. This helps ensure you have a tried and tested process to follow, but it does also mean that you and your customers will need to work within the third party structure and its terms and conditions. Whilst designed to facilitate trade, these are inevitably general in their scope and unlikely to be geared to specific issues that might affect your business. This approach may, however, be enough the test the water before you invest in your own website offering.
This stage boils down to two key issues – benefit and cost.
Benefit is exactly what each party expects to get out of the deal – and cost is how much they expect to pay for it – in the long as well as the short term. The two things are inextricably interlinked but both need to be thoroughly thought through. Usually the buyer wants a specified product and the seller wants to be paid an agreed price. This may be simple, but when it becomes more complex, take time to get the detail agreed and recorded.
The buyer is likely to be difficult about payment if there is any mismatch between expectation and delivery. You should double check that your offer and the buyer’s acceptance match precisely. If they don’t, you might have problems getting your money or at worst find you don’t have a legally binding contract at all.
Don’t deliver or commit to deliver until all the terms of the deal are settled, put in writing and any provisos or conditions resolved and cleared out of the way. In the process it pays to remember that most money disputes start off because the buyer is disappointed with some aspect of what the seller has delivered. As seller you want to be able to point to clear terms of the bargain and that you’ve done what you said you’d do. Problems are more likely to occur when buyers become fussy about what they want, or seek a lot of changes from your normal model, so your communications and your contract need to be very clear about these issues to avoid the potential mismatch of expectations.
The third big issue – risk!
Risk is the third part of the contractual trio, and will not necessarily be in proportion to the other two. For example, the main risk for a seller is getting paid, where the risk is directly in proportion to the expected benefit. But what if the price is modest and the potential risk is much greater than the price? One example would be a product which damages someone, leading to a loss of business profits claim – or even personal injury. Does your insurance cover you for these risks when selling abroad? Even if it does, have you thought through how else you might be affected if things were to go wrong. Have a look at your contract; have you clearly set out what you will – and will not – do? Consider your terms and conditions; is your risk excluded or limited in some sensible and legally enforceable way? Those exclusions and limitations need to be carefully worded and ‘fair’ in relation to the contract as a whole, failing which they may be overruled by the courts. Also, when selling abroad, your language should be even clearer than normal. Buyers dealing in English will generally be deemed to have understood the language used, but they could get the benefit of the doubt on any language which is unclear or capable of different interpretations. Also consider whether your terms and conditions apply or has the buyer – perhaps a large corporation – insisted on its terms applying, potentially with harsh warranties and indemnities? These are assurances you give, such as to the origins and quality of your products, and commitments to pay back the buyer for any claims they may receive relating to the products if anything goes wrong, so such provisions need to be watched –and ideally negotiated – carefully.
How risky is the deal? What chance is there you might get caught up in a lawsuit in another country? Stand back and check; does the benefit still match the risk?
Clearly all these risks are multiplied when trading abroad, so it pays to take extra care. For example your contract terms need to be very clear as to when payment is due and in what form and currency it is to be made. Don’t take a currency risk unless you have factored it in, and possibly hedged against it. Do ideally build up a relationship slowly to see you share business principles with your counterpart, including prompt payment, before you are too fully exposed, whilst still watching the big sting if something appears out of the ordinary.
Delivery is often a precondition of payment, so any problems in this area are likely to affect your cash flow.
Delivery is a particular risk area. Check for example that time of delivery is not ‘of the essence’. If those words or equivalent language are used and you don’t deliver ‘on time’ the buyer may be able to reject your delivery and cancel the contract. Even worse they may be able to claim against you for any further loss they suffer, such as loss of re-sale profit or claims from their own disappointed customers. What about inspection and quality? Can the product be checked so that any problems can be sorted out quickly? Who is responsible for arranging – and the cost of – export licences and shipping? All these things should be clear, and you should take care not to have different understanding of the same words or phrases, which may mean one thing in one environment and something else in another. (The use of standard ‘Incoterms’ can greatly assist here, especially with carriage of goods issues.)
Intellectual property rights
Another area to watch is that of copyright, trademarks and trade names. In most countries copyright arises automatically, and without registration, when someone produces an original artistic, literary, musical or other work in some permanent or semi-permanent form. So make sure you haven’t copied someone else’s work. Registered trademarks, on the other hand, as the name suggests, require a formal application and registration process, which may be limited to a specific country or class of goods – or may cover more than one class and/or country. In Europe there is also the CTM, the Community Trade Mark, giving protection across Europe.
Names are so important to business reputation and goodwill that double care should be taken.
Care involves firstly thinking about protecting your product or trading name before selling abroad, where and to the extent it is financially viable to do so. Secondly, and linked to the first, it is advisable to carry out searches to check you are not infringing the rights of any established product or business using the same or a similar name to yours in the countries where you supply. Others may have got there first or have prior rights in that class of goods or that country. Indeed, in UK and elsewhere brand protection can be acquired by promotion and general usage, so that if the brand is well known in a country, it may have unofficial protection there, even if not registered. In terms of risks, brands are major issues to watch out for.
Good luck and bon voyage!
© Charles Boundy 2013
* After starting his own law firm, Charles Boundy was a senior partner in a central London legal practice before becoming group legal director of a major international publishing group. He has published three books on business contracts, the latest of which, Contracts for Your Business, is a succinct guide to business contracts written specifically for those running growing businesses, with many practical examples included.
Contracts for Your Business, is available for purchase via the Enterprise Nation Website