2.       E-commerce, Contracts, Business Entities

·          Are eBay sales subject to traditional contract laws?

·         Yes: Peter Smythe v Vincent Thomas [2007] NSWSC 844  <http://www.austlii.edu.au/au/cases/nsw/NSWSC/2007/844.html>

n  The plaintiff saw an aircraft advertised for sale on eBay. $150,000 was the minimum bid. He spoke to the seller (the defendant) over the phone. The defendant claims that he told the plaintiff in this conversation that he wished to sell the aircraft for more than $150,000. The plaintiff bid $150,000 (as the minimum  bid) on the eBay auction. He 'won' the auction. The defendant refused to accept the plaintiff's tender of the purchase price (motivated by the fact that another buyer was interested in paying $220,000 for the aircraft). The defendant argued that eBay only provided a venue for him to advertise the aircraft as an 'invitation to treat' (an invitation to a potential buyer to make an offer – as normal classified ads are interpreted), and that not all of the elements of a binding contract had been satisfied (e.g., that they hadn't decided on a time for payment).

n  The court disagreed with the defendant and held that a binding contract had been formed, and that eBay auctions are subject to usual contractual principles. They ordered the defendant to sell the aircraft to the plaintiff for $150,000.

·         Is eBay an auctioneer, or simply a venue for people to sell and buy items by auction?

·         Clause 3 of their User Agreement says that they aren't: <http://pages.ebay.com.au/help/policies/user-agreement.html>

n  “eBay is not an Auctioneer.

3.1   Online Auctions. Although we are commonly referred to as an online auction web site, it is important to realise that we are not a traditional "auctioneer". Instead, our Site merely acts as an online venue to allow members to communicate and offer, sell, and buy just about anything, at anytime, from anywhere, in a variety of formats, including a fixed price format and an auction-style format commonly referred to as an "online auction". YOU ACKNOWLEDGE AND AGREE THAT EBAY IS NOT INVOLVED IN THE ACTUAL TRANSACTION BETWEEN BUYERS AND SELLERS. AS A RESULT, EBAY HAS NO CONTROL OVER THE QUALITY, SAFETY OR LEGALITY OF ITEMS OR CONTENT POSTED BY MEMBERS ON OUR SITE, THE TRUTH OR ACCURACY OF LISTINGS, THE ABILITY OF SELLERS TO SELL ITEMS OR THE ABILITY OF BUYERS TO BUY ITEMS. WE CANNOT ENSURE AND DO NOT GUARANTEE THAT A MEMBER OR BROWSER OF OUR SITE WILL ACTUALLY COMPLETE A TRANSACTION OR ACT LAWFULLY IN USING OUR SITE … “

·         Kariyawasam, Kanchana; Guy, Scott, 'The Contractual Legalities of Buying and Selling on eBay: Online Auctions and the Protection of Consumers' [2008] JlLawInfoSci 4; (2007) 19 Journal of Law, Information and Science 42 <http://www.austlii.edu.au/cgi-bin/sinodisp/au/journals/JlLawInfoSci/2008/4.html>

n  This journal article discusses whether an auction site such as eBay is really an auctioneer, that is, a party to any contract formed, or whether they are simply a neutral venue through which to conduct independent auctions. It concludes that either contract laws need to be updated to include online auctions and forums such as those found on eBay, or that there needs to be a new self-contained regulatory framework specifically for online auctions. It adds that it is not sufficient for eBay to be able to disclaim any involvement in eBay auctions, and argue that they are a neutral venue. That argument might have been appropriate in the 19th century when there were far fewer consumer protection laws, and less recognition of the power imbalances that exist between consumers and vendors. The article suggests that the law treat eBay as an auctioneer, that is, a party to any auctions taking place on the site. This means they would be made responsible for its actions.

·         The above journal article's conclusion may well be taken up in regards to Amazon.com sales too, despite the fact that Amazon is not an auction site. This recent newspaper article demonstrates the need for Amazon to take more responsibility in what it allows to be sold through its site:

·         AP, ''Pedophile guide' on Amazon sparks outrage' (11 November 2010) NZ Herald (Auckland, NZ) <http://www.nzherald.co.nz/lifestyle/news/article.cfm?c_id=6&objectid=10686871> at 11 November 2010.