Exchange-Dollar: Ecommerce Websites - 3 Tips To Avoid Liability For Actions of Your Online Resellers

By Chip Cooper in Ecommerce

Recent case law confirms once again: if online agreements are presented properly to end-users, they’re legally enforceable.

This continuing trend is good news for websites that contract with registered users though SaaS Agreements, Membership Agreements, Subscription Agreements, Terms of Sale, Content License Agreements, and the like.

Why? Among other things, this means that important legal disclaimers and limitations of liability are legally enforceable.

But what about liability exposure arising out of customer contracts entered into by your resellers? Are you liable for actions of your resellers?

The Direct Revenue Case

In the case of People v. Direct Revenue, the New York Attorney General in 2008 attempted to nail Direct Revenue for its distribution of software that served pop-up advertising software on consumers’ computers.

Direct Revenue is in the advertising business. It’s software client serves pop-up advertisements to consumer’s computer screens through the Internet. Direct Revenue does not charge fees to consumers. Instead, it charges fees to the companies whose products it advertises.

It’s interesting to note that one line of attack by the New York Attorney General focused on Direct Revenue’s “click-wrapped” (where the user clicks on “I ACCEPT”) end user license agreement (EULA) and Direct Revenue’s alleged deceptive and illegal practices. The court granted Direct Revenue’s motion to dismiss the claims noting that sufficient disclosure was given in the EULA, and the required elements for an enforceable agreement were followed.

Having failed with its first line of attack, New York’s additional line of attack focused on the customer agreements of Direct Revenue’s resellers in an attempt to hold Direct Revenue liable. The result was the same as with the EULA — Direct Revenue was held not liable.

New York conceded that Direct Revenue’s resellers were independent contractors rather than agents. Generally, a principal is not liable for acts of an independent contractor due to the lack of control over how the contractor’s work is performed. In addition, the court noted that Direct Revenue’s software distribution agreement required its distributors to obtain consent of consumers consistent with the EULA and prohibited distributors from holding themselves out as agents of Direct Revenue.

New York argued that Direct Revenue should be liable because it’s servers interacted with the consumers’ computers in the software installation process. The court pointed out that participation in installation was not enough for liability in the absence of participation in deceptive conduct that induced the installation.

Finally, New York argued that Direct Revenue should be held liable for the actions of its resellers on the ground that Direct Revenue ratified the conduct of its resellers. The court ruled that mere knowledge of consumer complaints was insufficient to impose liability on Direct Revenue, especially in light of the fact that when Direct Revenue had actual knowledge of a reseller misconduct, it took steps to remedy the problem.

3 Tips To Avoid Liability For Actions of Resellers

Potential liability for acts of online resellers is a major concern of ecommerce businesses which use reseller networks.

The Direct Revenue case teaches us that ecommerce sites may not be held liable for actions of their resellers if these 3 tips are followed:

1. if you transfer anything to a user’s computer, require your resellers to obtain consent of end-users consistent with your EULA - this means consent in clear and easy-to-understand (not deceptive) terms,
2. prohibit your resellers from holding themselves out as your agents, and
3. if a reseller does engage in misconduct, take affirmative steps to deal with the situation, including termination, if warranted (particularly if the reseller’s actions tend to indicate an agency relationship).

These 3 tips won’t guarantee that you have no exposure, but they’ll go a long way to protecting you from liability for actions of your resellers.
Chip Cooper is a leading intellectual property, software, and Internet attorney who’s advised software and online businesses nationwide for 25+ years. Visit Chip’s http://www.digicontracts.com site and download his FREE newsletter and Special Reports: “Determine Which Legal Documents Your Website Really Needs”, “Draft Your Own Privacy Policy”, and “Write Your Own Website Marketing Copy — Legally”.
How to Supercharge Your Selling Online
01 2009 Friday
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By Diego Norte in Ecommerce

The Internet has changed the way we do business, and the way we do marketing. Ten years ago, it was enough to have a print ad in the Yellow Pages and a quick radio spot to spread the word about your business. Now there are new ways to market your business on the Web, and they’re wonderfully cost-efficient.

The internet is such a huge market place. People from all points of the globe are going online on a daily basis looking for products to buy. This huge demand has prompted a lot of marketers to take their business on the World Wide Web. Are you one of them?

Whether you are selling your own products or promoting affiliate products, it is very important that you know the elements and the tools that you need to use in order to secure great sales potential in the online arena.

Here’s how you can sell more over the internet:

1. The first thing that you need to do is to create your own website.

No matter how good you are and no matter how great your products are, people will not possibly take you seriously if you don’t have your own place over the internet. Hire a professional web designer to create an ecommerce website for you where you can showcase your products and services. Ensure that your website is easy to navigate, secure, and loaded with valuable information that are closely related to your offerings and to your chosen niche.

2. Drive traffic to your website.

Think of your website as a shopping mall. You will need to attract people to give it a visit before you can actually make a sale. Use different traffic-generating tools that can help you drive interested people to your website. You can promote your website on relevant forums, blogs, discussion boards, and social networking sites (Facebook, MySpace, etc.). You can also use article marketing and various link building campaigns that can make your website highly valuable to the eyes of various search engines.

3. Promote your products.

Promote product awareness by properly advertising your offerings online. For this, you can use PPC advertising, search engine marketing, paid links, banner ads, ezine publishing, email marketing, etc. Since promoting your products using all available tools can be exhausting and time-consuming, you may opt to hire professional internet marketers to help you out. You will need to share a certain percentage of your earnings with these people in exchange of their services.

4. Take good care of your customers.

As they say, the most effective advertising strategy is word-of-mouth advertising. Ensure that you keep all your customers happy and satisfied through your products and through your customer service. By doing so, these people will surely recommend you to their friends and family members who might need your offerings.

For more information about running a successful Internet business, visit Diego Norte’s blog here: http://www.DiegoNorte.com/blog/