E-commerce

ELECTRONIC COMMERCE

With enactment of The Law on Electronic Commerce and new Commerce Law from 2019, e-commerce or electronic commerce over the Internet has finally come out of the gray zone in Republic of Serbia. New regulations cover legal transactions concluded over the Internet to some extent, i.e. by those regulations it is determined in which manner and under what conditions contracts concluded in electronic form have legal effect.

The law regulates service provided over distance, requested by service users, usually for a fee, via electronic equipment suitable for data processing and data storage, especially online shopping which further implies internet advertising, searching the electronic network, as well as storing service user’s data. All of that, in terms of law, presents a type of the information technology service. [1]

This law proclaims the freedom of providing cross-border services over the internet, and in addition to that defines numerous terms necessary for the interpretation of rights and obligations concerning providers of informational technology services, service users and customers.

The Law on Electronic Commerce is a Lex specialis in relation to Commerce Law, so many general terms are defined by Lex generalis, which applies unless The Law on Electronic Commerce indicates otherwise.

Commerce Law defines an electronic platform as medium which is used by provider of informational technology services to provide a connection service to the parties participating in electronic commerce. Also, natural person or legal entity managing the electronic platform can use that platform for selling goods or services. On the other hand, e-shop is defined as an online store which is used by merchant for offering goods or services. [2]

When it comes to sales through e-shops or electronic platforms (electronic commerce), the Law treats it as a subtype of distance selling and defines it as a form of distance commerce realized by offering, ordering and selling goods or services over the internet. Among other things, it can be done in form of trading through internet stores (e-shops) as a basic form of electronic commerce, through an electronic platform (e-commerce platform) and in the form of dropshipping. [3]

We can conclude that The Law distinguishes three categories of e-commerce:

Internet store (e-shop)
E-commerce platform
Dropshipping electronic commerce

E-commerce platform is used for connecting sides participating in electronic commerce, but also provides an opportunity for a electronic platform owner to offer his own goods or services through that platform. However, e-shop is much narrower term, it is limited to business that involves the sale of goods and services by a merchant. The difference between those terms and dropshipping is based on a fact that intermediaries in the sale of goods and services – dropshippers do not come into contact with the goods. Dropshippers just forward the orders they have received to merchants or manufacturers with an order to deliver them to specific address.

DROPSHIPPING

Dropshipping is one of the most popular business models on the Internet in recent years. Some of the world’s largest companies have become empires, such as Alibaba, by creating platforms that allow dropshippers to sell goods and services all over the world.

This type of e-commerce implies ensuring the delivery of goods from manufacturers or sellers to consumers. So there is a supply chain management methodology where the internet merchant does not have the goods in stock, but has it presented on the internet platform. So, when dropshipper receives an inquiry or order, he buys the goods from the manufacturer or a third party and later delivers it to the buyer.

CONTRACTS IN DIGITAL FORM

The law confirms that the contract can be concluded electronically, i.e. in electronic form, and emphasizes that the validity of such contract could not be denied because of electronic form. However, it is important to note that not all contracts can be valid if concluded in electronic form. Those are contracts and statements regarding warranty if the warrantor is acting outside the scope of commercial, business or professional activity, contracts for which is necessary to be in the form of solemnized document, as well as other contract for which special laws emphasize that those contracts cannot be concluded in electronic form. [4]

Electronic contracts are an important element of any internet business, because in that way rules are set by seller or service provider, and customers or users have to respect those rules after accepting them. Therefore, it is important to establish a convenient legal framework before starting e-commerce, which will regulate the rights and obligations of e-commerce participants.

Contracts concluded in electronic form must be preserved just like the ones concluded in traditional form for the purpose of proving the existence and content of the contractual relationship. Web platform used for e-commerce must also include a software solution that enables storaging of the evidence of acceptance of the electronic contract (“signature”) in the form of a written consent code or in another adequate way. On that occasion, it is usually registered which pages the user has visited or how much time he has spent reading the contract before he purchased the goods.

MANDATORY CONTENT OF THE ADVERTISING MESSAGE

In order to prevent misunderstandings, fraud and the negligence of customers, the legislator has regulated a mandatory content of the advertising message, by setting following conditions:

at the moment the customer receives the advertising message, it has to be clear that advertising message has commercial character;
it has to be clear who the sender is, i.e. whose goods or services are being promoted;
every invitation to make an offer, from the advertising message, has to be recognized in that way, even in the case of offering goods or services for free;
the conditions under which the offer is made by delivering the advertising message, have to be transparent.

SENDING THE ADVERTISING MESSAGE BY E-MAIL

There are several laws that regulate sending a commercial offer by e-mail, in order to protect the interests of customers and service users. The problem is that the solutions offered by these regulations are partially in conflict. The Advertising Law, as lex specialis when it comes to advertising, regulates this issue by requiring consent for using an e-mail address as personal data of a natural person. The Law on Electronic Commerce also determines that sending a commercial message by e-mail is allowed only if the receiver has consented to that, but the message sender must regularly check the requests for consent withdrawal.

Unlike the two previously mentioned laws, the Law on Personal Data Protection does not limit direct advertising by e-mail only to consent as the basis for personal data processing, and allows sending commercial messages by e-mail based on legitimate interest.

A similar solution is offered by the GDPR, which specifies that a legitimate interest may exist in the processing of personal data for direct marketing purposes, if there are reasonable expectations on the part of the individual, and if there is a previous business relationship between the sender and the receiver of the advertising message, i.e. between the client and the seller or service provider. In addition to the GDPR as a general regulation in this area, there is E-Privacy Directive, as a lex specialis which detaily determines advertising by using e-mail addresses. Although the E-Privacy Directive requires sending a commercial message with prior consent, further elaboration of this regulation determines an exception and offers a soft opt-in option, i.e. allows sending e-mails to individuals, in situations where their interest and this kind of data processing can regularly be expected.

Until other laws are harmonized with the Law on Personal Data Protection, the only option we have is to address issues of direct marketing in practice by using general rules on the interpretation of civil law.

TIME OF ENTERING INTO CONTRACT

The contract will be considered concluded when the service provider sends an mandatory e-mail to the consumers and, in that manner, confirms the acceptance of the offer made by the user, i.e. buyer from the website. The moment of receiving that message will be considered the moment of concluding the contract.

OFFER AND ACCEPTANCE OF THE OFFER

Understanding and precise determining the moment of contract conclusion is important due to rights and obligations of the contracting parties, i.e. the effect of the contract that begins at that very moment. Commercial message does not have the status of an offer in terms of the Law of Contract and Torts. The buyer, via a request for a certain purchase (selection of goods, services, quantity, etc.) and a statement that he agrees with the content of the contract, sends an offer to the service provider, and service provider accepts that offer by sending e-mail message to a buyer.

In order for a commercial message to be considered an offer, according to the rules of contract law, it must have the status of a contract proposal which contains all essential elements of the contract, so that acceptance of that proposal could conclude the contract. However, sending catalogues, price-lists, tariffs and other information, as well as advertisements published in the press, presented by way of leaflets, by radio, television or in some other way shall not be considered an offer to enter into contract, but only as an invitation to make an offer under the terms announced. To the listed ways of sending messages that do not have the character of an offer, we can also add a commercial offer made via website. We can conclude that both, the service provider and the user, can be recognized as an offeror, depending on the manner of formulation of the contract proposal, as well as of the fact whether contract proposal contains all of the essential elements of that particular contract. Commonly, the goods or services presented on the website together with price and conditions do not represent an offer, because the buyer himself, by choosing the type of goods, services, quantity, etc. actually sends and offer to the service provider, who latter accepts it by sending an e-mail message to the buyer and after that the contract enters into force.

THE RIGHT TO CANCEL ONLINE SHOPPING

One of the most controversial aspects of online shopping is the buyer’s right to withdrawal, which at the same time represents the good and bad side of this legal affair, depending on the interests of the different contracting parties. The right to withdrawal should certainly be approached through the context of possible abuse by the contracting parties, so it is necessary to find an adequate formulation of legal provisions and adequate way of the interpretation of those provisions, in order to reduce this “side effect” to a reasonable extent, if it is not possible to completely eliminate it.

The importance of this right to the legislator is reflected in e-merchant’s obligation to not only provide this right to the buyer, but also to inform him about the conditions, time limit and procedure for exercising the right to withdraw from online shopping in advance, as well as to inform the buyer about the fact that withdrawal is not possible in situation listed in the law.

The buyer with the status of a consumer has the right to withdraw from the contract concluded online (and over distance, in general) within 14 days, without the obligation to state the reasons for withdrawing from the purchase of goods and services. That buyer may exercise this right by sending a simple statement filled on specific withdrawal form.

E-merchant have to deliver written (or electronic) withdrawal form to consumer, at the moment of concluding the contract or at the latest when delivering the goods. In case of the withdrawal, the buyer fills in that withdrawal form and sends it back to e-merchant. E-merchant has the possibility to allow the consumer to electronically fill in and deliver the withdrawal form, but if that’s the case e-merchant has to notify the consumer, in written form (including e-mail), that the withdrawal form is delivered to him.

The statement of withdrawal sent in this way enters into force on the day of sending.

If consumer misses the mentioned 14-day deadline, his request will be considered untimely and he will lose the right to withdrawal.

REFUNDING

After the consumer exercises the right to withdraw from the contract, it will be deemed that the contract was not concluded at all. However, the e-merchant and the consumer still have to realize their obligations regarding costs and conditions of the refund. E-merchant is obligated to refund the payments received from the consumer including delivery costs, without delay and within 14 days from the moment of receiving the withdrawal form. The refunding procedure has to be carried out in the same way as the initial payment made by the consumer, unless the consumer has explicitly agreed on use of another means of payment with no additional costs for the consumer.

However, the refunding procedure performed in a way which is less favorable for the consumer, may be carried out only if the consumer has explicitly requested it (not if he has agreed with e-merchant’s proposal).

Bearing in mind that the consumer is obligated to return the purchased goods, the e-merchant has the right to hold off with the refund until he receives the goods or until the consumer provides proof that he has already sent the goods to e-merchant, unless the e-merchant has previously offered to take over the goods himself.

PRODUCT RETURN AND COSTS OF THE SENDING BACK

After sending the withdrawal form and no later than 14 days, the consumer is obligated to return the goods to the e-merchant or to the person authorized by e-merchant. The 14-day deadline will be considered met if the consumer sent the goods before expiration of mentioned deadline.

The costs of direct product return shall be borne by the consumer, unless the e-merchant has agreed that he will bear those costs, i.e. if he has not previously informed the consumer that the consumer is obligated to pay the costs.

If the goods are damaged or their value is reduced by handling the goods in inadequate manner, the consumer shall be responsible.

The consumer is responsible for reduces value, only if that reduction came as a result of inadequate handling of goods, i.e. handling in manner which exceeds what is necessary to establish the nature, characteristics and functionality of the goods.

EXCEPTIONS FROM THE RIGHT TO WITHDRAW/CANCEL

The consumer has no right to withdraw from the contract in following cases:

if the subject of the contract is the service and that service is fully performed (if the service began after the prior consent explicitly given by consumer and if the consumer confirmed that he understands he will lose the right to withdraw from the contract at the moment e-merchant fully performs the contract);
if the subject of contract are goods or services whose market price is variable, but which cannot be influenced by e-merchant and price changes may occur during the withdrawal period;
if the goods are custom-made, i.e. made according to special consumer’s requirements, or if it can be unequivocally concluded that the goods are related to a specific person;
if the delivered goods are perishable or ephemeral;
if the goods are delivered sealed, and cannot be returned due to health or hygiene reasons after they have been unsealed;
if the goods are inseparably mixed with other goods due to their nature and after delivery;
if the subject of the contract is an alcoholic beverage whose price is agreed at the time of concluding the contract, but whose delivery can be made only after 30 days from the date of conclusion of the contract, and whose market price is variable and depends on changes in market which cannot be influenced by e-merchant;
if the consumer expressly requests a visit from the merchant for the purpose of carrying out urgent repairs or maintenance, and if during that visit the merchant provided other services than those specifically requested by the consumer or if the merchant delivered other goods (except for replacement parts necessary for maintenance or repair) the right to withdraw from the contract will not apply to these ancillary services or goods;
if the subject of the contract is sealed audio, video or computer software, which are unsealed by consumer after the delivery;
in case of delivery of newspapers, periodicals or magazines, excluding subscription contracts which have the delivery of these editions as their subject;
if contracts are concluded at a public auction;
in case of provision of accommodation services (other than for residential purposes), transport of goods, car rental services, services related to the preparation and delivery of food or services related to leisure activities (if the contract provides a specific deadline or period of execution);
in case of delivery of digital content, provided that it is not delivered on a durable medium and if the execution began after the prior explicit consent of the consumer and his confirmation that he agrees to thus lose the right to withdraw from the contract.

From the aspect of e-commerce, the delivery of digital content is particularly interesting, because the sale of this type of goods via the Internet occupies a significant share in total e-commerce on the one hand, and on the other hand because this type of purchase of “goods” in non-material form is the most suitable and the most dominant.

In order for this exception to apply, the e-merchant is obligated to obtain the prior consent of the consumer if the delivery of digital content is not performed on a durable medium, as well as to obtain the confirmation from the consumer that he knows that, by such delivery, he loses the right to withdraw from the contract.

RIGHT TO COMPLAINT WHEN GOODS OR SERVICES PURCHASED ONLINE

COMPLAINT NOTICE

Similar to the right to withdraw from the contract, the e-merchant is obligated to inform the customer in a timely manner about the physical or e-mail address to which the consumer can file a complaint, as well as about the existence of his contractual relationship with the postal operator through which the consumer can send the goods back, at the expense of the seller.

Regardless of this obligation, the e-merchant is also obligated to inform the consumer in a clear and understandable manner, in the Serbian language and the language of the national minority, in accordance with the law and before concluding a contract, on the manner of filing a complaint, as well as on the place of reception of the goods and manner of conduct towards the consumer and the conditions related to the exercise of consumer rights on the basis of conformity of the goods.

REASONS FOR FILING A COMPLAINT

The consumer can file a complaint to the e-trader in the following cases:

In case of non-conformity of the goods;
In case of exercising of the right from the warranty;
In case of non-conformity of the service;
Incorrectly calculated prices;
Other defects.

NON-CONFORMITY OF GOODS AS A REASON FOR COMPLAINT

Non-conformity exists if the delivered goods do not correspond in quality and other characteristics to the goods that were ordered or whose purchase and sale were contracted. The e-merchant will be responsible for non-conformities of the delivered goods under the contract if:

the non-conformity existed at the time the risk was passed to the consumer, regardless of whether the seller was aware of this non-conformity;

the non-conformity occurred after the risk was passed to the consumer, if it originates from a cause that existed before the risk was passed to the consumer.

The e-merchant is also responsible for non-conformity caused by improper packaging, improper installation or assembly by him or a person under his supervision, as well as when improper installation or assembly of goods is due to a defect in the instructions given to the consumer for self-installation or self-assembly.

If at the time of concluding the contract it was known to the consumer or according to the circumstances of the case it could not remain unknown that the goods do not comply with the contract or if the cause of non-conformity is in the material provided by the consumer, the e-merchant will not be responsible.

Also, if the delivered goods do not comply with the contract, the consumer who has notified the seller of non-conformity, has the right to:

request that the seller rectifies non-conformity by repair or replacement, without compensation;
request an appropriate price reduction;
request the contract to be terminated, in terms of those goods.

The consumer has the right to choose the manner of elimination of non-conformity of goods by repair or replacement. However, if replacement or repair is not possible, the consumer has the right to request an appropriate price reduction or termination of the contract, but under the following conditions:

non-conformity cannot be rectified by repair or replacement at all or within a reasonable period of time;
the seller has not repaired or replaced the goods within a reasonable period of time, i.e. the right to repair or replace the goods cannot be exercised;
repair or replacement cannot be carried out without significant inconvenience to the consumer, bearing in mind the goods, its nature and purpose;
eliminating non-conformity by repair or replacement would not be a disproportionate burden for the seller.

TIME LIMITS OF SIGNIFICANCE FOR COMPLAINTS

To determine the scope of consumer’s right to choose, the moment when the deficiency appeared is also important. Thus, if the non-conformity occurs within six months from the date of transfer of risk to the consumer, the consumer certainly has the right to choose between the request to remove it by replacement, appropriate price reduction or has the right to terminate the contract. Also, if the non-conformity occurs within the same period of six months from the day the risk is transferred to the consumer, the elimination of the non-conformity is possible by repair, but only with the explicit consent of the consumer.

If after the first repair the same or another defect appears, re-repair is possible only with the consent of the consumer, and if he agrees then he has the right to request a replacement, appropriate price reduction, as well as right to request a termination of the contract. It is important to note that termination of the contract cannot be requested if the non-conformity of the goods is insignificant.

The claim for responsibility for non-conformity of the goods with the contract may be pointed out if the defect occurs within two years from the date of reception of the goods, i.e. from the transfer of risk to the consumer. When selling second-hand goods, a shorter period can be agreed in which the e-merchant is responsible for non-conformity, but that period cannot be shorter than one year.

If the non-conformity occurs within six months from the day the risk is passed on to the consumer, there will be a rebuttable legal presumption that the non-conformity existed at the time the risk was transferred, unless that is contrary to the nature of the goods and the nature of the non-conformity, and e-trader will have to prove otherwise.

It is important to note that these deadlines do not run during the period that the seller uses to eliminate the non-conformity, i.e. the period of responsibility is extended for the duration of the elimination of the deficiency.

Considering the nature of the goods and the purpose for which the consumer procured them, the repair or replacement must be carried out within a reasonable time so that the consumer does not suffer significant inconvenience.

Exercising the right to complaint, i.e. the repair, the replacement or the termination of the contract does not affect the consumer’s right to simultaneously, cumulatively demand from the seller compensation for damages arising from non-conformity of goods, in accordance with the general rules on responsibility for suffered damage, determined by the Law of Contracts and Torts.

COMPLAINT PROCEDURE

The consumer may file a complaint orally at the point of sale where the goods were purchased or at another place designated for receiving complaints, by phone, in writing, electronically, or on a durable medium, with an invoice or other proof of purchase (copy bills, slip, etc.). After receiving the statement on the complaint, the e-merchant is obligated to issue a written confirmation to the consumer or to confirm the reception of the complaint electronically, i.e. to announce the number under which the consumer’s complaint is registered.

The e-merchant is obligated to respond to the consumer in writing or electronically without delay, and no later than within eight days from the day of reception of the complaint. The seller’s response to the consumer’s complaint must include a decision on whether to accept the complaint, a statement on the consumer’s request and a specific proposal and deadline for resolving the complaint. The deadline cannot be longer than 15 days, i.e. 30 days for technical goods and furniture, from the day of submitting the complaint.

The seller is obligated to act in accordance with the decision, proposal and deadline for resolving the complaint, only if he has obtained the prior consent of the consumer.

If the seller is not able to satisfy the consumer’s request within the agreed time due to objective reasons, he is obligated to inform the consumer about the extension of the deadline for resolving the complaint and state the deadline within which he will resolve it, as well as to obtain the consumer’s consent which he has to record in the records of received complaints. The deadline for resolving complaints can only be extended once.

In the past, as a frequent reason for rejecting a complaint, it was pointed out that the consumer is not in possession of the original packaging in which the product was purchased. This practice is ended by a legal provision that explicitly emphasizes that the consumer’s ability to deliver the original packaging of the goods to the seller cannot be a condition for accepting the complaint, i.e. the inability of the consumer to deliver the original packaging cannot be a reason for seller to refuse to eliminate the non-conformity.

The seller is obligated to keep records of all declared complaints for at least two years, counting from the day of submitting consumer’s complaints. The mentioned records can be kept in electronic form, i.e. tables in Excel for example, but also in the form of a bound book if the e-merchant prefers it that way. In particular, the records must contain information on the applicant, the date when the complaint was received, information on the goods, a brief description of non-conformity and the request from the complaint, the date of issuance of the reception of the complaint, the decision on the complaint, the date of delivery, the agreed deadline to which the consumer agreed, the manner and date of resolving the complaint, as well as information on the extension of the deadline for resolving the complaint.

E-COMMERCE LEGAL SUPPORT

Every internet business model requires legal support. Even small businesses that sell through their online stores need a well-written user agreement or terms of use, but also a privacy policy as proof that they are treating personal information in accordance with the law. In addition to these two basic documents, depending on the form of internet business, the online trader or service provider may face a number of problems and the need for additional consultations, legal opinions or obtaining the necessary permits from the competent authorities.

APPLICATION OF OTHER LAWS TO E-COMMERCE

If e-commerce addresses individuals as final customers, given their consumer status, the e-merchant must also pay attention to the regulations regarding their protection, which is due to the effect of imperative norms very strict.

The Law of Contracts and Torts applies in a subsidiary manner to all situations that are not regulated by special regulations governing trade which is confirmed by the the Law on Electronic Commerce itself. The Law of Contracts and Torts is especially important for the regulation of rights and obligations between e-merchants and service users without the status of consumers, i.e. for regulation of the legal relations between legal entities.

If the e-merchant chooses a specific area or activity related to goods or services that require special treatment, in addition to the above, special laws governing certain specific areas should also be taken into account. Thus, the sale of certain goods or services imposes the obligation to obtain the prior authorization of the competent authority or implies different business rules in relation to those that apply to activities in the general regime.

INFORMATION ON SERVICE PROVIDER IDENTITY

Transparency of conditions under which e-commerce is performed, as well as the accuracy and content of the offer offered to users through the online store or platform from the legislator’s point of view is in the public interest, which is why Republic of Serbia’s law prescribe detaily determines the minimum data that must be communicated to the user or that the e-commerce service must contain. Therefore, the service provider is obligated to always provide the following information during the performance of its activity, such as name and surname or name of the service provider, seat of the service provider, data on the service provider on the basis of which the service user can communicate with him quickly and smoothly, including e-mail address, etc.

If a certain activity is regulated by special regulations, in a way that the obligation to provide prior approval is applied to it, in that case it is necessary to visibly point out precise information on the name of the activity, on the country where its performance is approved, if possible with a reference to an individual act, its number and date of enactment, as well as the name of the person or entity who has enacted it. It is important to present the official rules for performing the activity to the users, by presenting those rules in a visible place, or by presenting the internet address where the users can find those rules, if their presentation within the page where the goods or services are offered would be technically demanding or unfeasible.

[1] The Law on Electronic Commerce, Article 3

[2] Commerce Law, Article 3

[3] Ibid. Article 17

[4] Ibid. Articles 9-10