Online selling can get complicated

FCW's DotGov Thursday column offers guidance for creating binding contracts that will be executed over the Internet

Federal WebMasters Forum

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Because the federal government increasingly uses the World Wide Web to conduct

transactions, it would be useful to review the issues involved in creating

a binding contract when agencies sell products or services to the public.

The Federal Acquisition Regulation guides agencies when buying from the

public, but no similar, singular guidance exists for agencies when selling

to the public.

Federal sales to the public amount to billions of dollars, and the government

has many methods of selling. For instance, it operates department stores

(base or post exchanges) and grocery stores (commissaries), conducts auctions

of surplus or seized property and licenses land for different uses.

Use of the Internet introduces yet another marketplace.

The first and crucial step is to determine the types of contracts that will

be executed via the Internet. Start with simple and small-dollar transactions

that offer the most immediate payback. Also, be conservative in taking on

contracting via the Web because there a surprising number of complexities

and costs involved in working directly with the public.

The next step is to clearly identify who has the authority to create binding

contracts via the Internet with the public. It is unclear to me whether

a warranted contracting officer must be vested with this responsibility.

The FAR states that a warranted contracting officer is the only person who

can procure goods and services for the federal government. But it is unclear

if that includes circumstances when the government is selling goods and


At a minimum, it would appear that the responsible program office should

be "vested" with the authority, accountability and responsibility for the

contracts to sell goods and services to the public. I would recommend taking

a business course in contract law if you are assuming this responsibility.

Any Web site conducting transactions to sell goods and services to the public

should have a button labeled something like "Contracting Terms and Conditions."

Clicking on this button should lead to a list of key contracting terms and

conditions, such as how an offer is made and how an acceptance is communicated.

I recommend forming a team that includes the Webmaster, your program officer

and your legal counsel to develop a standard contract. The standard contract

should be tailored to the products and services your organization provides.

This is not a case where one size fits all. Some legal terminology must

be included (several legal terms must be used when disclaiming warranties),

but most of your standard contract can be written to make it easy to read

by the public.

The next step in forming binding contracts via the Internet is to define

who is making the offer and who is accepting it. When you sell your home,

you are not making an offer. You are asking for offers. The buyer makes

the offer and the seller decides to accept the offer.

I recommend that agencies follow a similar methodology by posting in their

"Contracting Terms and Conditions" that the Web site is inviting offers,

not making offers. This allows the agency to conduct a series of operations

before committing to the contract. Such operations might include checking

the order, verifying inventory, looking for mistakes (or signs of hacking)

in the catalog, verifying identity and conducting a credit check. The acceptance

is made by the agency generally through a confirming e-mail. Contract formation

is complete once the confirming e-mail is received (not necessarily read).

The button on your Web site linking to the standard contract should be highly

visible, with strong wording recommending that the public read it. My opinion

is that you do not need to require clicking on the button to create a binding

contract. Based on general contracting principles, if the button is highly

visible and has strong wording recommending reading, then the contract will

be binding on the parties. Your standard contract should specify that binding

contracts only can be formed as specified through the Web site. This is

necessary to avoid any misunderstandings with the public if there are attempts

to change the terms and conditions through the use of e-mails.

Other key terms and conditions to be included in your standard contract

might include some of the following listed below. This is not an exhaustive

list, and your legal counsel will be quite versed in writing contracts for

your agency. It is a business decision of your agency's program office,

Webmaster and legal counsel to determine what is most appropriate for your

programs and customer base.

* The offer and method for communicating an offer.

* Acceptance and method for communicating an acceptance.

* Confirming e-mail.

* Authority to contract.

* Revocation.

* Warranties and damages.

* Capacity to contract (age, etc.).

* Jurisdiction for disputes.

* Digital signatures.

* Mistakes in transmission (when the transmission is garbled).

* Privacy, including release of privacy rights for credit checks.

* Payment (and what process occurs for the lack thereof).

* Acts of God.

* Security.

* What happens when either party introduces a virus or other malicious software?

—Kellett is founder of the Federal Web Business Council, co-chairman

of the Federal WebMasters Forum and is director of GSA's Emerging IT Policies