Different customary practices create global trading issues

Recently we wrote about how customary practice can be recognised by the Courts as evidence of the implied terms in a contract. (See 'Customary practice key to Y2K liability suits' - Computerworld, September 14 1998 - also available at www.clendons.co.nz.

Recently we wrote about how customary practice can be recognised by the Courts as evidence of the implied terms in a contract. (See "Customary practice key to Y2K liability suits" — Computerworld, September 14 1998 — also available at www.clendons.co.nz. That article covered cases in the New Zealand Courts that recognised customs as being part of the contract terms and speculated on how that might apply on Y2K programmes. Essentially Techlaw argued that companies designing Y2K programmes should consider adopting a well recognised published standards for such programmes. We pointed out that adopting a standard would be a good customary-practise shield against any litigation. The role of the law of customary practice is broader than just as a shield. Establishing customary practise can be helpful when a way of dealing develops (such as is happening with e-commerce) but where that way of dealing is not completely or cleanly documented between the parties. This situation is just what is developing as international e-commerce practise blasts through to create new ways of trading with consumers at all points of the globe. Before exploring how customary practice and e-commerce may be related, to recap on our earlier article, there are five key issues that the Courts consider when accepting and recognising customary practice. These five issue are drawn from the Woods and Westpac cases cited in the article). The key issues are:

  • Notoriety of practice: The practice must be well known in the trade or industry to which it applies.
  • Certainty of practice: The practice must have just as much certainty as any written contract.
  • Reasonableness of the practice: The practice must be reasonable. The Courts will refuse to assist if the customary practice is unreasonable.
  • Publication of the Practice: If any individual in the trade does not know the practice, then that person must be able to get to know the practice if they took the pains to inquire what is the practice.
  • Proof of the Practice: The method of proof of the customary practice is by oral evidence. That evidence must come from people in the trade "who become cognisant of its existence by reason of their occupation, trade, or position". Returning to e-commerce, Web designers and marketing-executives’ recoil from subjecting the surfer to legal terms and conditions notices. There is nothing wrong with that. What has to be borne in mind is that no contract or few contract terms will not mean that a sale is "as is, where is". Most countries around the world have some sort of consumer protection legislation, much of which provides that it is illegal to even try to contract out of the statutory protections. We have a number of laws including the Fair Trading Act and the Consumers’ Guarantees Act. The Consumers’ Guarantees Act statutory guarantees are regarded as quite onerous. However, even that Act does not deal with an issue vital for Web buyers. That issue is order-fulfilment. In many US states it is illegal to debit a consumers credit card before fulfilling the order. These laws have been around for a long time and were passed to protect consumers when ordering goods by mail order. The practice here in New Zealand has been different. Most merchants debit the card and then work on fulfilling the order. If the order cannot be fulfilled the merchant then may back-order the order. That practise may be protected by customary practise in New Zealand. On the international trade scene that practice is, in some states in the US regarded as close to theft, a serious crime and an act entitling the consumer to damages. The legal story from here gets increasingly complex in considering the issues of where such a "crime" might be committed and whether an aggrieved consumer might be able to sue either here or in the US. Lest this is thought to be an issue that will not arise there are already issues arising between US investors and expensive New Zealand tourist services being marketed on the Web. The backers of sites might also want to consider the salutary experience of the Italian businessman who "ripped" the Playboy site. Playboy brought proceedings in New York State for breach of copyright. The Italian ignored the court orders. He was arrested and thrown in jail on landing in the US. For all the problems that arise in international trade customary practise in New Zealand is still an important consideration in contracting with New Zealand consumers. Craig Horrocks is the managing partner of Clendon Feeney and is part of Clendon Feeney’s technology law team. This article, together with further background comments and links to other Web sited can be downloaded from www.clendons.co.nz. Send email to techlaw@clendons.co.nz.

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