As e-commerce flourishes in both mainland China and Hong Kong, disputes related to online consumption have correspondingly increased. In this article the author presents a comparative analysis of legal requirements concerning standard terms adopted by e-commerce platforms in both jurisdictions, including recommendations for cross-border e-commerce platform operators.
LATEST IN MAINLAND CHINA
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Requirements relating to standard terms can be found in the E-Commerce Law, the Civil Code and other relevant laws and regulations. On 13 January 2022, the Beijing No. 4 Intermediate People’s Court announced “Ten Typical Cases of Internet-related Civil and Commercial Trials” and, among these, half related to issues concerning standard contractual terms adopted by e-commerce platforms.
On 15 February 2022, the Supreme People’s Court announced the Provisions on Several Issues Concerning the Application of Law in the Trial of Online Consumer Disputes (I), indicating further circumstances where certain standard-form contractual terms provided by e-commerce operators would be rendered void and/or unenforceable.
The provisions also make detailed stipulations concerning obligations of e-commerce operators over return of goods without reasons, proprietary businesses, platform payments, second-hand goods transactions, sales through live-streaming, fabricated transaction contracts, and online catering platforms.
HONG KONG REGULATION
Unlike mainland China, there are no specific legal provisions in Hong Kong targeting standard terms of e-commerce activities. In general, standard terms and conditions are regulated by the Control of Exemption Clauses Ordinance (Cap. 71) and the Unconscionable Contracts Ordinance (Cap. 458).
The Hong Kong Court of Appeal recently decided that some standard exemption clauses in investment service contracts signed between a bank and its clients were neither fair nor reasonable. Giving full effect to such clauses being un-conscionable, the court ruled they could not exempt or limit liability, and rejected the bank’s appeal.
COMPARING VOID TERMS
In mainland China, major circumstances where standard terms would be regarded as void or unenforceable include:
- Terms excluding one party’s liability for personal injury or property damage caused intentionally or by gross negligence;
- Terms made by one party that exclude the counterparty’s major rights; and
- Terms made by one party that unreason-ably exempt or reduce its own responsibilities, increase the counterparty’s responsibilities, or limit the counterparty’s major rights.
Standard terms specifically targeting e-commerce operators that would be regarded as void include:
- Terms stipulating that the contract is not concluded even after consumers have made payments;
- Terms stipulating that acceptance of delivery of goods by a consumer is to be regarded as deemed confirmation by the consumer of such goods being in conformity with the agreed quality;
- Terms stipulating that all legal responsibilities that should be borne by the e-commerce platform operator shall instead be borne by the merchant/operator within the platform;
- Terms stipulating that the e-commerce operator has the right of unilateral interpretation or final interpretation;
- Terms made to exclude or limit consumers’ right to complain, report, request mediation, apply for arbitration and commence a claim in accordance with the law; and
- Other terms unfair and unreasonable to consumers, such as those excluding or limiting consumer rights, reducing or exempting e-commerce operators’ responsibilities, or increasing consumers’ responsibilities.
In Hong Kong, major circumstances where standard terms would be regarded as void or unenforceable include:
- Terms made to exclude or limit the liability for death or personal injury resulting from negligence;
- Terms made to unreasonably exclude or limit liability for other loss or damage resulting from negligence;
- In contracts with consumers, terms made to exclude or limit liability for breach of seller’s obligations arising from the Sale of Goods Ordinance, such as in relation to the quality, fitness, description and ownership of the goods;
- In contracts with consumers, terms made to unreasonably exclude or limit liability in respect of breach of contract, or render no performance in respect of the whole or any part of the contractual obligations, or render a contractual performance substantially different from what was reasonably expected;
- Terms made to unreasonably require consumers to indemnify another person in respect of liability that may be incurred for negligence or breach of contract; and
- A contract (or any part of it) with consumers that the court finds to have been unconscionable at the time of conclusion.
ADVICE FOR E-COMMERCE
From this analysis, it can be seen there are similarities and differences in the regulatory regime over standard terms in mainland China and Hong Kong.
Key factors to be considered include fairness and reasonableness to consumers, and whether such terms are unreasonably drafted in favour of the party providing such terms.
It is extremely important for companies considering engaging in cross-border e-commerce businesses to understand and properly manage their legal liability risks by properly preparing their platforms’ standard terms of business.
E-commerce platform operators conducting businesses in both mainland China and Hong Kong are recommended to: (1) learn how the laws of both jurisdictions regulate standard terms of e-commerce platforms; (2) pay attention to circumstances where standard terms may be deemed void or unenforceable, and consider whether standard terms as drafted are in line with the laws and regulations of the jurisdiction; (3) develop their businesses in accordance with latest laws and regulations to better regulate their business processes; (4) prudently handle complaints received by the e-com-merce platform from consumers; and (5) fully assess potential legal liability risks to ensure legal operation of the e-commerce platforms, and appropriately manage their dispute risks.
Philip Kwok is a counsel at LC Lawyers
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