Contract Analysis
Customer transactions on eBay constitute an online form of auction. What happens is that items are listed for sale with reserved prices and prospective buyers make their bids. An item is sold to the highest bidder provided the reserve price is met. Online auctioning, such as that done on eBay, is not a new phenomenon. The increased use of the internet for financial transactions has greatly affected online auction processes. However, consumer bodies and law enforcement agencies have not been able to keep pace with the growth of online auction sites such as eBay. Many people ask whether eBay auctions are legally binding. This paper uses the rules of contracts to analyze whether eBay auctions are legally binding.
Based on contract law, there are three main elements of a complete contract process: offer, acceptance, and consideration. The lack of one of these elements nullifies the existence of a contract. The most basic rule of contract law is that a legal contract exists when one party makes an offer, which is then accepted by the other party. In most cases, the offer and acceptance process is conducted either in writing or orally. There are three main requirements of a valid offer: communication, commitment, and definite terms. EBay auctions fulfill these requirements, as offerers and offerees communicate via the online platform, offerees state their commitment and offers are definite and specific in their terms. Therefore, eBay auctions incorporate valid offers.
Ebay auctions also have valid acceptances. For a valid acceptance to exist, all parties should agree to the terms of the contract. Also, only the recipients of offers should accept the offers. This is the case with eBay, as only the potential buyers accept offers – nobody accepts offers on their behalf. Valid offers should also be accepted within time frames. On eBay, acceptances are valid since they are given before expiry or withdrawal of offers. Thus eBay auctions consist of valid acceptances.
Based on contract law, a contract arises after acceptance of the offer. However, legally binding contracts must have a form of consideration. This means that both parties must receive some form of consideration. Otherwise, no contract exists. It is the existence of consideration that distinguishes contracts from gifts. Usually, consideration involves one party offering a good or service in exchange for monetary compensation. On eBay, sellers may state acceptable payments and time frames for payment. Most eBay purchases are processed via PayPal, a third party that monitors the process and resolves grievances between sellers and buyers when terms of sale are not met. Since PayPal acts as an arbiter, there might be no need for court decisions. Therefore, eBay auctions have the element of consideration.
In conclusion, eBay contracts are legally binding. They fulfill the requirements of legally binding, including valid offers, valid agreements, and consideration. Hence they are enforceable. However, the enforcement of terms contracts against buyers for online transactions may be difficult, especially when they reside far away from the sellers. The lack of commitment by buyers after agreeing to the terms of commitment is common, and sellers end up paying auction fees despite buyers not buying their items. Since eBay has no control over buyers’ ability to buy items or the ability of sellers to sell items, it has limited power to intervene in disputes. In effect, the company only provides online bidding services.