This article is written by Hemnaag, pursuing Diploma in Advanced Contract Drafting, Negotiation, and Dispute Resolution from LawSikho.
Everyone at some point of time in their lives dreams of starting their own business. Some would have been successful and some would have faced disappointments. Earlier starting a business was a very big deal with a huge amount of investment and capital but in today’s electronic world with a minimum amount of capital, anyone can start an e-commerce business. Nowadays many start-up companies are shifting to e-commerce businesses. Even the existing traders, physical shops are shifting their businesses online. If you’re amongst them and want to start an e-commerce business, you must be very careful about protecting your data online. This article will help you to get some ideas related to data protection clauses that are important in an e-commerce contract
What is e-commerce?
“If your business is not on the internet, your business will be out of business”. Bill Gates. E-commerce is quite a simple process of buying and selling goods or services using the internet. It is also known as electronic commerce or internet commerce. There is no particular territory for an e-commerce business since the sales take place over the internet. You can potentially sell or buy products across the world and it’s available 24/7 just at the comfort of a single click. You can buy or sell any product you want, well-known examples for e-commerce companies are Amazon, Flipkart, Olx, Dominos etc.
What is known as data protection?
Data is units of information about people that is collected through various sources. People who want to predict your behaviour, gender, likes, dislikes and everything for their marketing strategy, collect this data and use it for their personal gains. To prevent this data from being misused and to protect the fundamental right to privacy, we have data protection laws. Data protection can be defined as the way third parties handle the information they hold about us, how it is collected, processed, shared, stored and used.
Why do we need data protection in e-commerce?
Only the data protection clause gives the user or the customer the knowledge about how his or her data is being protected, stored, used and how safe it is as a customer of any e-commerce website. This gives the customer or user safety and a solution in case the personal data is misused by the service provider and reduces the fear of his or her data being misused.
Law governing e-commerce in India
The Information Technology Act 2000 is the primary law that deals with cybercrime and electronic commerce in India.
Recently the government has notified new e-commerce rules namely the Consumer Protection (E-Commerce) Rules 2020 these rules have been issued by the Ministry of Consumer Affairs under the Consumer Protection Act 2019.
The major provisions of the new rules are:
1. The e-commerce players will have to mention the total price of goods and services offered for sale along with a break up of other charges.
2. The e-commerce players have to indicate the expiry date of goods offered for sale and the country of origin of goods and services.
3. E-commerce players have to display details about returns, refunds, extend the warranty and guarantee delivery and shipment and any other information that may be required by consumers to make informed decisions.
4. E-commerce companies should not impose cancellation charges on consumers.
The new rules are applicable to all retailers registered in India or abroad but providing goods and services to Indian customers. The violation of the rules will attract penal charges under the Consumer Protection Act 2019.
Things you must know before starting an e-commerce business
When a person is interested in starting an e-commerce business, first the business needs to be registered under the Companies Act according to the proprietor requirement. The business can be registered under partnership, private limited, public limited, proprietorship or one-person company.
A business that is registered must have all the tax-related documents and must be registered under the tax law according to their country.
Create an online portal
Portal, in simple terms, is an online website where people interested in your business or product can buy, sell or view your product from your business portal. You must have your own business portal according to your business style and nature. Example: Flipkart.comD. Agreement.
Every proprietor must register their trademarks under the Trademark Act, 1999 Act to avoid causing confusion to the customer or consumer, in the event if the competitor uses the existing trademark the actual owner of the trademark can file a complaint under trademark infringement. Logo, brand name, business name, product name, etc. can be registered under trademark.
Payment gateway registration
The method of payment must be available to your customer or consumer in your business portals like credit card payment, debit card payment, PayPal and net banking etc. After submitting the required documents to the service provider, the service shall be made available in your portal.
Every business has a separate licence related to the business. If a business is related to food, the business must be registered and must own an FSSAI licence. According to the nature and product, the business must be registered under that specific industry.
Government initiative in e-commerce
The Government of India has announced various initiatives since 2014 namely Digital India, Make in India, Start-up India, Skill India and Innovation Fund. The timely and effective implementation of such programs will likely support the growth of e-commerce in the country. The Government of India is planning to implement new laws and amendments in technology and data protection which will encourage new e-commerce interventions and entrepreneurs.
Key data protection clauses
Personal data protection
Details mentioned in this clause are;
1. The transfer of personal data.
2. Law under which it is protected.
3. The usage of the data.
4. The duration of the data being stored.
Personal data protection (sample clause)
1. Personal Data obtained by the parties during the performance of this contract shall be that data which is strictly necessary for the performance of the same and may only be applied or used to fulfil the purpose of the contract.
2. Personal Data will be stored as long as such data is necessary for the purpose of this agreement.
3. Personal Data hereunder this agreement shall be protected in accordance with the _____ laws.
4. Personal Data of the users shall not be transferred or handed to any third parties other than the government authority with court orders to transfer such data.
Transfer of data
This clause is used if the company is transferring its data to a third party. Essentials of a Transfer of Data Clause are as follows
1. The purpose of the transfer is mentioned.
2. The companies to which the data is being transferred is mentioned.
3. The term period of the transfer is mentioned.
4. The data which is being transferred is mentioned.
Transfer of data (sample clause)
1. The Data is being transferred only for the purpose of advertisement and to make a user-friendly practice to the customers.
2. The search details of the users and e-mail IDs of the users shall alone be transferred. No other Personal Data shall be transferred.
3. The Data is transferred till the termination of this agreement.
4. The Data shall be transferred to ______. The Data shall not be transferred to any individual or organisation.
Destruction of data
After the termination period of the agreement, the duration for which a company can store the data is mentioned in this clause.
Destruction of data (sample clause)
1. The Personal Data of the user or consumer shall be destroyed after the termination of this agreement.
2. All other data of the users shall be stored for a period of 3 years from the date of termination of this agreement.
Recording of data
How does the company record the data and where the data is stored by the company is mentioned in this clause.
Recording of data (sample clause)
All data received from the user shall be encrypted and shall be transferred to the cloud storage facility under Google.
Liabilities of the company
The liabilities on behalf of the company related to data protection are mentioned here.
Liabilities of the company (sample clause)
1. The company shall not share any personal data of the client or users.
2. The company shall store the collected data in an authorised storage facility.
3. The company shall use the search history of the users only for the purpose of making a user-friendly quick guide. The company shall not disclose the search history of the users to any third party.
4. The company shall store only the encrypted data of the users.
5. The company shall disclose the data only to the Government and not to any other entity.
6. The company shall not disclose the place of storage facility to any third party other than the Government.
In case of breach of this agreement or any data breach, the available procedure for the user to file a complaint is mentioned in this clause.
Complaint (sample clause)
In the event of a data breach, the user shall file a complaint to the support team ____. The problem will be resolved within 48 hours. In case the issue is not resolved, the user can proceed with the arbitration process within 5 days from the date of request registered.
Other important clauses
Term and termination
Information that is mentioned in this clause is:
1. Commencement date of the agreement.
2. The time period of this agreement.
3. The right of both the parties to terminate this agreement.
Term and termination (sample clause)
1. This Agreement shall commence from ____ and shall last for ___ years continuing automatically when the membership of the User is renewed. The terms and conditions shall remain the same.
2. The User has the right to terminate this Agreement by sending a cancellation mail to the support team.
3. The Company has the right to terminate this Agreement when the membership amount is not paid by the User.
The information shared by the user or customer must be confidential. The time period within which the information is to be kept by the company can also be mentioned here.
Confidentiality (sample clause)
The Company agrees to keep all the personal data of the User confidential and will not disclose to any third party the identity of the User provided. However, the Company may disclose and discuss the search data of the User to any advertisement company for further reference of the product in the market. The Company shall delete all the Data of the User after one year from the date of termination of the membership.
Governing law and jurisdiction
The law governing the policy will be given in this clause. The laws of the State if any amendment is passed are also mentioned. The court which the party approaches if any dispute arises in this agreement is mentioned as well.
Governing law and jurisdiction (sample clause)
These terms and conditions and the transaction contempt hereby shall be governed by and construed and interpreted in accordance with the laws of the state of _____ India. Any action seeking legal or equitable relief arising out of or relating to this Agreement will be bought only in the court of ____.
1. How the parties resolve a dispute arising out of this agreement should be specified here. The applicable rule, act or regulation will be mentioned.
2. If the parties decide to arbitrate, the rules, arbitration procedure, language and venue etc will be specified.
3. If litigation, court to be approached, governing laws etc will be specified.
Dispute resolution (sample clause)
1. Any dispute arising out of this Agreement, the User shall notify the Company through sending a mail to the support team or sending a written notice to the head office.
2. The parties shall resolve the dispute in an amicable matter before the authorised persons of the company. In the event, if the parties fail to resolve the dispute amicably, the parties shall resolve the dispute through an arbitration process.
3. The arbitration process shall be conducted by a sole arbitrator and shall be appointed by Both the Parties mutually.
4. The proceeding of the Arbitration shall be conducted in English and the venue of the arbitration shall be_____.
E-commerce is one of the most booming business categories in India. It has transformed the way business is done in India. The Indian e-commerce market is expected to grow to $ 200 billion by 2026. Higher the usage higher the lack of responsibility which is why protection of user data is a very important reasonability of any e-commerce. Thus, e-commerce shall ensure that they have important data protection clauses in its e-commerce agreement on its portal so that a user can quickly go through this agreement and feel safe before sharing his/her data with the e-commerce company.
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