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In an online marketplace, you can sell goods and services. For example, on Gumtree, you can buy, sell and rent goods (such as furniture, electronics, or art) or you can buy and sell services (such as tutoring, cleaning, or photography). Marketplaces like Freelancer or Airtasker connect a service provider with someone who needs that service.
If your online marketplace provides services, you will have several crucial legal responsibilities that you need to consider. This article will take you through three of those responsibilities:
- contracts;
- payment options; and
- Australian Consumer Law (ACL) obligations.
Contracts
If you run an online marketplace, you will need three legal documents:
- website terms of use;
- privacy policy; and
- marketplace terms and conditions.
Your marketplace terms and conditions will outline:
- how a user can book a service;
- what happens when the service is complete;
- how payment flows between parties;
- what happens if a user wants to submit a rating or review of the service; and
- your refund policy.
Risks might arise if you do not properly address these issues within your terms and conditions.
Payment Options
Payment is an integral part of the way your marketplace functions. Service providers want to get paid for providing the service, users will need to pay for the service, and you as the operator want to get paid too.
There are many options for when payment could occur throughout the process. For example, payments could be made:
- when users and services providers sign up to your marketplace;
- once a user makes a booking;
- before the service is complete;
- in instalments;
- after the service is finished; or
- a specific time period after the service is completed unless either party receives a complaint.
You must make a decision about how payments are to be made and implement this across your online marketplace.
Escrow
A common way of ensuring the service is completed to users’ satisfaction and that the service provider gets paid, is by holding the money in escrow until the service is complete. This means that you will hold onto the payment for a period of time before transferring it onto the service provider when their obligations are complete.
There will need to be a function on your site for the user or service provider to indicate that the service is complete. If you hold onto the money, this may make you a limited payment collection agent, which comes with some legal responsibilities.
Offering Security
You will want to ensure that people use your marketplace for any transactions, rather than contacting service providers externally. To do so, one option is to offer security. You can provide security in many ways, such as by:
- having formal marketplace terms and conditions in place to set out what happens if either the service provider or the user is unhappy;
- allowing online payment through safe payment systems;
- offering insurance if the payment occurs through your payment system;
- allowing feedback, ratings and reviews so that potential service providers and users can review each other; and
- offering dispute resolution assistance.
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ACL Considerations
The ACL will apply to your online marketplace. This will mean that consumers will have rights relating to the services provided by both you and any service providers. Your business will have a responsibility to ensure that your service providers do not mislead or deceive users.
You can include disclaimers in your marketplace terms and conditions which will limit your legal responsibilities to an extent. But, you still must ensure the accuracy of any posts made by service providers. Your marketplace should provide functionality for service providers to clearly list their prices and a description of the quality and scope of their services.
Key Takeaways
When someone provides a service, parties may disagree on the quality, scope, or completeness of the work. As an online marketplace operator, you will want to provide clarity about these issues from the outset to minimise any disputes. You can do this by having well-drafted contracts in place and providing safe payment options. You will also need to uphold your ACL obligations and ensure you do not confuse users about the quality, scope or price of the services. If you have any questions about operating an online marketplace, get in touch with LegalVision’s e-commerce lawyers on 1300 544 755 or fill out the form on this page.
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