What are remote contracts? What are the characteristics of a remote contract? What should you pay attention to when concluding a remote contract?
Nowadays, concluding transactions remotely is already common practice, and parties increasingly exchange transaction documents electronically. It no longer matters where the cooperation partner is located—transactions are quick and convenient, and there are no longer any restrictions on exchanging documents and signing contracts. However, the question often arises as to whether contracts concluded in such cases are considered distance contracts.
In everyday business practice, the term “distance contract” is very often used incorrectly, applying it to any contract that is concluded remotely.
It is important to note that the mere fact of exchanging documents electronically and signing a contract remotely does not mean that a distance contract has been concluded. Any transaction can be concluded remotely using any contract, but not every contract concluded remotely will be a distance contract!
A remote contract is an agreement to purchase goods or provide services concluded in the absence of personal contact using means of remote communication.
A contract concluded at a distance has the following characteristics:
- the parties to the contract are the seller (service provider) and the consumer;
- the contract is concluded at a distance, i.e., the agreement is reached without the physical presence of the consumer and the seller. For example, a purchase is made in an online store — clothing, appliances, etc.
- Organized form of trade - the contract is concluded using a method (system) that the trader usually uses to conclude contracts - these contracts are drawn up automatically when the customer fills in the necessary data and gives their consent using one of the identification methods.
- The seller’s online store is considered a system organized by the seller.
- Concluding contracts by telephone or email is considered a system organized by the seller if the seller usually concludes contracts in this way.
- there are conditions for remote communication, namely, the contract is concluded using only means of remote communication, for example, the contract is concluded using only a website, mobile application, email, telephone, TV shopping, catalog, etc.
- When concluding a contract, it is not necessary to sign it with a reliable electronic signature. The buyer confirms their identity by identifying themselves through a bank or other identification methods (Smart-ID, electronic signature, etc.). For example, an individual orders the delivery of a garden shed and receives an electronic invoice, which they pay. Upon confirming the order electronically, they receive a contract with the delivery terms and service documents for the goods. Invoicing, payment for the order, and its confirmation serve as an agreement between the parties, and separate signatures on the documents are not required.
- Distance contracts are usually prepaid contracts in which the customer pays for the goods or services when placing the order. In more rare cases, payment is made upon receipt of the goods (delivery of the goods).
Important!
- A contract concluded between consumers or between sellers is not a distance contract!
- A contract concluded by exchanging electronic messages using a reliable electronic signature is not considered a distance contract! For example, if an individual places an order for the development of a project for which a contract is concluded, and the parties sign it using a reliable electronic signature, and the contracts are sent by email, then this contract will be a service contract.
When concluding distance contracts, there is a particular risk of threats to the interests of consumers, as consumers may have limited opportunities to obtain sufficient information and verify the quality of the goods or services!
To protect consumers’ interests, regulations set out specific requirements for sellers, such as the obligation to provide pre-contractual information, and specific consumer rights, such as the right of withdrawal. Exceptions to the right of withdrawal and the procedure for exercising it are defined in regulations, and the parties to a distance contract are not entitled to agree on terms that are less favorable to the consumer than those established in regulations.
Dispute resolution issues — distance contracts are drawn up in the form of standard forms, into which information about the customer, provided by the customer themselves, is automatically entered. Unfortunately, such standard contract templates do not provide for the possibility for the customer to choose the dispute resolution procedure or to exclude or supplement any clause of the contract. In this case, you can only decide whether to accept the terms of the distance contract or refuse to purchase the goods or services.
When choosing to purchase goods or services remotely, consider how and what kind of contract you want to conclude. Distance contracts are convenient for small transactions involving relatively small amounts. For larger transactions concluded remotely, we still recommend using reliable electronic signatures and verifiable email addresses of your business partner!
Close deals safely using the most appropriate documentation available at the moment! Always read the contents of the transaction documents before confirming the transaction!
Author of the article: Ilga Neretniece, Administrative Director of the Riga Arbitration court.