The following article was prepared by Mike Taylor, C.P.M. for distribution to NAPM affiliate newsletters. 


People in seminars and programs used to ask, " is Electronic Commerce Legal". Meaning, "Can merchants form legally binding contracts in cyberspace?" With all the millions of consumers and thousands of companies, jumping onto the e-commerce bandwagon, I think that question is moot. Obviously, we can.

Now the issue really becomes; "What do we have to do in order for the courts to help enforce contracts formed on line?" I think there are a number of issues we must address from a "legal" perspective. Of course you will want to get legal advice before sticking your neck out, but here is one idea to get you started.

Set up a Trading Partner Agreement (TPA) between the Buyer and seller.

The TPA establishes the basis for a long-term relationship between the buyer and seller that will be conducted on a transactional or release basis. The TPA becomes the basis for how the business will be conducted, specifies the terms which will apply to each subsequent transaction and clearly signals the intent of the two parties to form binding contracts electronically. A well-prepared TPA protects and serves both parties during the course of the relationship. It should be negotiated on a win-win basis as a long-term agreement.


Without the TPA, transactions or releases between end users and the seller might not include sufficient information or be transacted in such a way as to form binding contracts.

The TPA should be drafted between the buyer seller to include terms appropriate for each specific situation. How will products be released? Who will have the authority to order? How will payments be handled? What are the payment terms? How will products be shipped and billed? How will security be handled? How will users be trained? Who is responsible for software licensing and patent problems? All of these and more can be discussed and set forth in advance of beginning the e-commerce relationship.

On a more creative note, the TPA can also provide a forum to discuss and agree to new ways of handling customer service and supply chain issues. If you are setting up a long term agreement, consider moving the responsibility for various elements to a better location in the supply chain and reducing redundancies.

Examples: Why should the purchasing department and the seller both have to track individual releases for end users? Once should be enough as long as both have access and trust the information. Why shouldn’t the seller be directly responsible for customer service problems with the end user? Why does the seller both have to ship and bill? Can’t we pay based on receipt?

A sample TPA is posted on line to give you some ideas.

In the end, it will be up to you, your supplier and your legal counsel to find the best agreement for the situation. However, we can start the ball rolling by including the TPA in our planning process.



MLTWEB is assembled and maintained by Michael L. Taylor, C.P.M. 
Materials and articles prepared by Mike may be shared in NAPM affiliate meetings and newsletters provided that this source is cited and no fee is charged. The rights for any other use are withheld.
Copyright;  Michael L. Taylor, C.P.M.
Last Updated: 02/26/2012