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Statistics Canada reported earlier this year that retail sales in general increased by 4.7% year over year, but e-commerce retail sales increased by a whopping 41.6% over the same period.

Shopping cart and laptop

Data in the US revealed that 51% of Americans prefer to shop online; in particular, 67% of Millennials and 56% of GenXers prefer to do their shopping by way of e-commerce.

The trend toward this method of retail and service delivery is clear and will only increase in volume in the years to come. It is much easier, quicker and less capital-intensive to set up an online business as opposed to a bricks-and-mortar one.

However, in the rush to get into this burgeoning market, it is also easy to overlook some of the risks.

Here is a brief list of some risks you need to consider:

  1. If you plan to sell goods online, the transactions will be governed by the Sale of Goods Act. It provides for certain implied warranties of merchantable quality and fitness of the goods you are selling. If there is an issue, the buyer can negate the transaction and you may not have an easy remedy against the person or company from whom you bought it.
  2. The Consumer Protection Act applies to the sale of both goods and services. And similar to goods under the Sale of Goods Act, this Act provides for an implied warranty that services supplied in a consumer transaction will be of a reasonably acceptable quality.
  3. The Consumer Protection Act also covers unfair practices, which are defined as unconscionable, false, misleading or deceptive representations. If you engage in any unfair practices, the customer will be entitled to rescind the sale and to obtain damages. The court can also award exemplary damages to deter any unfair practices.
  4. If a product you sell is dangerous or unsafe and causes injury or death, you could be held liable for any resulting damages. This includes a situation where all you did was buy it from the manufacturer or a middleman and then re-sell it.
  5. To the extent that any user of your website or services provides personal information to you, then you must comply with privacy legislation. You must have a proper privacy policy and you must inform your users of that policy. You also must collect, use and disclose personal information by fair and lawful means. Once you have collected personal information, you must protect it with appropriate security measures and destroy it when no longer needed. Any breach can give rise to damages.
  6. Content on your website may contain material that is defamatory or in breach of someone else’s intellectual property rights. Even if you did not write the offending material and are simply relying on wording provided to you by others, you could still be liable for damages.

This list is not complete and the references are by no means comprehensive. It is simply intended to give you an idea of some of the risks often overlooked in the rush to get an online business up and running. These businesses can be tremendously successful but a breach of these risks can be costly and potentially devastating to your venture. A little research and planning will go a long way. You should work with your lawyer to implement strategies and procedures to avoid these and other risks.

For more information about the legal issues involved with setting up an online business venture, contact our Commercial Litigation Group or our Business Law Group.


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This content is not intended to provide legal advice or opinion as neither can be given without reference to specific events and situations. © 2021 Nelligan O’Brien Payne LLP.

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