Pivoting a Business to E-Commerce/Delivery/Pickup

Providing online gift cards is an easy and important way of increasing sales for small businesses, especially in such uncertain times.

There are various courses of action that a business owner can take to implement an online gift card program. One option is using a program that gift card vendors offer. There are multiple third-party gift card vendors that offer online gift card programs for small businesses. These programs are web-based e-gift card applications. Most of these companies charge either a small monthly fee or a percentage-based fee for every sale using the gift card. Some of these companies include GiftFly, Gift Up!, Givex, and Yiftee, and you can sign up easily online. You should check with your credit card or other payment processors to make sure that these services are compatible with your existing processors.

Apart from directly contacting these companies, another option is to directly contact your credit card processor. If your credit card processor already has a relationship with gift card vendors, you could set up a gift card program through them.

 

It depends.

Pennsylvania law holds that gift cards/certificates (“gift cards”) are written contracts to perform a service or deliver a good by a specified date upon presentation of the card/certificate. Generally, a closed business does not have to honor a gift card, though it is possible that a consumer will assert a claim against that business or its owners for the value of the unused gift card. Often, businesses that close do not have any assets, however, so there is little for the consumer to recover.

We recommend that you advertise that your business will be closing and that gift cards must be used by the time you close. If you are selling gift cards and your business is currently closed, and may not reopen, you should warn your customers of that possibility. (Your customers may also be able to file an insurance claim for the value of their gift card).

Expired Gift Cards Are Not Redeemable

We recommend that you keep a record of the sales of any gift cards and that those gift cards contain an expiration date. Certain statutes at the federal and state levels address gift cards in a functional business context. At the federal level, the Credit CARD Act of 2009 stipulates that any gift cards issued cannot expire unless the expiration date is at least five years from the date of issue (or loading of funds) and is made explicit on the card itself.

At the state level, the law around honoring gift cards may differ by state and by type of gift card. In Pennsylvania, gift cards are considered “abandoned and unclaimed” if unused for at least two years after their expiration date (or as provided by federal law, if later), and otherwise at least three years after the date of issue if there is no expiration date. Gift cards without either an expiration date or other fees, however, are not subject to this provision.

In New York on the other hand, the statute states simply that gift cards must be accepted for at least five years after issue.

You May Be Able to Discharge Gift Cards in Bankruptcy

If you file for bankruptcy, you should discuss with your attorney how to honor your existing gift cards. If you’re in a reorganization proceeding rather than liquidation, your attorney may reach out the bankruptcy court presiding over your reorganization to ask for the ability to continue accepting gift cards. Nevertheless, the court may place conditions on subsequent gift card sales you may be able to make.

 

As a result of the pandemic, many businesses that did not previously offer delivery are now offering it. It’s important to consider that this pivot is a change in business operations that adds a significant new business service—delivery. Business owners should consider creating terms of use for their delivery services.

Terms of use are legally binding contract terms that protect businesses against future liability and inform customers of the business’ payment terms, shipping policies, and return and refund policies. Customers agree to terms of use by making an order to use a service. (You’ve likely agreed to many terms of use today – and you have agreed to terms of use even reading this web page). Having terms of use is also an essential way to show your customers how your company does business, including how a delivery will be conducted.

We recommend that you consider the following terms of use for your delivery:

• Availability: You should state that your inventory may change and that you can only deliver the product or service if the product is available.
• Scope of Delivery/Delivery Area: You should be as specific as possible about your delivery area, and that your estimate for a delivery time is just that – an estimate, not a guarantee.
• Fees and gratuity: You should specify any additional delivery fees, and state whether gratuity goes to you or your delivery person (or is split).
• Minimum order size: You should specify if there is a minimum order size for delivery or a reduction in price for delivery.
• Contact: You should specify how your delivery person will contact your customer, including requiring a domestic or local phone number.
• Liability: You should make sure your customer understands that you are not liable for any damage to them or their property as a result of your delivery service.
• Third Party Delivery: If you use a third-party delivery service such as Caviar or GrubHub, you should make it clear that you are not responsible for any errors, mistakes or damage caused by that delivery service.
• Independent Contractor: If you do employ delivery drivers on an independent contractor basis (i.e. they are not your full time or part time employees), you should make sure your terms include that information, so that your customers know that their delivery person is an independent contractor, and that you do not take any responsibility for damages caused by them. (Separately, you should make sure that your agreement with your delivery person establishes an independent contractor relationship).
• Privacy: You may be collecting your customers’ names, phone numbers, addresses and email addresses and storing them in a database for the first time. You should consider including a privacy policy on your web site stating that you will keep that information confidential.
• Refusing Orders: You should state that you have the right to refuse or cancel any orders, whether or not the orders have been confirmed or paid, in the event a product is listed at an incorrect price or with incorrect information due to typographical errors, or in the event that an order appears to be placed mistakenly.
• Mistake: You should specify the process for obtaining a refund or exchange if you make a mistake with respect to delivery. You may require that your customer return a mistakenly delivered item, but you should not charge your customer an additional fee for fixing your mistake.
• Alcohol: You may need special licensure to deliver alcohol in your jurisdiction. For example, you do need such licensure in Philadelphia. If you do deliver alcohol, you should include a requirement that a person above the required age for the purchase of alcohol in your delivery area be present and present identification to complete delivery.
• Pharmaceutical Products: If you intend to deliver prescription drug products or other drug products, you should: 1) state that you make no referrals, recommendations or warranties regarding pharmacy or products and does not provide any medical advice, diagnosis or treatment; 2) encourage customers to understand that the customer needs to provide valid government-issued identification proving their age when receiving the prescription drug products; and 3) require customers to agree any prescription drug products has not been purchased with the intent to resell or provide to someone other than to whom it is prescribed.
• Method of Delivery: If you intend to practice certain methods of delivery, like contactless delivery, you should specify the conditions upon which you will make a delivery. (See, for example, Yard’s Brewery’s terms of use and Jet’s Pizza’s video and graphic terms of use for the dynamics of contactless delivery or pickup, which include the customer holding their ID up to the door, then keeping 10 feet away from the delivery driver until after delivery is complete). You should specify that you reserve the right to refuse or cancel any delivery for any reason, including that you believe that the delivery will be unsafe.

Even though having terms of use is not mandated by either federal or state law, they provide business owners with the tools necessary to protect themselves from potential liabilities that may arise from delivery services, for instance when there are discrepancies between what is offered online and what the business can actually deliver. It is essential to make the terms and use enforceable, which could be done typically by making the customers take an action, commonly by clicking on a button acknowledging the terms of use.

 

Shopify and Apple Pay (or “payment services”) are examples of easy and fast payment processes for businesses to provide their customers with an option to pay by credit card over the internet or with an app. To start using a payment service, a business owner needs to either sign a contract or otherwise agree to be bound by the payment service’s terms of use. Common terms for payment services include:

• Limitation of Liability: Provides that the payment service are not liable for any of the business owner’s illegal actions or due to the breach of the terms of use.
• General Conditions: Explains that the services belong to the payment service and the business owner cannot use them for any illegal purposes.
• Account Terms: Provides that payment services do not owe any responsibility to the customer for what the business owner does with their service.
• Cancellation and Termination: Provides that the business owner must initiate a termination contract in order to terminate the relationship.
• Point of Sale (POS) Services: If the business is using one payment service’s point-of-sale services to make in-person sales to customers, it must use the same payment processor for its online services as well.

Payment services will then automatically create certain accounts to accept payments, which the business owner is responsible for activating and deactivating, in addition to paying subscription fees usually billed by payment services every 30 days unless terminated by the business owner or the payment service.

You should review these terms carefully, as they may change how you do business. However, payment services have created helpful guides to these terms. Shopify, in its Terms of Service, provides explanations in common terms next to the legal clauses. It also has other payments and Apple Pay terms. Apple Pay also provides further information on how your business can use it as a payment service.

 

Probably. Businesses should typically “take reasonable preventive measures” to protect customers and employees, and refusing an unsafe delivery might well fall within that scope in the context of COVID-19. As potential support for such a decision, even delivery businesses are taking criticism for delivery practices during the COVID-19 pandemic. In general, throughout COVID-19, businesses should continue to ensure that they are following federal laws and recently released federal guidelines for employees’ health and safety in the workplace, such as encouraging sick employees to stay home and allowing employees more flexibility in their schedules.

 

For many transactions, electronic exchange of signatures is adequate. If your business currently requires a physical signature, it is likely that you can pivot to using an electronic signature without any issue.

However, in certain transactional contexts or where notarization is required, there may be additional federal and state requirements with which to comply.

For transactions that require notarization, businesses should consult the legal requirements for the state where they are located. Options that states may pursue for alternative notarization processes include: in-person electronic notarization (or IPEN), remote online notarization (or RON), and remote notarization. Currently, nearly half of the states already have “remote online notarization” laws in place. Other “emergency short-term measures” have also been taken in many states since the onset of COVID-19. For instance, Pennsylvania has amended its in-person notary requirements during COVID-19.

Business owners selling age-restricted products must use some kind of age verification system to meet the legal requirements of their state and avoid regulatory fines and lawsuits. For example, you could use a system in which the customer is required to upload their ID, or you could create a consent document in which the customer confirms that they are over the minimum age. Both of these practices would help you to establish that you have done your “due diligence” to make sure the customer is not under the minimum age requirement.

 

In general, your company should make sure that it is legally able to make the product(s) it intends to make during COVID-19 based, for example, on federal and state guidance about “essential” businesses.

Where your company shifts its focus to the creation of new products and items in high demand, there may be specific regulations, guidelines, or best practices that pertain to your efforts. For instance, companies that begin to create hand sanitizer—like New Orleans-based Porchjam distillery—may need to maintain awareness of unique federal guidelines, which may be subject to unexpected changes. Although the FDA explains specific considerations for hand sanitizer producers, the FDA also states that it “does not intend to take action” on producers during COVID-19 as long as they restrict their products to certain enumerated ingredients.

As another example, for mask producers, including a disclaimer with your new products can help clarify to consumers what the masks’ effectiveness are and avoid misunderstandings regarding their purpose. For instance, fashion designer-turned-face mask designer Naeem Khan specified in one interview: “These are not designed for people in the forefront of the corona fight.” No matter the product, it is good practice for your company to ensure that it pays attention to and abides by relevant standards and limits risks to itself and others in order to both do the most good and create the most value.

One thing to be cautious about is price gouging. It is regulated by state law and around forty states have laws or statutes that prohibit price gouging. While some of these laws define price gouging as around a 20 percent increase in the price of goods, some merely ban price increases that are “unreasonable.” If you do not want the attorney general of your state to file a complaint against you, you should set your prices with a reasonable markup. (It’s also the ethical business practice and the nice thing to do).

It may make sense to reach out through social media or other networks to businesses who currently produce the products you intend to start creating, to obtain a sense of what legal issues they faced. Also, if you intend to make a substantial pivot of your business operations to produce a new good or engage in a new service, we recommend you consult a small business attorney with experience advising clients in that industry for guidance on any local, state, or federal regulations with which your new operations may need to comply.