##### Before starting an e-commerce website, there are a few vital aspects you need to understand in order to successfully (and legally) sell any products and/or services online. Let us walk you through the legal document necessities required for your e-commerce website

![Placeholder Image](https://assets.stackbit.com/components/images/default/post-4.jpeg)

An e-Commerce business predominantly involves the use of a website on which products and/or services are sold. These products might be physical products delivered through couriers or might be digital products delivered by means of email or a downloadable link (such as Hello Contract).

In setting up and running an e-Commerce website, you, as the website owner, need to set expectations and binding rules between yourself and your customers. These rules are predominantly set up in three separate legal documents which should be viewable on your e-Commerce website and to which each customer needs to agree.

This article will aim to educate you on the function of each document, as well as the important decisions that you need to make, which pertain to your e-Commerce website, in order to correctly compile these documents without the help of lawyers.

**Head directly to our shop for the three documents you need:**

1.  [e-Commerce website terms of service;](https://shop.hellocontract.co.za/permalink/65f57b59-b4a5-42ae-bc96-ae7648c39833)

2.  [e-Commerce website returns policy](https://shop.hellocontract.co.za/permalink/4af54f52-67a8-4e9d-8571-0b212b8d82d0); and

3.  [Website privacy policy.](https://shop.hellocontract.co.za/permalink/ba81b288-0e26-45da-91c1-0233b63e424b)

#### **Contents of this blog**

##### e-Commerce Website Terms of Service:

*   Delivery of goods and their time frame

*   Payment methods

*   Warranties by a customer

*   Unauthorized use of the e-Commerce website

*   Limitation of liability

*   Copyright

*   Prohibition on reverse engineering of website

*   Breach provisions

*   Dispute resolution

##### e-Commerce Website Returns Policy:

*   Circumstances in which returns are allowed

*   Timeframe in which returns are permitted

*   Choices upon return

*   How returns are initiated

*   Condition of the product returned

*   Manner of return

*   Product inspection

#### Website Privacy Policy:

*   What personal information is collected

*   The reason for collecting personal information

*   Sharing of personal information

### All the documents you need on our [website](https://shop.hellocontract.co.za/packages/hello-contract-package-deals/webshop-starter-package)

**e-Commerce Website Terms of Service:**

An e-Commerce Website Terms of Service is the main governing document of your website, and sets out the overarching and binding obligations as between the e-Commerce website owner and its customers.

An e-Commerce website terms of service should at the very least have clauses in it which pertain to the following:

#### **Delivery of goods and their timeframe**

One of the most essential aspects of an e-Commerce Website Terms of Service is specifying the manner of how goods are delivered to a customer and the timeframe in which you intend to deliver those goods. For example, should you specify that a delivery might take up to 14 working days, and the customer begins to complain that they have not received the goods after day 5, you may refer them to your e-Commerce Website Terms of Service in order to show that you are only obliged and will have the goods delivered within 14 calendar days of the goods being ordered.

This clause is also important in instances when you use external couriers, so that you are able to indemnify yourself against late delivery by an external courier, as you do not have control over the exact date and time frame in which they might deliver.

Additionally, this clause is necessary from the perspective of determining when risk associated with the goods transfers from you to the customer. It is ideal to record that upon delivery to the customer, whether the customer is at the premises for delivery or not, the risk associated with the goods and their being stolen or damaged, for example, transfers immediately on delivery to the customer.

#### **Payment methods:**

It is important to record exactly what payment methods you allow on your e-Commerce website in order to ensure that customers do not try to negotiate alternative payment methods which might be risky or simply not accepted by you. Furthermore, if you accept payment by credit card and the name of the payment processor is mentioned, it should be recorded that the customer acknowledges that it is subject to the terms and conditions of the payment processor rather than just being subject to your own terms and conditions.

#### **Warranties by a customer:**

The customer needs to warrant that any information that they provide to you is accurate and true, that they are not impersonating any other person, not violating any laws in making the purchase, such as a person being over the age of 18 should you operate an e-Commerce website which deals in liquor deliveries, for example.

#### **Unauthorised use of the e-Commerce website:**

Users should undertake that they will not post anything to your website which is objectionable or is unlawful, spam the website, make use of unsolicited mass emailing techniques, introduce a virus, worm, Trojan horse or malicious code, redistribute or use your information for commercial purposes and the like.

#### **Limitation of liability:**

It is very important that you record that a customer is required to use your e-Commerce website at their own risk. Further, that you will not be liable for any use or conduct in the connection with their use of the website at all.

#### **Copyright:**

It should be recorded that the contents of the website are the subject of your copyright. A copyright is essentially a protection that is afforded to a piece of creative work. This might include pictures, logos, the general look and feel of the website, audio files and the like. Generally, copyrights do not need to be registered and are created automatically.

As such, the images on your website, unless they are from third party manufacturers and suppliers are the subject of copyright protection, and should be recorded as such.

#### **Prohibition on reverse engineering of the website:**

One should also record a general prohibition that users cannot take your website and simply reverse engineer it for their own purposes in an attempt to copy your website based on the source code thereof, which comprises your intellectual property.

#### **Breach provisions:**

Clear terms, setting out what the procedure should the customer or yourselves not adhere to their respective obligations in terms of the e-Commerce Website Terms of Service should be recorded. These are what are known as breach provisions.

Normally, a breach provision will provide that should either party commit a breach of the agreement, such as the customer not making payment of the goods despite having ordered them, or your failing to deliver the product to the customer, the innocent party will be entitled to place the other party in breach, and require that the other party rectify the breach by either making payment of the goods (in the case of the customer breaching) or delivering the goods (in the case of you failing to deliver the product). Thereafter, and should the breach continue, the innocent party will either be entitled to cancel the transaction and/or claim damages through a court of law.

#### **Dispute resolution:**

Related to the above, in the event that there is a dispute between yourself and your customer, a procedure to resolve any dispute should be set out.

Normally, this dispute resolution procedure will involve the parties having to try and attempt to settle the dispute for a certain period of time informally between themselves, and if this fails we would suggest attempting mediation with a qualified mediator for a further period of time, and thereafter, should that fail, either looking at permitting the parties to take it to court, or otherwise, arbitration.

### **e-Commerce Website Returns Policy**

Any e-Commerce Website Returns Policy sets out the circumstances in which goods which are purchased from your e-commerce website may be returned by the customer who purchased them.

An e-Commerce Website Returns Policy should at the very least have the following terms contained in it:

#### **Circumstances in which returns are allowed:**

It is very important to record when returns will be permitted. For example, this might include that the incorrect product was delivered to the client, the client no longer wants the product, or that a product which is of the incorrect size or specifications was delivered to the customer.

#### **Timeframe in which returns are permitted:**

The timeframe for a return should also be recorded. This will prevent customers from using the product for a significant period of time prior to their return. For example, you might impose a 14 day window from the date of purchase in which a customer is required to initiate a return through your website.

#### **Choices upon return:**

Once a product has been returned, your website might allow for one or more of the following, which needs to be recorded:

*   a customer has their account credited;

*   the amount be refunded to them; or

*   that a replacement product be delivered to the customer.

#### **How returns are initiated:**

It should clearly be recorded what the procedure is to return a product. This might include, for example, that an email is sent to a specific email address or that there is a page on your website with a form devoted specifically to returns.

Furthermore, it should set out the contents of what might need to be included in the return request. For example, this might include the reason for the return, the choice as to what they would like to occur upon the return, such as their account being credited, and the like.

#### **Condition of the product returned:**

It is very important to stipulate the circumstances in which you will permit a product to be returned. For example, this might include that the product needs to be undamaged, unused and in original packaging. It goes without saying that products which have been extensively used should not be permitted to be returned to you.

#### **Manner of return:**

Should you have the ability to collect the product to be returned from the client, it should be mentioned that the customer has the choice of the product being collected from them or that they may deliver the product to you for the return.

#### **Product inspection:**

We suggest that it is very important to include a clause in your e-Commerce website terms of service that permits you to inspect the product which is being returned prior to you validating its return.

### **Website Privacy Policy**

A Website Privacy Policy is required by law in terms of the Protection of Personal Information Act No 4 of 2013. It sets out what personal information you collect from customers, what you do with that personal information, and who that information is shared with.

**A Website Privacy Policy should at the very least set out the following:**

#### **What personal information is collected:**

In operating an e-Commerce website, generally speaking, you will collect the following personal information from a customer which needs to be recorded in your Website Privacy Policy:

*   name of the customer;

*   email address;

*   physical address for delivery;

*   payment and/or credit card information.

To the extent that you collect any further personal information from a customer in the process of their ordering through your e-Commerce website, please note that this needs to be recorded in the Website Privacy Policy as it is required by law.

#### **The reason for collecting personal information:**

Your Website Privacy Policy should clearly set out the reason for which the personal information is collected. For example, this most likely will include the fact that the information has been collected in order that you as the e-Commerce website owner, have enough information in order to accurately and timeously deliver the product to the correct customer.

Further to the above, it also might include the fact that you might in future market to the customer of certain of your other products and/or services.

All reasons for which you collect personal information need to be clearly recorded in your Website Privacy Policy.

#### **Sharing of personal information:**

It needs to be recorded the categories and types of persons and/or entities to which any personal information is shared with.

For example, and in the circumstances of an e-Commerce website, you would need to share address information with any couriers which will deliver the products. In addition, payment information will be shared with the necessary payment processors of your website.

### **All the documents you need on our website:**

At Hello Contract, we have all of the above documents available on our website so that you can generate these documents entirely on a self-service basis without getting lawyers involved. All that you need to do is select the appropriate documents that you would like to generate, answer a few questions and our document generation software will automatically compile the e-Commerce Website Terms of Service, e-Commerce Website Returns Policy and Website Privacy Policy for you.

**All of these are available at the following links:**

1.  [e-Commerce website terms of service;](https://shop.hellocontract.co.za/permalink/65f57b59-b4a5-42ae-bc96-ae7648c39833)

2.  [e-Commerce website returns policy](https://shop.hellocontract.co.za/permalink/4af54f52-67a8-4e9d-8571-0b212b8d82d0); and

3.  [Website privacy policy.](https://shop.hellocontract.co.za/permalink/ba81b288-0e26-45da-91c1-0233b63e424b)



ECommerce legal website documentation

An eCommerce Returns Policy acts as a legal contract between you (the eCommerce store owner) and the users who make use of your eCommerce website. Think of it as a document which sets out the basic ground rules around how, when and in what circumstances you permit returns and refunds of products or services sold on your eCommerce website.

> Vestibulum ullamcorper risus auctor eleifend consequat.

![Placeholder Image](https://assets.stackbit.com/components/images/default/post-4.jpeg)

### \*\*eCommerce Returns Policy \*\*

There are four key policy documents required to better legally manage your eCommerce store. A website Terms and Conditions, a Privacy Policy, a Delivery Policy and lastly, a Returns policy. This blog will walk you through why you need a Returns Policy in South Africa and most importantly, how to draft a Returns Policy.

If you’re still in the process of drafting your Terms and Conditions or Privacy Policy, we have dedicated guides for each of these documents in our blog library, [here](https://hellocontract.co.za/blog/). 

When operating any shop, whether a physical store or an eCommerce webshop, it is expected that customers may, in some instances, want to return or exchange goods bought from your business. 

There are a number of reasons why you, as a business owner, should draft a Returns Policy for your store, but the primary reason is for retailers to offer a policy to help mitigate the business owner’s risk by only permitting returns when returns should be permitted. 

After purchasing a product from your store, if your customer is not happy with your product, if it is defective or it is damaged, then it should be returned to you under certain circumstances. 

Most business owners try to strike a balance between offering a lenient Returns Policy and protecting their own business interests.

In a recently published study in the Journal of Retailing, the authors identified five common aspects which are in Return Policies to make them more or less lenient. 

They are:

1.  Monetary Leniency: How much of the price of your product is refunded;

2.  Time Leniency: The duration within which returns are accepted by your business;

3.  Effort Leniency: How difficult it is for your customers to return their products;

4.  Exchange Leniency: Whether refunds for products are in the form of store credit or cash;

5.  And, Scope Leniency: The type or categories of products which can be returned — for instance, whether perishable goods (such as milk) are accepted or not

These terms are important to keep in mind when planning your Returns Policy.

You can read the full article [here,](https://www.sciencedirect.com/science/article/abs/pii/S0022435915000822) but to skip ahead, the study found that drafting a more lenient Returns Policy can actually increase the number of products purchased on your store more than it increases the number of products returned by customers. 

The authors go on to say that this is policy or product dependent and not a sure bet but, they offer insight into what may help to incentivise product purchases.  

To reduce the number of returns, they highlight the importance of increasing the time leniency of your Returns Policy and reducing your scope leniency. For example, not rushing your customers’ decision to return a product may allow them the time to enjoy it and therefore not return it. Further, limiting your acceptance of returned goods to non-discounted products will also limit returns. 

As such, drafting your own Returns Policy is a balancing act. You need to carefully increase the demand for your products whilst simultaneously limiting the eventual returns.

Here are 6 tips provided by the authors to help you with your Returns Policy drafting:

1.  Be selectively lenient based on the cause of the return; 

2.  Be selectively lenient based on time;

3.  Be selectively lenient for cheaper products that need a quality prop up. For example, offering “more than your money back” can increase the perceived quality of your product;

4.  Be selectively lenient for your more important customers;

5.  Have the Returns Policy apply for a longer period after purchase so that the “[endowment effect](https://www.behavioraleconomics.com/resources/mini-encyclopedia-of-be/endowment-effect/)” kicks in. This basically means that customers may feel a better sense of ownership after a period of time so, offering a longer return window may reduce the likelihood of the product being returned;

6.  And lastly, limit the return of any gifted or discounted items. For example, only offer store credit if the product is returned by the person that purchased the gift. 

Although it is not required by law that you have a Returns Policy, the document’s potential effect on your business may be significant, so it is advisable to have one in place to better control your store’s returns and refunds.  

So with this knowledge in mind, there are three key questions which need answering before you go ahead and draft your Returns Policy:

1.  **What is a Return Policy?**

2.  **Why have a Return Policy?**

3.  **What should be included in your Return Policy?**

4.  **Your Return Policy**

### **What is a Return Policy?**

A Returns Policy, as mentioned above, is a document that contains a set of rules that an eCommerce shop owner sets out to manage how customers return and/or exchange unwanted, damaged, defective or incorrect merchandise that they have purchased. 

A Returns Policy also sets out to customers what items can be returned or rejected and for what reasons, and the timeframe over which returns are accepted.

Every business should tailor their Returns Policy to fit their logistics capabilities, customer expectations, and product offering. For example, a Returns Policy for handmade, customised artwork will be completely different from one for a mass-market apparel company.

### **Why have a Return Policy?**

Apart from what has been set out above, a concise and clear Return Policy provides consumers with some security that what they are buying is what was represented to them. Without this consumers might become suspicious and avoid buying the product.

The nature of eCommerce is that it doesn’t allow customers to see and feel products before buying them. Naturally, customers want to be sure that if they don’t like what they bought or if it does not match their expectations, they can return the product. 

Almost half of all eCommerce shoppers check Return Policies before purchasing online and so we believe it is essential to have one. 

### **What should be included in your Returns Policy?**

#### **Timeframe for returns**

To ensure that Customers don’t abuse the returns process and that there is a clear line in the sand, the time period in which product returns are to be effected needs to be recorded. 

The time frame might differ dramatically from one website to another. For example, a fresh produce website will differ markedly from an electronics company.

Either way, it is up to you, but we suggest that due to Consumer Protection Act requirements this should not be less than 10 business days.

#### **Returning of unwanted goods**

A clause should then speak to the return, if applicable, of unwanted goods or products. These are items bought by your customers but returned not because they are faulty or incorrect but simply, because the custom does not want the item any longer. 

Depending on the condition and type of item or the time it has taken to be returned, you may want to be selectively lenient when drafting this clause. 

Setting clear terms will help you limit the return of any items which may result in a loss of profit for your business. For example:

*   Items can be returned if undamaged and unused, with the original labels and stickers still attached; 

*   Items can be returned if they are in the original packaging, which must be undamaged and in its original condition with all seals still intact (if applicable);

*   Items can be returned if they are in perfect working order and not missing any accessories or parts;

*   Items can be returned if they are not in the clause outlining products that are not eligible for return; and 

*   Certain items or categories of products can be returned if within a specified time frame.

Because these items often need to be returned in undamaged and unused condition, we suggest that it is very important to include a clause that permits you to inspect the product which is being returned prior to you validating a refund or exchange.

#### **Damaged goods**

Delivery is the backbone of many eCommerce stores, and sometimes products may leave your business in working condition but are damaged in transit or when they are collected. These are referred to as “damaged goods”.

If goods are delivered to your customer in a damaged state, the South African [Consumer Protection Act](https://www.gov.za/documents/consumer-protection-act) places a responsibility on the retailer to remedy the situation. 

As physical damage to goods is often fairly obvious, many businesses offer a full refund/repair and free collection of the damaged item if\*\* \*\*it is returned within a relatively short time frame and passes an inspection.

#### **Defective goods**

Defective goods are normally items which fail to conform with or operate according to applicable specifications. 

If items are defective, generally, the retailer is expected to refund the customer and permit a return of the item.

There is sometimes a fine line between products which are defective and damage which is caused to products for some other reason.

As such, we would suggest terms such as the below to mitigate your need to effect a refund unless necessary:

*   Items will not be refunded if faults resulted from normal wear and tear;

*   Items will not be refunded if damage arose from negligence, user abuse or incorrect usage of the product;

*   Items will not be refunded if damage arose from electrical surges or sea air corrosion;

*   Items will not be refunded if damage arose from a failure to adequately care for the product; and

*   Items will not be refunded if damage arising from unauthorised alterations to the product.

Again, it should also be recorded that you have a right to inspection of the items prior to effecting a  repair, refund or exchange.

#### **Non-returnable goods**

Non-returnable goods are those products that your business does \*\*not \*\*refund- regardless of the condition of the product or timeframe in which they were purchased. 

The return of these products may be a contentious subject with your customers, so you need to be especially transparent and understandable when you draft this clause, if it is applicable.

Reasons to justify not returning products include:

1.  Public and food safety regulations;

2.  Hygiene reasons; 

3.  Applicable legislation; and

4.  Reasons of cost efficiency.

Here are a few examples of products which are accepted as non-returnable for the above reasons:

*   Products purchased by way of special arrangement or which comprise a custom order;

*   Perishable products and/or food items; and

*   In certain circumstances, swimwear, underwear, shavers, toothbrushes and other health, beauty and personal care items.

#### **Refund methods**

In a standard eCommerce Returns Policy, the methods that your permit to effect a refund or return should be recorded. 

For example, whether you permit refunds, or prefer to replace items, or alternatively prefer to issue store credits, it is up to you.

In this regard, however, whatever methods you permit needs to be recorded in the Refunds Policy.

#### **Methods of return**

eCommerce website owners all need to determine how products are returned. For example, is a customer required to repack the product and send it back to you at their cost or do you perhaps collect the product from the customer.

There is no right or wrong answer, but whichever method you decide upon, this should be recorded in the Returns Policy.

### \*\*Your Returns Policy \*\*

There are two key parts to drafting this document yourself. The first is that you need to thoroughly understand your own eCommerce website, the products/services you market and the outcome you want to achieve from your Returns Policy. Do you have complete trust in your product and want to offer an incredibly lenient policy? Or do you need to limit your returns? 

Secondly, you need a basic understanding of South Africa’s consumer legislation, such as the Consumer Protection Act. If you are not absolutely comfortable with legally drafting your own Returns Policy, we do not recommend that you go it alone. 

At Hello Contract we’ve created a simple way to skip traditional legal fees and create an automated customisable eCommerce Returns Policy. 

We provide you with a step by step questionnaire to answer, and once you’ve entered your information, we take care of the legal stuff automatically and, in seconds, we provide you with a comprehensive Returns Policy. 

It’s simple.  

Check out our Returns Policy, [here](https://shop.hellocontract.co.za/permalink/4af54f52-67a8-4e9d-8571-0b212b8d82d0)


ECommerce return policy

##### Whilst most start-ups try to take a shortcut in compiling their Website Terms of Service by simply copying and pasting some industry leader's terms and conditions which is comparable to their own and placing it on the website, this is fraught with dangers and not advisable.

> Terms and Conditions are not required by law, but we highly recommend these having in place to prevent abuse of your site

![Placeholder Image](https://assets.stackbit.com/components/images/default/post-4.jpeg)

For example, one may consider their peer-to-peer lending or renting platform of movable equipment as comparable to Airbnb and therefore, simply copy Airbnb’s terms of service. Apart from the fact that this is copyright infringement, there will be aspects within Airbnb’s terms and conditions which are worlds apart from how you intend your business to function, but are now legally binding.

For example, a cover of up to $100 000 in respect of the breakage or theft of any movables on a property. 

This would have nothing to do with your own business, but could be problematic as a disgruntled consumer could try and justify some arbitrary claim of theirs.



>
>
> Terms of service (also known as terms of use and terms and conditions, commonly abbreviated as T\&C) are the legal agreements between a service provider and a person who wants to use that service. The person must agree to abide by the terms of service in order to use the offered service.
>
>



#### **As such, we list below the 5 most important aspects to consider in a Website Terms and Conditions.**

#### **The type of website:**

It is important to distinguish between whether the site will, for example, simply be for providing information to users, or rather allow users to submit information, content and the like on the website.

Examples of information websites might simply be a website about your company and what it does, whilst sites which allow for users to upload content might be a social media site, directory or the like.

If your website is simply to provide information, you will not be concerned about your terms and conditions recording the kind of content which might be uploaded, the fact that users which upload content need to ensure that they are permitted to upload such content and the like. Social media websites, and other websites which require content which needs to be uploaded require one to consider and record in the terms and conditions what kind of information might be uploaded, any rules pertaining to how users may engage with your site and potentially a community on your site.

#### **Whether you receive payments:**

If you receive payments through your website, you should record what payment methods will be acceptable, whether or not you store the card details, and if you do not store the card details, who will be storing the card details on your behalf.

Additionally, by accepting payments, you should then go on to record in what circumstances, if any, refunds shall be given, as well as any discount coupon policies.

#### **Which law is applicable to your site:**

There is a possibility that your users might be accessing your site from all over the world, but you might be headquartered in a single country only. It is often cheaper to record that the law applicable to your website is the one in which you are situated, which will inevitably save you costs should you ever go to litigation. This is on account of the fact that if the litigation is to be held in a foreign country, you would have to appoint foreign lawyers, and potentially incur travel expenses and accommodation.

#### **Dispute resolution mechanisms:**

It is important to consider that if the users ever have a dispute, what will be the process to resolve that dispute. We highly recommend that you simply don’t nominate a dispute to go to a court or arbitration as the first step, but rather record a process in which the parties will attempt to resolve the dispute informally between themselves. 

If that dispute is not resolved within a certain period of time the matter is then referred to potential mediation where a mediator will try and find a resolution between the two parties and only thereafter if the dispute is still not resolved one should then go to arbitration or through court proceedings. 

#### **Shipping:**

To the extent that your company ships goods physically, it is very important to manage expectations in the Website Terms and Conditions and set out the time frame in which goods are to be delivered and in which they might be returned, as well as what consequences would exist should the goods be delivered late, or in a defective state.

We hope that the above will equip you with the knowledge required to successfully set up your Website Terms and Conditions.


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More Like this

##### *Whether you are looking to purchase or sell shares in a private company, you will need to go down the administrative road of conducting a sale of shares. Read more about how you can successfully conduct a sale of shares without a lawyer.*

![](/images/saleofshares.webp)

Ordinarily, conducting a sale of shares would entail having to go to a firm of attorneys who would need to prepare and draft the necessary documents and contracts in order to properly and effectively transfer the shares.

Unfortunately, the cost of lawyers can be prohibitively expensive, but ordinary business owners are left with no choice because they do not know how to go about properly and effectively attending to a sale of shares.

This article aims to educate you as much as possible, without going into too much legalese, of how to conduct and go about a sale of shares transaction without the help of lawyers.

### Get going now, and create the documents you'll need to do your sale of shares

1.  [Sale of Shares Agreement](https://shop.hellocontract.co.za/permalink/5fd1db42-2ad3-4625-9b93-6d0aa0945772);

2.  [Share Transfer Form](https://shop.hellocontract.co.za/permalink/d8ffdd48-e2c4-42f3-9aeb-1c3e97afe255); and

3.  Authorising resolutions of both the [shareholders](https://shop.hellocontract.co.za/permalink/4fcb8b64-c620-40f7-af2a-9492fd18d15e) and [directors](https://shop.hellocontract.co.za/permalink/9e85667e-ed2f-4b15-95b7-88a5c424b956).

#### **Sale of Shares Agreement:**

> A Sale of Shares Agreement is the main governing document that serves to set out the details of the transaction, the obligations of each party, the purchase price to be paid, as well as the relevant time frames for the sale.

#### **A Sale of Shares Contract should, at the very least, have terms which pertain to the following:**

##### **Purchase Price:**

It is important that, in order for the purchaser and the seller to clearly understand the expectations as to how much the shares will be sold for and the terms surrounding how the payment is to be made, the purchase price be recorded with sufficient detail in the Sale of Shares Agreement.

For example, the purchase price might be paid in one lump sum of R50 000.00 on X date, or it might be paid in instalments of R10 000.00 over 5 months, or there could be some other custom payment timeline. Whichever it is, this should be recorded.

One of the reasons that the above is so important is that in the event that payment is not made on time, there should be the ability for the seller to place the sale on hold and not permit the sale of shares to go through, and also allow for the seller to place the purchaser in breach and potentially force the purchaser to make payment of the purchase price.

##### **Transfer Date:**

It is very important to record what the actual date of the transfer will be as this date will be recorded in the requisite share register, share certificates and the like, and is a clear line in the sand to determine when the purchaser’s obligations to the company begin and the seller’s obligations in respect of the company cease.

##### **Number and class of shares:**

To ensure certainty, it is essential to record the number of shares that are being sold coupled with the class of those shares.

A lot of people when completing template Sale of Shares Agreements tend to fill in the percentage of what the sale will comprise. However, and depending on the time frame of the sale, and what other share sale transactions might be going on at the same time, the number of shares comprising the percentage might change, and as such, it is very important to record the number of shares rather than the percentage which is to be sold.

Additionally, as the company may comprise more than one class of shares, it is important to specify what class is the subject of the share sale.

Should this terminology be completely foreign to you, you most likely only have one class of shares in your company, and as such, the class of shares that will be transferred will be ordinary shares.

##### **Warranties:**

This might be bordering on a bit of legalese, but it is very important to understand. You do want to ensure, among others, that the seller is in fact selling shares which he in fact owns.

As such, it is important to have a clause which speaks to the warranties given by the seller that they are the sole owner of the shares, that they are not the subject of a pledge or some other form of security and that they can freely and effectively transfer the shares to the purchaser.

##### **Confidentiality:**

Ordinarily, and although this is not an obligation on the part of the parties, a confidentiality clause is ideal in that you do not want the seller or the purchaser to wilfully advertise and speak to others about the terms of the sale and what might internally be considered a sensitive and confidential matter.

##### **Accession to the provisions of the Shareholders Agreement:**

Should there be multiple shareholders of the company, and should there exist a Shareholders Agreement which was signed by the shareholders of the company, a clause which requires the purchaser to automatically agree to (accede) the terms of the Shareholders Agreement is necessary, so that the purchaser will, as from the date of the sale of shares, be bound to the terms of the same Shareholders Agreement.

##### **Breach Provisions:**

Clear terms, setting out the procedure should either the purchaser or the seller not adhere to their obligations in terms of the Sale of Shares Agreement, should be included. These are what are known as breach provisions.

Normally, a breach provision will provide that should a party, such as the purchaser, not pay the purchase price on time, the seller will be entitled to place the purchaser in breach, and require that the purchaser rectify that breach by making payment of the purchase price within a specified time period, failing which the seller will be entitled to cancel the agreement and/or claim damages through a court of law.

##### **Dispute Resolution:**

Somewhat related to the above, in the event that there is a dispute between the parties, a procedure to resolve any disputes should be set out.

Normally, the dispute procedure will involve the parties having to try attempt to resolve the dispute for a certain period of time informally between themselves, and if this fails we would suggest attempting mediation with a qualified mediator for a further period of time, and thereafter, should that fail, either looking at permitting the parties to take it to court or otherwise arbitration.

##### **Share Transfer Form:**

Although the Companies Act is not entirely clear on the exact nature of what and how shares are transferred, it only records that share transfers, such as a sale, should be “evidenced by a proper instrument of transfer”.

As such, along with a Sale of Shares Agreement we would advise a simple 1 pager instrument of transfer (share transfer form) which records who the purchaser is, who the seller is, the number of shares being transferred, the class of shares being transferred, the purchase price and the transfer date.

##### **Which law is applicable to your site:**

There is a possibility that your users might be accessing your site from all over the world, but you might be headquartered in a single country only. It is often cheaper to record that the law applicable to your website is the one in which you are situated, which will inevitably save you costs should you ever go to litigation. This is on account of the fact that if the litigation is to be held in a foreign country, you would have to appoint foreign lawyers, and potentially incur travel expenses and accommodation.

##### **Authorising Resolutions:**

Along with the aforegoing, there might well be certain authorising resolutions of the company which are needed.

For example, should a Shareholders Agreement exist, it will most likely have pre-emptive rights in that agreement, meaning that if a shareholder wants to sell any of their shares, they will first need to offer those shares for sale to the other shareholders before offering them to an outsider. If the sale of shares is in fact to an outside party, a Shareholders Special Resolution will need to be entered into where the shareholders waive those rights of pre-emption to permit the sale to go ahead.

Furthermore, the company will most likely need to cancel existing share certificates and issue a new share certificate to the purchaser which would require that a Directors Resolution be passed to permit this.

##### **All the documents you need on our website:**

At Hello Contract, we have all of the above documents available on our website so that you can conduct your sale of shares transaction entirely on a self-service basis without getting lawyers involved. 

All that you need to do is select the appropriate document that you would like to generate, answer a few questions, and our document generation software will automatically compile the Sale of Shares Agreement, the Transfer Forms and Authorising Resolutions necessary for you to conduct your sale of shares transaction.

#### **All of these are available at the following links:**

1.  [Sale of Shares Agreement](https://shop.hellocontract.co.za/permalink/5fd1db42-2ad3-4625-9b93-6d0aa0945772);

2.  [Share Transfer Form](https://shop.hellocontract.co.za/permalink/d8ffdd48-e2c4-42f3-9aeb-1c3e97afe255); and

3.  Authorising resolutions of both the [shareholders](https://shop.hellocontract.co.za/permalink/4fcb8b64-c620-40f7-af2a-9492fd18d15e) and [directors](https://shop.hellocontract.co.za/permalink/9e85667e-ed2f-4b15-95b7-88a5c424b956).

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