You’ve built your product, worked out (most of) the kinks, and are ready to sell it to the public online. Before you put it out there, you need a Terms of Use (TOU) outlining the terms and conditions to protect yourself and ensure that others who use your goods and services understand the regulations.
When I first began creating Terms of Use and Terms of Service ten years ago, there was a drive to make these online legal agreements easier to read and comprehend. Having Terms of Use that are basic and in layman’s phrases is still necessary, but doing so might often entail neglecting or leaving out significant terms that are critical to risk management. Avoiding these common blunders might be the difference between remaining in business and going out of business.
Table of Contents
1. Making use of a cut-and-paste or template.
One size does not fit all when it comes to contract law. Because your goods and services are unique, why use a template that does not take into account your unique services and leaves out essential phrases that might protect you if anything goes wrong?
2. Failure to make your TOU enforceable.
Informing your customers about your terms and conditions is not enough to make them enforceable. Several tools are required to make your online contract enforceable. To make a Terms of Service enforceable, four essential elements must be met.
Adequate notice of the proposed terms’ existence;
It’s a good idea to go through the words again.
Adequate warning that doing a certain action indicates agreement with the conditions
The user takes the action requested in such a message.
If you have service sign-up, subscriptions, or registrations, make sure the user openly agrees to the Terms of Use (and provides a link to it) when they register or buy services. Make sure your links to your Terms of Service (or privacy policies) aren’t buried at the bottom of the page. In addition, include wording in the TOU that makes usage of the site and services contingent on adopting the TOU.
3. Integrating the privacy policy with the TOU.
Customers must be informed if you gather data or have third parties collect it on your behalf. Make a privacy policy and include it in your Terms of Service, but don’t attempt to integrate them into one document. Combined TOU/privacy policies are difficult to understand.
Furthermore, the Federal Trade Commission has shown a strong preference for forcing online service providers to inform their consumers of major changes to their privacy policies and terms of service. Most TOUs refer to their related privacy policies, but keep them separate so that they are not required to inform users of changes to both papers unless there are genuine major changes to both. Be prepared for the broad General Data Privacy Regulations, an urgent warning for anyone that service European Union nations or manage big volumes of data.
4. Failure to implement your company concept, specific services, and location.
Your Terms of Service are more than simply a broad legal document; they also include specific terms that pertain to the specifics of your organisation. Failure to distinguish these specifics might result in nuisance lawsuits, misunderstandings, or government investigations. For example, if you live in California, you must have a California Civil Code 1789.3 disclosure that states:
(a) The service provider’s name, address, and phone number.
(b) Any costs imposed by the provider on the customer for the use of the service.
(c) The processes a consumer may utilise to resolve a complaint about the service or to get further information about using the service, including the phone number and address of the Complaint Assistance Unit of the Division of Consumer Services of the Department of Consumer Affairs.
If you have specialised goods, provide links to the unique terms of service for those items in your TOU, and if you interact with suppliers and customers, be sure to include different terms for each, either in the same document or separately.
4. Inconsistent phrases in paper contracts
Many businesses, particularly those in the Software as a Service sector, maintain paper contracts with their suppliers or customers. Most of the time, such agreements require the other party to adhere with both the agreement and the conditions of use, and there will almost always be phrases that contradict or overlap between papers. Make it clear which papers or phrases take priority.
5Â . Failure to safeguard your material and/or manage the risk associated with third-party content. Most web services provide some type of content, such as articles, news, or information. If you create your own material, make it clear that you own it and have set boundaries on how it may be used (that includes no framing and no reselling).
If you enable people to publish material or supply information to your service/site, make sure you have a code of conduct, Digital Millennium Copyright Act takedown request procedures, and the right to delete any violative content as well as the offending poster’s account if required.
If there are connections to third-party material or sites, such as Facebook or Google, make a note of it and make it clear that you are not liable for third-party links/content or what your users publish on those sites. Under Section 230(c) of the Communications Decency Act of 1996, the United States gives limited civil protection for third-party material, while other nations, such as the United Kingdom, do not and will force you to remove inflammatory, libellous, or slanderous information if it is detected. You may also want to include wording that allows users to recommend enhancements or adjustments to the software that you use.
6. Ignoring legal disclaimers. Your attorneys routinely include limitation of liability provisions, indemnity clauses, and warranty disclaimers in your contracts, so why are they absent from your terms of service? Consider if the following are appropriate to your company:
Limitation of responsibility by the use of a claims cap
Warranties are excluded.
Indemnities for customer or vendor abuse of your services
Links or services provided by other parties
Liability is disclaimed in the case of a network outage or a force majeure occurrence.
Jury trials and class action lawsuits are waived.
Keeping an eye out for these six blunders will help you manage risk on your website and keep the lights on.