By UpCounsel Technology Attorney Andrew Lachman

You’ve set up your product, gotten (most of)the bugs out and are ready to take it to the masses online. Before putting it out there, you need a Terms of Use (TOU) detailing the terms and conditions to protect you and to make sure that those who are using your products and services know the rules.

Ten years ago, when I first started writing Terms of Use and Terms of Service, there was a push toward making the these online legal documents easy to read and understand. Having Terms of Use that are simple and in layman’s terms is still important, but sometimes doing so can mean overlooking or leaving out vital terms that are key to managing your risk. Avoiding these simple mistakes can mean the difference between staying in business and turning out the lights.

1. Using a cut and paste or template.

When it comes to contract law, one size does not fit all. Your products and services are different from everyone else’s, so why use a template that does not take into consideration your unique services and leaves out critical terms that could protect you if something goes wrong?

2. Forgetting to make your TOU enforceable.

Telling your consumers what your terms and conditions are is not enough to make it enforceable. In order to make your online contract enforceable you need several tools. There are four basic requirements to make a Terms of Use enforceable.

  • Adequate notice of the existence of the proposed terms;
  • Meaningful opportunity to review the terms;
  • Adequate notice that taking a specified action manifests assent to the terms
  • Action specified in such notice is taken by the user.

If you have service sign-up, subscriptions or registrations, make sure the user expressly consents to the Terms of Use (with a link to it) when they register or purchase services. Be sure not to bury your links to your Terms of Use (or privacy policy) on the bottom of the page. Additionally, add language to the TOU making use of the site and services conditional on accepting the TOU.

3. Combining the privacy policy and TOU.

If you collect any data, or have third parties do it for you, your customers need to know. Be sure to have a privacy policy and mention it in your Terms of Use, but do not try to combine them into one document. Combined TOU/privacy policies are hard to read.

Furthermore, the Federal Trade Commission has shown a strong preference toward requiring online service operators notify their users of material changes to your privacy policies and terms of use. Most TOUs make reference to their associated privacy policies, but keep them separate so that they don’t have to notify users of changes to both documents unless there are actual material changes to both. As an important warning for those who serve European Union countries or handle large amounts of data, be ready for the sweeping General Data Privacy Regulations.

4. Not applying your business model, special services and location.

Your Terms of Use are not just a broad legal document, they also have specific terms that apply to the particulars of your business. Failing to differentiate these particulars can lead to nuisance lawsuits, misunderstandings or government inquiries. For instance, if you are in California, you must have a California Civil Code § 1789.3 disclosure providing:

(a) The name, address, and telephone number of the provider of service.
(b) Any charges to the consumer imposed by the provider for the use of the service.
(c) The procedures a consumer may follow in order to resolve a complaint regarding the service or to receive further information regarding use of the service, including the telephone number and address of the Complaint Assistance Unit of the Division of Consumer Services of the Department of Consumer Affairs.

If you have specialized products, have links to the specific terms of service for those products in your TOU and if work with vendors and consumers, be sure to lay out differing terms for each, either within the same document or separately.

4. Conflicting terms with paper contracts.

Many companies, especially those in the Software as a Service space have paper contracts with vendors or clients. More often than not, those agreements require that the other party comply with both the agreement and the terms of use, and more often than not there will be terms that conflict or overlap between documents. Be sure to make clear which documents or terms take precedence.

5. Not protecting your content and/or regulating the risk around third party content. Most online services involve some sort of content, whether it is articles, news or information. If you have your own content be sure to note that you own your content and put limits on how you want it used (that includes no framing and no reselling).

If you allow others to post content or provide information to your service/site make sure that you have a code of conduct, Digital Millennium Copyright Act takedown request instructions and the keep the right to remove both any violative content and if necessary, the offending poster’s account.

If there are links to third party content or sites such as Facebook or Google, be sure to note that as well and make clear that you are not responsible for third party links/content or what your users choose to share on those sites. The United States provides some civil immunity for third party content under Section 230(c) of the Communications Decency Act of 1996, but other countries, like the United Kingdom, do not and will require you to take down offensive, libelous or slanderous content when discovered. You may also wish to have language that licenses user suggestions for improvements or changes that you use.

6. Forgetting your legal disclaimers. Your lawyers always put limitation of liability clauses, indemnity and warranty disclaimers in your contracts, so why are they missing in your terms of use? Be sure to consider if the following are applicable to your business:

  • Limitation of liability with a claims cap
  • Disclaimer of warranties
  • Customer or vendor indemnities for misuse of your services
  • Third party links or services
  • Disclaiming liability for lack of network access or force majeure events
  • Waiver of jury trials and class action suits.

Keeping an eye out for these six mistakes can go a very long way toward managing risk on your sites and keeping the lights on.

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About the author

Andrew Lachman

Andrew Lachman

Andrew Lachman is managing attorney with Lachman & Associates and has been an UpCounsel attorney since 2014. A former Vice President of Legal Affairs at Paramount Pictures and corporate counsel for Move.com, he has provided transactional services for over 50 tech startups and small businesses in California and Washington, D.C.

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