Your terms of use documentation may seem like a useless appendage (something like an appendix) when you’re building your business from the ground up, but it’s actually a very important, legally binding, contract between you and your users/customers.

In fact, Mikal Belicove, of Entrepreneur, warns that, “publishing poorly worded or ill-advised conditions and policies could result in the documents being tossed out of court in the event you need to enforce terms of sale against a consumer.”

Belicove goes on to say that many big name companies have been investigated by the Federal Trade Commission (FTC) and have suffered fines for misleading policies.  Granted, your business probably isn’t going to rival Sony, BMG, Dave & Buster’s, or BJ’s Wholesale any time soon, but you should definitely prepare your terms of service with care in order to safeguard your business to the best of your ability.

What Goes In a Good Terms of Use Policy?

Stephen Fishman, writing for Nolo, says that the main things to consider are interaction with various users and the rights attributed to various types of content (or products) created by your business or the user.

State Your Conditions of Sale

If your business is selling anything (hard goods or services) you absolutely need to include conditions of sales.  Fishman notes that, “Spelling out these terms will avoid customer misunderstandings and potential lawsuits from unhappy buyers.”  Aspects to incorporate include: payment, credit card use, shipping terms, refund and return policies, and warranties (if any).

It may also be wise to mention liability in regards to use of said products/services.  You don’t want to assume any liability that you don’t have to—doing otherwise could be financially disastrous in the future.

Unfortunately, several layers of state and federal “consumer protection” and “deceptive trade practice” laws apply to such terms, so it’s in your best interest to seek out legal help when crafting any such documentation.

Intellectual Property Rights

You must take the proper precautions to recognize and respect property rights.  This is huge in the Web 2.0 era with popular social media website like Facebook and Instagram cutting a path for smaller businesses to follow.  In short, users don’t like it when a company “steals” rights to content they’ve created.

Likewise, a company must safeguard the rights of content it creates against plagiarists, thieves, and bootleggers.  The best policy is probably based on the Golden Rule:  treat the property of others as you would want your own property treated.  Again, consult with legal counsel regarding copyright law if you have any doubt about what’s covered under various legislation.

Privacy Policies

While privacy policies are generally a separate document from your terms of use, it’s a good idea to make mention of your specific policies here as well. A Privacy policy generally deals with how your company will use, distribute, or even sell information given to you by the customer/user.

While most companies won’t use information for anything other than their private databases and marketing, some partner with third party marketing agencies or complimentary businesses.  This must be disclosed in very clear language, otherwise your users will likely take up arms against you.

Creating and Accessing Accounts

You want to cover your company should certain user accounts run into trouble.  That trouble may be generated by something a user did/created (such as links to malicious, pornographic or offensive material), but also you’ll want to define access.  For example, if a user dies or is disabled, do surviving relatives have the right to access their content?

Facebook recently revised their memorialization policy which states specifically that while other users (such as surviving relatives) don’t have the right directly access a deceased user’s account, they can request the account be locked and remain as a “digital memorial.”

Your business might not run into such issues (depending on its nature), but access and account creation are always important aspects of a terms of use policy.

Disclaimers of Affiliation

Similar to privacy policies, businesses must disclaim any affiliation they may have with financial partners, business associates, or parent companies.  The Digital Media Law Project points out that if a company fails to disclaim affiliation and a user’s content and/or account is used for profit by the affiliated company, it may be held responsible for actions of that affiliate.

The last thing you want is a complicated legal battle all because your users didn’t know or understand why you were affiliated with another company.

Termination of Accounts

You should always state your right to terminate accounts for any reason.  However, you should also explain various other reasons for termination which might have something to do with user activity (such as malicious behavior).  Additionally, you should go into detail about the steps of the termination process and any appeals or reinstatement options available to end users.

Many small businesses, simply Google, “Terms of Use,” and cut and paste in order to create their own terms of service.  This is disastrous because every terms of use policy should be tailored to fit the individual company.

You don’t want to be legally bound by the policies of another company, have terms in your policy that don’t even apply, or confuse users with language that obscures their rights or your obligations—that’s just begging for a hassle.

Instead, you should create your terms of use policy from scratch, keeping in mind that it’s bound by state and federal regulations.  If you don’t understand all of the applicable laws, it’s a good idea to search out qualified legal counsel using a service like UpCounsel in order to get your documentation right the first time.

The last thing you want is to learn what your policies do and do not cover the hard way—when a user or competing company files a lawsuit against you for breaching their rights. Doing the hard work now and outlining your legal protection before you need it is a tremendously effective way minimize the risk of lawsuits, user complaints, and bad PR.

About the author

Matt Faustman

Matt Faustman

Matt is the co-founder and CEO at UpCounsel. Matt believes in the power of online platforms to change antiquated ways of life and founded UpCounsel to make legal services efficiently accessible. He is responsible for our overall vision and growth of the UpCounsel platform. Before founding UpCounsel, Matt practiced as a startup and business attorney.

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