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Drafting Effective Online Terms and Conditions

In today’s global society, business is increasingly being conducted over the Internet. Accordingly, any company that operates an online website should have a properly drafted set of Terms and Conditions (sometimes referred to as the “Terms of Service” or “Terms of Use”) that are easily accessible to a website user. The Terms and Conditions outline the rules that online visitors must agree to in order to use the website and are what create a legally binding contract/agreement between the website user and the website operator.

Although the law regarding the enforceability of such online contracts continues to evolve, website operators should take two important – albeit often overlooked – steps to best ensure the agreement established by the Terms and Conditions is effective and enforceable.

The first is to include all the necessary terms and provisions. The second is to make sure the user adequately assents to them.

What to Include

The specific language and information set forth in the Terms and Conditions will vary depending on the content or services offered on a particular company’s website; however, there are several important terms and provisions that should be included in every company’s Terms and Conditions, including:

  1. Acceptance of Terms: One of the factors courts consider when analyzing whether a particular set of Terms and Conditions is enforceable is whether or not the user accepted and assented to it. How a user may adequately asset to a website’s Terms and Conditions is explained in more detail below. Nevertheless, a company’s online Terms and Conditions should contain a clear and unambiguous statement providing that users acknowledge and agree that their access to and use of the company’s website is conditioned upon the users’ acceptance of and compliance with the Terms and Conditions.
  1. Description of a Website’s Content/Services/Offerings: The Terms and Conditions should set out exactly what content, products or services the website operator is offering and any necessary preconditions to accessing any online content or using or purchasing any of the company’s services or products. This could include any restrictions, such as a minimum age or location requirement.
  1. Payment Terms: If the website allows for any monetary transactions, there should be a description of how the funds are collected and handled. There are a number of privacy and e-commerce laws and regulations that govern how a company may handle any user funds.
  1. Restrictions on User Conduct: The Terms and Conditions should include a promise by the user not to use the website for any purpose that is unlawful or specifically prohibited elsewhere in the Terms and Conditions, such as using the provided online services for abuse or harassment purposes. The Terms and Conditions should also specifically reserve the company’s right to terminate or restrict a user’s access to the website should the user violate the online terms.
  1. Intellectual Property Rights: It is important to state ownership, whether by the website operator or a third-party, over all logos, graphics, designs, content, trademarks, trade dress, copyrights, or other intellectual property appearing on the website and in any services offered therein. There should also be language in accordance with the Digital Millennium Copyright Act of 1998, helping to insulate the website operator from potential copyright infringement liability
  1. Disclaimers and Limitation on Liability: In order to protect a website operator from liability for incidental or special damages that arise out of the users’ access to the website or its services, it must be stated in clear and conspicuous language the operator is not to be held liable for those types of damages. Depending on the nature and purpose of the website, other, more specific warranties and disclaimers may be available that can potentially limit a company’s liability under special circumstances.
  1. Dispute Resolution Section: In the event a dispute does arise, it is in a company’s best interest to set out how those disputes will be handled before they happen, including dictating the governing law and jurisdiction or including the necessary terms for a binding arbitration clause or class action waiver.
  1. Waiver of Terms: There may be certain instances in which the website operator fails to enforce a certain provision included in the Terms and Conditions. It is important to state that such failure does not waive the company’s right to enforce that provision in the future.

User Assent to Terms and Conditions

Even if a company’s Terms and Conditions are perfectly drafted, the only way to enforce those terms is if it can demonstrate the user actually agreed to them. Many websites employ “browsewrap” agreements, in which hyperlinked Terms and Conditions are found on a separate webpage that the user does not have to actually visit to continue using the website or its services. With some exceptions, courts have generally declined to enforce such browsewrap agreements, because the fundamental element of assent is lacking. In analyzing browsewrap agreements, courts will look at whether a particular user had reasonable notice and an opportunity to review the Terms and Conditions – a fact-intensive investigation that does not frequently weight in favor of a company deploying an online browsewrap agreement.

Conversely, courts have routinely uphelp “clickwrap” or “scrollwrap” agreements, in which a user is required to take some type of affirmative step to accept the Terms and Conditions.

A “clickwrap” agreement requires a user to affirmatively acknowledge agreement to a website’s Terms and Conditions. This often takes the form of a user  clicking an “I Agree” checkbox, located below a scrolling text box containing the Terms and Conditions, before the user is allowed to proceed. Similarly, in order to manifest assent to a scrollwrap agreement, a user must scroll through the entire Terms and Conditions. Once a user has scrolled, and presumably read the entire online agreement, he or she must click on a button that indicates his or her acceptance of the Terms.

Other Considerations

There are many other steps website operators can take to further strengthen the enforceability of their Terms and Conditions. Some of the best practices include:

  • Providing the Terms and Conditions in a conspicuous manner (i.e., normal size and readable font, reasonable length);
  • Providing the user a clear opportunity to review the Terms and Conditions (i.e., using a scroll box, allowing the user to print or save a copy of them);
  • Ensuring that the Terms and Conditions remain easily accessible to a user even after he or she assents to them; and
  • Not including any unilateral amendment clauses or modifying the Terms and Conditions without first obtaining new consent from the users.

Conclusion

Although not foolproof, properly drafted Terms and Conditions help shield business owners from legal liability, as well as protect their valuable intellectual property and other rights. Both website owners and users also stand to benefit from effective Terms and Conditions, as owners have more certainty in knowing that their online agreements will be upheld, and users have a greater understanding of the terms dictating their use of the website or any commercial transaction.

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