30 March 2020
Creating a Terms and Conditions agreement is crucially important for practically any business, whatever its turnover, industry, or target market.
In this article, we're going to address some of the most common questions that business owners have about Terms and Conditions.
What are Terms and Conditions?
Terms and Conditions constitute a legal agreement between a business and its customers.
In the broadest possible terms, these are two main things that Terms and Conditions set out:
Any type of business can have Terms and Conditions. Terms and Conditions are frequently used by online businesses offering:
If your business offers goods or services to consumers or business clients, it would almost certainly benefit from creating a Terms and Conditions agreement.
No, Terms and Conditions are not a legal requirement. There's no law stating that a business must create Terms and Conditions: they are optional.
Terms and Conditions are important for many reasons, including:
"Terms and Conditions" and "Terms of Service" essentially mean the same thing. There's no meaningful difference between these two terms.
For more information, see our article Privacy Policies vs. Terms & Conditions.
Yes, Terms and Conditions are legally binding. Or at least, they can be legally binding if:
Terms and Conditions are a business agreement and can be a type of contract, so long as they meet the elements of a contract under law.
Some of the key elements of a contract include:
The element of "consideration" might not always seem relevant to Terms and Conditions, as many businesses provide free software or accounts. However, sometimes the customer will be offering something of benefit in exchange, even if they aren't paying for a service.
Terms and Conditions don't have to be "signed" in order to be legally binding. However, there has to be some evidence that the customer has accepted the Terms and Conditions.
If you display your Terms and Conditions on your website, app, or software, you should obtain acceptance of your Terms and Conditions via a "clickwrap" prompt.
In order for your Terms and Conditions to be legally binding on another person, that person must accept (agree to) them.
Obtaining acceptance of your Terms and Conditions is difficult if they are designed to cover the use of a website. This is typically done via two methods known as browsewrap and clickwrap.
Some businesses attempt to do this using "browsewrap." Browsewrap involves notifying the user that they accept your Terms and Conditions by browsing your website.
Here's an example of a browsewrap prompt from tourism website Visit Bath:
It might be unreasonable to claim that every person who has used Visit Bath's website is bound by the company's Terms and Condition, whether they had actually read the agreement or not.
A better way to obtain acceptance is by using a "clickwrap" prompt. This requires a person to confirm that they accept your Terms and Conditions before they use your service.
There are several circumstances in which it is appropriate to use a clickwrap prompt. For example, you can use clickwrap when a user of your service:
Here's an example from Facebook's account setup process:
And here's another example from Amazon's order process:
It is also possible to use a clickwrap prompt to prohibit visitors from using your website unless they agree to your Terms and Conditions. This would obviously drive traffic away from your site. Here's how Stewart Investors does this:
Whether you use browsewrap or clickwrap, make sure you take all reasonable steps to draw the user's attention to your Terms and Conditions.
To make it more likely that your Terms and Conditions will be enforced, you should make sure that the user can understand what they're agreeing to.
There's really no reason for Terms and Conditions to be written entirely in "legalese," or to be full of unnecessarily long and complex clauses.
When writing your Terms and Conditions:
This can be difficult, and some sections of your Terms and Conditions (such as any "limitation of liability" clause) are likely to include some legal language.
You can consider providing a short-form summary of your Terms and Conditions that users can read alongside the full text. Just make sure your users know that this doesn't replace your main Terms and Conditions.
Here's how Call-Em-All does this:
You can include pretty much whatever you want in your Terms and Conditions agreement. However, there are certain clauses that the courts won't enforce because they are considered to be "unfair" or "unconscionable."
Some Terms and Conditions agreements contain an "exclusion of liability" clause. Effectively, an exclusion clause states that the customer cannot sue the company for any amount, no matter what the company has done. Exclusion clauses are often considered unfair.
An alternative is to include a "limitation of liability" clause. Effectively, a limitation clause states that the customer can only sue the company for a limited amount.
Here's an example of a limitation of liability clause from Waffle:
Different legal jurisdictions have different laws or approaches, and what's fair in one country might be unfair in another. However, generally speaking, it isn't possible to assert that a person has waived their right to legal protection due to a clause in your Terms and Conditions.
Here are some examples:
The content of your Terms and Conditions agreement will depend on the nature of your business.
Here are some common sections that are included in many Terms and Conditions agreements:
Yes, you can change your Terms and Conditions if you need to. However, you should make sure you take reasonable steps to inform your customers of any changes you make. This gives them the chance to withdraw from the agreement if they wish to do so.
For example, Quora emailed its registered users with advance notice of a change in its terms:
Whenever you update your Terms and Conditions, make a note at the top of the agreement and provide a new effective date. Here's an example from Kik:
You should also include a clause in your Terms and Conditions which gives you the right to make changes, and informs your users of any notice period you provide.
Here's how Facebook does this:
Our Terms and Conditions Generator makes it easy to create a Terms and Conditions agreement for your business. Just follow these steps:
Enter your email address where you'd like your agreement sent and click "Generate."
You'll be able to instantly access and download your new agreement.
This article is not a substitute for professional legal advice. This article does not create an attorney-client relationship, nor is it a solicitation to offer legal advice.