If you own or operate an online marketplace, it's important that you post a Terms and Conditions agreement on your marketplace website. Your Terms and Conditions is where you'll let marketplace users know about the rules, restrictions, warranty disclaimers and other important aspects to using your website.
Your marketplace users should be required to agree to your Terms before using your site.
What's an Online Marketplace?
An online marketplace (or online e-commerce marketplace) is a type of e-commerce site where various third party sellers and providers can transact in one streamlined place. Amazon is a good example of an online marketplace.
Online marketplaces are growing in popularity.
In a period of 12 months, Amazon and Wal-Mart recorded roughly the same percentage in growth of their online marketplaces, declaring $82.7 billion in sales and $12.5 billion, respectively.
A study of online shopper behaviors revealed that 96 percent of Americans are aware that third parties sell products on marketplaces. 85 percent of these shoppers have bought things at an online marketplace, and 35 percent check a marketplace first before other channels.
Why have a T&C for your marketplace?
The rules and guidelines you establish in your T&C give you control of your website and protect you from liability. Most T&C agreements protect your right to stop any abuse of your website or even close accounts for any users who violate your T&C.
Having a T&C for your marketplace can help do the following:
- Protect you from liability
- Give you rights to control your website
- Protect your content and intellectual property
- Set forth your payment/refund rules
- Allow you to decide who resolves your disputes
The functions of your T&C is not limited to the list above.
Displaying your T&C on your marketplace website
Most marketplaces have an easy-to-locate link to their T&C, usually in the website footer.
Here's an example from Ebay:
You can also add links to your "Legal" or "About" pages or menus. This is a good option for mobile apps that don't have footers.
Getting Users to Agree to Your T&C
Most sites use either the Clickwrap method or Browsewrap method to get users to agree to their T&C's.
With Clickwrap, users must actively click an "I Agree" (or equivalent) box or button before they can use your site. This is a way of showing clear and undoubted user agreement.
Here's how WeTransfer does this:
With Browsewrap, agreement links are displayed in a footer or similarly. However, they don't require an active acceptance from the user as in the example above. Browsewrap assumes user's acceptance or opt in is assumed by virtue of their using your site. A paragraph somewhere in the legal agreement will say something along the lines of, "By using this website, you're agreeing to be bound by our Terms."
Here's an example of a classic Browsewrap clause in a T&C:
Clickwrap is the preferred method for getting consent and agreement.
Key Components of T&C for Marketplaces
Below are a few common clauses you should add to your marketplace T&C agreement.
1. Prohibited Uses of your Marketplace
Let your users know what they aren't allowed to do with your service. This should be very detailed and specific.
Here's how eBay includes prohibited uses in its User Agreement:
2. Governing or Applicable Law
The Applicable Law clause in your T&C provides information about which governing body is responsible for settling any disputes, and what law any disputes will be decided under.
This can be very important with the more global your business is. If you don't set your governing law and your U.S.-based business is sued by a shopper in Ireland, you don't want to risk Irish law applying to your case.
eBay lets users know that arbitration is their only method for resolving a conflict and that the laws of the state of Utah will apply.
Upwork's T&C states that its terms are governed by the state of Delaware:
3. Dispute Resolution
You also might choose to use dispute resolution instead of allowing lawsuits. This method is faster than a lawsuit, gives both parties a fair hearing and the satisfaction rate is usually high.
Include a Dispute Resolution clause in your T&C if you choose to go this route to resolve legal issues.
Here's how eBay does it:
4. Payments and Billing
If your website involves subscription fees or payment for goods, services or memberships, you must address all of this in your T&C. Omitting your policies for payment-related information could lead to issues such as the inability to collect.
Or, in the case of third party platforms that connect buyers and sellers in which you personally aren't selling any goods or services, your T&C should point that out in order to avoid entangling you in any payment disputes.
Alibaba is a marketplace that allows sellers to market their products and buyers to purchase them, though Alibaba itself is not selling any goods and services. Its T&C explicitly states they are a third party, representing neither buyers or sellers, and providing only a platform to connect buyers and sellers.
5. Fees you Collect
Because you're operating as almost a middleman of sorts with your marketplace, you're likely collecting fees from at least the sellers. It's wise to include a clause that discloses this and details the fees so that your users won't be surprised or upset and try to dispute any fees when you attempt to collect them.
Here's how eBay covers its fees in its T&C:
6. Copyright Infringement
When you operate a marketplace, you'll have a number of different brands and companies involved on your website, each with its own unique copyright protection. That's a lot of opportunity for infringers to cause issues.
In the United States, the Digital Millennium Copyright Act, DMCA, makes it possible to hold businesses accountable for Copyright Infringement even if they don't own the content. To protect your interests, it is recommended that a Copyright Infringement policy include a method for reporting violations, as well as clearly stating your rules for obeying copyright laws.
Here's how Amazon handles copyright matters:
eBay's Copyright Infringement clause specifically mentions the DMCA and also provides a link to where users can report a potential copyright infringement.
Amazon allows users to submit claims both through an online form and in writing. They link the form to this clause within their Conditions of Use, as well as provide all the details you'll need to include if you're going the old-fashioned pen and paper way.
7. Disclaimer of Warranties/Limitation of Liability
Sometimes users might encounter problems with your website. A seller may lose business because of some unexpected downtime. A buyer may catch a virus through one of your third party links.
A Disclaimer of Warranties and a Limitation of Liability can protect you from liability in these circumstances and others.
You will want to let your users know that your service is provided "as is" and that you will not be held liable for damages as a result of inaccurate content, financial damages caused by service downtime, malware, etc.
Here's an example from Amazon:
One of the key methods you have to protect your marketplace is to be able to block access to abusive users. Because of this, you should always include a Termination clause in your T&C.
Here's a clause from Amazon that reserves Amazon's right to refuse service, terminate accounts and cancel orders at its sole discretion:
You can also let users know how to go about terminating their own accounts and what happens upon termination by either party.
Here's an example from Upwork's user Agreement:
9. State Your Position as a Third Party
In a marketplace, users interact with each other over a platform you have provided. As the owner of a marketplace site, you are, therefore, a third party. A Third Party clause will spell this out, thus, protecting your rights and limiting your liabilities in any disputes between your users.
Upwork does this well:
Thoroughly assessing the unique nature of your marketplace will help you create a solid T&C agreement that protects you and limits your liability while also ensuring your marketplace is a pleasant place to do business.