If you operate a web-based business, chances are you have a “Terms of Use” or “Terms of Service” (TOU) document posted somewhere on your website – if you do not, you should get one right away. Depending on the nature of your business, you might even require users to “sign” the document electronically. The enforceability of these of “contracts” is rapidly changing in the digital age, but there are a few important considerations that will help ensure your agreement is enforceable.
Generally, the main thing that courts consider when determining whether a TOU is valid and enforceable is evidence that the user actually “assented” to abide by the terms of the agreement. That is, you must show that the user read and understood the terms and voluntarily agreed to abide by them. Additionally, “conspicuous” or obvious notice of the agreement’s existence prior to the user accessing your product or service is very important.
Here are a few guidelines to ensure that your agreement is enforceable if ever called in to question in court.
- The more steps a user must go through to “assent,” the more likely the TOU will be considered enforceable. However, it is important to balance business concerns with the need to protect the interests of the business. So, asking for the user to “initial” agreement to terms is completely reasonable, whereas insisting on an initial at every page followed by requiring the user to provide a written statement accepting the terms might be excessive. Terms of Use that are available only through a tiny link at the bottom of a page are unlikely to be enforceable without other evidence of “reasonable manifestation of assent.”
- Match your agreement to your business. The value of each sale or service should be considered in light of how big of an effect a breach of the agreement would have on your business. For example, a simple “I agree” may be sufficient assent by a consumer, but if you are dealing with another business, it might be worthwhile to require more evidence of “assent,” such as an initial on each page or requiring the user to write out the full name of the business after reviewing the document.
- Terms of use should be simple to read and understand. The more legal-ease your agreement contains, the less likely people are to read it. The likelihood that an agreement was actually read by the user may factor into a court’s determination of whether it is enforceable. Further, if the agreement goes on for pages, people will be more likely to simply “click through” and ignore key provisions. An attorney can draft a simple one or two page document to contain the most important terms that you need.
- Keep track of updates to your TOU. If you update your TOU, make sure you note the date of the change and what changes were made, so that you know what version was in place at any given time. If you are changing key terms, keep in mind that a large prior customer base may not be subject to them, so you should advise them of the update and, of course, require a new consent.
- Consider re-confirmation of assent at various times. It may be wise to consider sending out the TOU to major customers at regular intervals and requiring them to acknowledge ongoing consent of the terms. While this seems burdensome, it can protect your business in the long run.
- Traditional contracts concepts still apply. Even if your TOU follows all of the foregoing guidelines, if it violates traditional rules of contract it may still be unenforceable. Again, the importance of having your attorney draft the TOU is key.
- Users should be given the opportunity to reject the agreement. This seems obvious, but if the users’ only option is to select “I agree,” this will weigh against your argument that the user voluntarily consented to the terms.
This post does not constitute legal advice and is intended to act only as a guideline on the foregoing topic. You should always consult an attorney regarding any legal issue that might affect your rights, and you should research your attorney’s background and credentials before hiring them.
