Ah, the Terms of Service agreement. The lengthy agreements we all click though without a second thought before using a new app, software, or website. Although most of us do not have 250 hours a year to devote to reading these agreements, they contain important terms that have an impact on your use of the service. As website agreement attorneys, we see this on a daily basis.
Kickstarter, the donation-based crowdfunding platform, recently made an important change to its Terms of Service. Specifically, Kickstarter attempted to address the problem of project creators failing to follow through with the project that backers supported. Kickstarter did not mince words in its new Terms of Service, stating:
The creator is solely responsible for fulfilling the promises made in their project. If they’re unable to satisfy the terms of this agreement, they may be subject to legal action by backers.
Kickstarter also provided alternate ways a creator could fulfill its obligations to its backers, including posting an update as to what work has been done, how the funds were used, and what is preventing them from completing the project as planned.
Kickstarter’s new Terms of Service are effective October 19, 2014 and can be reviewed in total here.
So, Can Backers Now Sue a Project Creator?
Well, backers probably could have sued a project creator that made promises that were not fulfilled before the new Terms of Service. In fact, it has happened before.
But, the new Terms of Service clarify the mutual understanding of the parties. The project creator is under a clear obligation to complete the project and he/she is on notice that legal liability may attach if the project is not completed. However, the lawsuit would still be based on traditional legal grounds of a breach of contract, fraud, or equitable principles.
Does Kickstarter Have any Liability?
According to the Terms of Service, no. Kickstarter disclaims any liability and states it does not oversee the performance of any projects. Kickstarter advises users that their use of the platform is at their own risk.
And that is likely the most useful statement of all. Donating to a Kickstarter project with the promise of receiving an award is a risky proposition. The creator may not live up to expectations and the hassle of a lawsuit may not be worth the limited investment into the project. Study the project, ask questions, and back wisely.
If you are creating a project, however, this should be a clear message: do not make promises you cannot keep. With Kickstarter’s new Terms of Service, starting a project and fraudulently accepting donations may expose creators to real liability.