Terms of Service Agreements for Crowdfunding Platforms

Terms of Service (“TOS”), sometimes referred to as terms of use agreements, are the ubiquitous footer link that typically contains a large block of text, often ignored by users (and sometimes website operators). However, the importance of these agreements should not be overlooked for any website. And terms of service agreements for crowdfunding platforms should address a number of industry specific points.

Create a Binding Contract

The TOS is designed to form a contract between the website and its user. And the first thing the TOS should accomplish is laying out the terms to create that contract. For any contract to be formed, both parties must consent to be bound by the contract’s terms and conditions. A TOS is no different.

The TOS identifies the method in which the user assent to the TOS’s terms, which is generally accomplished by simply using the site (called a browsewrap agreement) or by requiring the user to affirmatively click on an “I Agree” button (called a clickwrap agreement). Some sites may use a combination of the two, but only require an affirmative action when the user intends to make a purchase, donation, or otherwise bind themselves to an enforceable action.

Address Ownership of User Generated Content

Crowdfunding platforms should carefully consider the rules, regulations, and disclaimers they wish to include regarding the creation and submission of user generated content. Examples include:

• Addressing the ownership of intellectual property submitted by the user. Many  include an express license granting the website permission to use user generated content for its own purposes;
• Having users confirm their intellectual property rights to the submitted content, and;
• Requiring users to affirm the truthfulness of their statements and intended goals for the project.

The goal is to become a trusted source for both projects and contributors alike. The TOS provides platforms or portals the opportunity to place some responsibility on the project creators while gaining the option to use their projects as advertisements for the platform itself.

Clarify Your Funding and Refunding Policy

There should be no confusion regarding the funding triggers of your projects. Will you require the funding goal to be met to charge credit cards? Do you release any funds collected regardless of satisfying the funding goal? Are contributors entitled to a refund if the funding goal is met? How is your percentage determined and when are you paid?

Many crowdfunding platforms choose to offer a number of project plans with different funding triggers. Flexibility is an asset for potential projects, but your TOS must clearly identify the terms and conditions of the project. After all, this is how you get paid.

Include the Necessary Waivers, Disclaimers, and Pay Attention to the Boilerplate

Waivers and disclaimers are an integral aspect of all TOS agreements. Care should be taken to address your right to modify the TOS, limit the acceptable uses of the site, and select the proper forum (a specific court or arbitration in a specific location) to resolve any disputes. While many of these provisions are standard, they should be tailored to your specific preferences.

In the crowdfunding space, the TOS should also address what steps, if any,  you will take to ensure the listed project is authentic. For many, it is advisable to specifically disclaim that your platform cannot guarantee the project creators will use the raised funds in a specific manner or that the project creators will provide the promised rewards for supporting a project.

Conclusion

Crowdfunding platforms and portals are embarking a new world. As with the old world, problems will arise. And when they do, your TOS will be left defending your position. This post describes some, but not all, of the the provisions that should be included in any crowdfunding platform or portal’s TOS.

Take the time to obtain a TOS you are satisfied with and invest 30 minutes to review it every so often. This will build a solid foundation for your business to stand on.