If you are an E-commerce store owner it’s important that you adopt a terms of use agreement (or terms and conditions) that is custom crafted for your situation, and here’s why. Terms of use agreements define the relationship between you and your audience, which in your case is your customer. It sets the tone for the licensing of your intellectual property, for the resolution of disputes, and for the limitation of liability for your sale of products or services.
It’s important that you hire an attorney to draft a custom terms of use agreement that deals specifically with your business model. If you don’t, you can end up with a lot of problems. For example, I recently had a client that had a custom terms of use agreement drafted who was able to resolve his dispute through arbitration instead of federal court or state litigation. If you don’t do that, and use a terms of use agreement that you’ve received from your E-commerce card provider for example, you may find yourself fighting a claim in the state courts of California, which is a lot of times what the terms of use agreements that are given to you by default by these cart providers say.
It’s important that you actually get a custom define terms of use agreement (or terms and conditions) and implement it properly. If you need one contact us and we can help you out.
A comprehensive e-commerce terms and conditions agreement addresses a range of legal issues that arise specifically in online retail transactions. Generic templates—whether provided by your shopping cart platform or copied from a competitor’s website—almost certainly miss legal provisions that are critical to your specific business model, the types of products you sell, and the customers you serve. Here is what a well-drafted e-commerce terms and conditions agreement should include.
A terms and conditions agreement is only enforceable if the user has adequate notice of its terms and has assented to be bound by them. For e-commerce transactions, this typically means implementing a clickwrap agreement—requiring customers to actively check a box or click an “I Agree” button before completing a purchase. Courts have repeatedly held that browsewrap agreements (where the terms are posted on the website but require no affirmative assent) may not be enforceable against customers who had no actual notice of them. Your e-commerce terms and conditions must be implemented in a way that creates an enforceable contract.
A limitation of liability clause caps the amount a customer can recover from your business in the event of a dispute. For e-commerce stores, these clauses typically limit recovery to the price paid for the specific product that gave rise to the claim, and exclude indirect, consequential, incidental, and punitive damages. Courts generally enforce these limitations in commercial transactions, provided they are clearly disclosed and not unconscionable.
One of the most important decisions in drafting an e-commerce terms and conditions agreement is selecting the governing law and the forum for dispute resolution. Without these provisions, a customer in California can potentially sue you in California state court under California law—even if your business is in Michigan and has no presence in California. A well-drafted arbitration clause with a class action waiver can redirect disputes to a single arbitration proceeding in your jurisdiction, dramatically reducing the risk and cost of litigation.
The enforceability of arbitration clauses in consumer contracts is well established under the Federal Arbitration Act, 9 U.S.C. § 1 et seq., and the Supreme Court’s decisions in AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011), and Epic Systems Corp. v. Lewis, 584 U.S. 497 (2018), which upheld class action waivers in arbitration agreements. A properly drafted arbitration clause is one of the most effective tools available to e-commerce businesses for managing litigation risk.
Your e-commerce terms and conditions should clearly state your return, refund, and cancellation policies. Ambiguous or missing refund policies are among the most common sources of customer disputes and chargebacks in e-commerce. Clear policies reduce the risk of chargebacks, which can have significant consequences for your merchant account if they occur with sufficient frequency.
Your e-commerce terms and conditions should assert ownership of all intellectual property on your website—including trademarks, copyrighted content, product photographs, and website design—and prohibit unauthorized reproduction or use. If you allow customers to post reviews, questions, or other content on your website, the terms should include a license from the customer granting your business the right to use that content for your own purposes, along with a representation from the customer that they own the rights to the content they submit.
Your terms and conditions should reference and incorporate your privacy policy, which governs how customer data is collected, used, and shared. Privacy law requirements vary by state and by the nature of the data collected. If you sell to California residents, the California Consumer Privacy Act (CCPA) imposes disclosure and opt-out obligations. If you collect data from children under 13, COPPA applies. Your terms and conditions should reflect these legal obligations and direct users to your privacy policy for the full details.
The most common mistake e-commerce businesses make is using a generic template without tailoring it to their specific situation. Other common mistakes include:
The attorneys at Revision Legal draft custom e-commerce terms and conditions agreements that address the specific legal issues facing your business. Contact us today for a consultation so we can provide you with terms that protect your business and are properly implemented on your platform.
E-commerce law is not static. Privacy regulations change, new consumer protection requirements are enacted, courts issue decisions that affect the enforceability of particular contract provisions, and your business model evolves. A terms and conditions agreement that was adequate when your business launched may be dangerously outdated two years later. Every e-commerce business should review its terms and conditions at least annually and update them when significant legal developments occur or when the business’s products, services, or practices change materially.
When you update your terms, you must also ensure that existing customers have adequate notice of the changes and an opportunity to review the updated terms. Simply posting new terms on your website without notifying existing customers is not always sufficient to bind them to the updated provisions—particularly for material changes. Our attorneys advise e-commerce clients on best practices for implementing and communicating terms of service updates. Contact Revision Legal today for a review of your current e-commerce terms and conditions.
The bottom line for e-commerce businesses: a custom, properly implemented terms and conditions agreement is not an optional formality. It is a foundational legal document that governs every transaction your business conducts online and provides the legal framework for resolving disputes when they arise. Contact the Internet lawyers at Revision Legal today to discuss drafting or updating your e-commerce terms and conditions.
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