If you operate a forum community, social networking website, or e-commerce store, your website terms and conditions could be your best defense against a number of legal pitfalls. A well-drafted website terms and conditions agreement will allow you to control the relationship between you and your users and to ensure that your intellectual property and proprietary rights are protected.
A website terms and conditions agreement is a legal contract that outlines the relationship between your website or e-commerce store and the end user. It controls eligibility for participation in your website, and it sets the terms on which a member account may be created and maintained. Most importantly, it limits your liability for various legal issues, such as the posting of user generated content that may infringe upon the rights of third parties or the violation of the rights of privacy or publicity of other website users.
Finally, a website terms and conditions agreement may also protect your website from theft. Our firm has seen a marked increase in information theft, whether through data scraping or unauthorized access attempts. A well-drafted terms and conditions agreement will increase the likelihood that you will be able to prosecute third parties for these sorts of actions through a breach of contract or other action.
Terms and conditions are only useful if they are enforceable, and courts have developed a clear distinction between two methods of presenting online agreements: browsewrap and clickwrap.
A browsewrap agreement is one where the website displays a notice that use of the site constitutes acceptance of the terms, but requires no affirmative action from the user beyond simply visiting the site. Courts have been inconsistent in enforcing browsewrap agreements. The critical factor is whether the user had actual or constructive notice of the terms — whether the link to the terms was prominently displayed, whether the user was made aware of the terms before using the site’s services, and whether the site’s conduct was consistent with the terms it claims to enforce.
A clickwrap agreement requires the user to take an affirmative step — typically clicking an “I Agree” button — before proceeding. Courts have consistently enforced clickwrap agreements when the agreement’s terms were available for review before acceptance and the user’s act of clicking constituted unambiguous assent. For any website where enforceable terms are critical to the business, clickwrap is the preferred approach.
The landmark cases of Specht v. Netscape Communications Corp., 306 F.3d 17 (2d Cir. 2002) and Nguyen v. Barnes & Noble Inc., 763 F.3d 1171 (9th Cir. 2014), established standards for when online terms will and will not be enforceable. Both cases turned on the adequacy of notice — whether the user had a reasonable opportunity to read the terms before they became bound by them. Your website’s terms and conditions are only as valuable as your method of presenting them.
Your terms and conditions should clearly state that you own the intellectual property on your site — your content, code, design, trademarks, and any other proprietary material. For sites that allow user-generated content, the terms must address the license you receive to display and use that content. Without a clear license grant from users, you may lack the legal right to display content your users post on your platform.
The license grant should specify its scope: Is it exclusive or non-exclusive? Worldwide or limited to specific territories? Does it survive account termination? Does it allow you to sublicense the content to third parties? These are business decisions that must be translated into precise legal language to be enforceable.
A robust limitation of liability clause caps the damages a user can recover from you in the event of a dispute. Courts generally enforce these limitations when they are prominently displayed, clearly written, and not unconscionable. Most commercial terms and conditions limit liability to the amount the user paid for the service during a specified period — commonly the prior twelve months — and disclaim all consequential, incidental, and punitive damages.
Warranty disclaimers under the Uniform Commercial Code and state consumer protection laws must be drafted carefully to be enforceable. Your terms should disclaim implied warranties of merchantability and fitness for a particular purpose to the extent permitted by applicable law.
Your terms should specify the state law that governs the agreement and the forum where disputes will be resolved. Arbitration clauses that waive class action rights have been heavily litigated, with the Supreme Court consistently upholding them under the Federal Arbitration Act in cases like AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011), and Epic Systems Corp. v. Lewis, 584 U.S. 497 (2018). If your business model involves high-volume consumer transactions, a well-drafted arbitration clause is one of the most valuable provisions in your terms.
Clearly defining prohibited conduct gives you the legal and contractual basis to terminate user accounts, pursue civil claims, and in appropriate cases, support criminal referrals under the Computer Fraud and Abuse Act. Prohibited conduct provisions should cover unauthorized access, data scraping, reverse engineering, spamming, harassment of other users, and any other conduct that poses risk to your platform or its users.
If your website hosts user-generated content, your terms and conditions should address your DMCA safe harbor compliance. Under 17 U.S.C. § 512, service providers that host user content are protected from copyright infringement liability if they implement a notice-and-takedown process, designate an agent to receive copyright infringement notices, and promptly remove infringing content upon receiving valid notices. Failing to maintain DMCA safe harbor compliance exposes user-generated content platforms to potentially ruinous copyright liability.
Generic terms and conditions templates downloaded from the internet are inadequate for any business that faces real legal risk from its online operations. Revision Legal’s internet attorneys draft custom terms and conditions agreements tailored to your specific business model, content, and risk profile. Contact us today to discuss your website’s legal needs.
A website terms and conditions agreement is not a static document. Your business evolves, your data practices change, new legal requirements emerge, and your understanding of your users and their expectations develops over time. Your terms must evolve with your business.
Any time you make a material change to your terms — changing how user data is used, modifying your dispute resolution procedure, adding or removing services, or changing your fee structure — you must notify existing users of the change. Courts have found that unilateral, retroactive changes to online terms are unenforceable if users were not given adequate notice and an opportunity to accept the new terms or close their accounts. Your terms should include a mechanism for notifying users of changes (typically email notice or prominent display at login) and should specify that continued use of the site after notice constitutes acceptance of the updated terms.
Revision Legal recommends that clients conduct an annual review of their website terms and conditions with legal counsel to ensure the terms remain accurate, enforceable, and compliant with current law. The cost of this annual review is trivial compared to the cost of defending a claim that your terms are unenforceable.
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