What is a Terms of Service agreement? Benefits
While some may answer the question of what is a Terms of Service agreement with “legal jargon”, the truth is that a Terms of Service agreement is a statement that can help protect your business and website. Having a Terms of Service agreement will help you:
- Answer commonly asked customer questions about purchases (e.g. do you offer refunds or charge a cancellation fee?) and thus help move them along the path to making a purchase;
- Lessen your liability by spelling out what warranty, if any, you offer on goods or services sold on your website, or on the website itself;
- Protect your intellectual property such as images or text on your website (e.g. your company’s logo) by making it clear that such items belong to you. It can also help protect you from copyright infringement lawsuits in certain cases;
- Save costs by spelling out where dispute resolution will take place;
- Lessen the amount of damages that you may be be responsible for in case of a dispute;
- Maintain control over your website and its users.
As you can see, there are numerous benefits to having a Terms of Service that really boil down to one main benefit – protecting your business.
Who needs a Terms of Service?
Since a Terms of Service helps protect businesses, it is recommended that every website has one. If your business is based in Australia or the United Kingdom and you sell goods or services to consumers through your website, the consumer protection laws in your country may require you to make very specific disclosures about those sales (e.g. your warranty and refunds policy). These disclosures are usually made in the Terms of Service and can thus help you comply with those laws and avoid costly violations. In addition, if you are offering a subscription service to residents of California, Section 17602 of the California Business and Professions Code may require you to have a Terms of Service that includes specific disclosures about such subscriptions. Lastly, if you are selling goods or services internationally through your website, you should also have a Terms of Service that expressly disclaims the application of the United Nations Convention on Contracts for the Sale of International Goods, the Uniform Commercial Code, and INCOTERMS. If you do not expressly disclaim these laws and conventions, they will automatically apply to your sales, leaving your business at a great disadvantage on the terms of such sales.
Thus, whether you want to protect your business, have links to websites operated by third parties, want to protect yourself against copyright infringement, or have an eCommerce website, virtually any business can benefit from having a Terms of Service.
Contents of Terms of Service
When asking what is a Terms of Service agreement, you undoubtedly also want to know what a Terms of Service should contain. While the exact contents of your Terms of Service will vary based on what laws apply to you, whether consumers can make purchases on your website, whether you offer subscriptions, and your business practices, the following disclosures are often found in a comprehensive Terms of Service:
- Your company name and contact details;
- Who the Terms of Service applies to;
- If consumers can make a purchase on your website:
- What you offer for sale;
- The prices of those goods or services or where the price can be found;
- Whether those prices include taxes and other fees;
- How customers can make a purchase;
- What third party payment processor is used, if any; and
- What payment methods are accepted.
- Your cancellation policy, which should state whether consumers can cancel their order. If they can, your cancellation policy should include:
- When a customer can cancel their order;
- How a customer can cancel their order;
- Whether you will charge a cancellation fee;
- Whether you will issue a refund to a customer that cancels their order.
- Your refunds policy, including whether you offer refunds to customers. If you do offer refunds, your refund policy should disclose:
- Under what circumstances customers qualify for a refund;
- When a customer qualifies for a refund;
- If you sell goods, whether the customer must ship the goods back to you and who will be responsible for such shipping costs.
- If you sell goods, your shipping policy, including the cost of shipping and the timing of the shipping, or when customers will receive that information (e.g. shipping information will be provided to the customer upon placing an order);
- If you take advance payments or deposits, you will need to disclose whether the customer will receive a refund of such payments if their purchase is cancelled;
- What warranties, if any, you offer on goods or services purchased on your website;
- What remedies, if any, are provided to customers that purchase goods or services on your website;
- Whether you offer subscriptions and, if you do, the following disclosures:
- The initial term of the subscription;
- Whether you offer a free trial and the length of that trial;
- Whether a minimum purchase is required;
- How frequently the subscriptions automatically renew;
- Whether consumers can revoke their subscription and how to do so.
- Whether consumers can create an account on your website and, if they can, the rules of using that account;
- Whether consumers can make comments or upload content onto your website. If they can, the types of content and comments that are prohibited and a clause that allows you to display comments and content on your website;
- Prohibited uses of the website (e.g. no hacking, copying of the text, or using the information on the website to spam others);
- A clause that allows you to correct any errors on the website, such as pricing errors;
- A clause that limits your liability and the amount of damages that you may be responsible for in case of a dispute concerning the website or any of the information presented on the website;
- A clause that limits your liability in case a user clicks on a link to a third party website from your website and is then injured by that third party website;
- A clause that makes it clear that the website and the content of the website are your intellectual property;
- A clause that provides the disclosures necessary to achieve the safe harbor of the Digital Millennium Copyright Act, which may protect you from copyright infringement lawsuits in certain cases;
- A link to an industry or trade code of conduct that you subscribe to, if any;
- A clause ensuring that all disputes regarding the website will be resolved in a forum that is most convenient to you;
- How you will notify users of changes to your Terms of Service;
- Where individuals can contact you if they have any questions about your Terms of Service.
As you can see, a Terms of Service is a document that can contain all or a portion of the above clauses that can protect your business from various liabilities. Now that you have the answer to the question of what is a Terms of Service agreement, make sure that you check out Termageddon’s Terms of Service generator to protect your business with a comprehensive Terms of Service.
Donata is the Co-founder and President of Termageddon, an auto-updating generator of website and application policies. She is a licensed attorney and Certified Information Privacy Professional. She also serves as the Vice-Chair of the American Bar Association’s ePrivacy Committee and the Chair of the Chicago Chapter of the International Association of Privacy Professionals. In her free time, Donata enjoys beekeeping, hunting for morel mushrooms, and walks with her husband and two dogs.