Online Terms of Service (TOS) are the contract between a company and its users that set the terms and conditions regarding use of a website or app. There is no magic to the name “Terms of Service.” Companies also list TOS on websites as “Terms of Use,” “Terms and Conditions” or “Terms of Sale.” This piece refers to them all interchangeably. For reasons why a company needs TOS, please see 5 Benefits of Implementing a Good Online Terms of Service.
Posting TOS with provisions that protect a company is only part of the equation. A company must also make sure its TOS are enforceable if challenged in court. Here are four pitfalls under US law that may make some or all of the provisions of TOS unenforceable:
Courts have held that TOS (or certain provisions of TOS) are unenforceable when users can only locate TOS by clicking on a hard-to-find link on a company’s website. Generally, the easier the TOS is to find and view, the better the argument that the user was on notice of the TOS.
To form a binding TOS (like any contract), a company needs to show that users consented to and accepted the TOS. For this reason, a company should consider including language on the account registration and login pages that the TOS govern all website usage and require all users to click a box confirming their agreement before they can register or login.
Many companies prefer to include arbitration clauses in TOS. However, courts have deemed unenforceable TOS that contained an arbitration clause that did not let users opt out of arbitration. Giving users a right to opt out of arbitration — even if limited to a 30-day window to opt out after they sign up, or 30 days after a company posts a modified TOS with an arbitration provision — may save the day.
Courts have held that significant revisions to the TOS require some additional notice of the change to users (such as an email notice) in order for the changes to be enforceable. Besides a separate email, a company could require users to affirmatively acknowledge acceptance of the revised TOS the next time the user logs on. If this requirement is too cumbersome or if not all users register accounts, then at the very least, companies should consider posting a notice for a set period of time on the homepage or login screen (or both) that the TOS have been modified and including a link to the updated TOS.
