legality of terms of service

Terms of Service: Legally binding? Yes, if done properly

In Blog, Contracts 101, Online Business Necessities by Shannon Montgomery

There seems to be quite a bit of confusion on the internet as it pertains to the terms of service most websites have you click before using the site. Or, as it is better known that pesky little “I agree” button.

Are they legally enforceable? Is it a binding contract? Do I have to actually do what the terms say? Rather than go through the background on the issue, I want to review how a terms of service is enforceable.

If your business has an internet presence whatsoever, you likely need a terms of service on your website.

They are needed so people know what they can and cannot do with your products or information, what refund policies are if they buy things from you, if you run a subscription based business the details for that can go in the terms of service, what actions they can take for recourse, and so so much more.

Let’s start with the basics. Contract formation.

Contract Formation

For a contract to be enforceable there must be an offer, acceptance, and consideration, all of which must include the mutual assent to be bound by that contract or agreement.

How does this apply to the terms of service? The argument is that consumer’s aren’t necessarily agreeing to anything and definitely don’t assent to being bound by the terms the website has written out.

Mutual Assent

The courts have been somewhat clear on how a website can present the terms of service in a way that shows the intent to be bound by the person clicking “I agree” or something along those lines.

1. Click Wrap: A click wrap terms of service is generally when a website makes it an initial condition to engaging with that website. A user must affirmatively agree to the terms that are posted on the site, or linked somehow conspicuously for the user to see, but not directly written on the “I agree” button. The idea is that the user is told, hey go check these out and agree to them or else don’t use our website. This type of presentation has generally been upheld as proving mutual assent by the user. As they stand, the user can’t even access the site if they don’t agree thus its on the user to actually read them and make themselves knowledgeable on what they are agreeing to. The court doesn’t care if you read it, that is your own fault, just that you had the chance to. And with a click-wrap type scenario you likely could have.

2. Browsewrap: An alternative to click-wrap is known as browsewrap. An example of this would ben a hyperlink at the bottom of a website indicating that the terms of service where hiding somewhere down there. But, the user is never expressly asked to agree or to even view the terms. Courts tend to disfavor this type unless there is clear evidence that the user consented to the terms. 

3. Scroll-Wrap: This is when the website gives you the terms written out and forces you to scroll to the bottom and then press the great “I agree” button. When the terms are presented in this manner courts have a hard time not holding the user to what the terms are, as you had to scroll through the whole thing! Again, they don’t care if you don’t read them, just that you had the chance to and that you agree to the terms laid out in front of you.

4. Sign In Wrap: These are a little more questionable lately. However, courts have held the sign in agreement to be a valid assent by an end user. Essentially, the website offers a sign up box for use of the site paired with a hyperlink to the terms of service. The signing up for the site, and agreeing to the terms are all done with one click. Again, the site makes it known that you are agreeing to terms and you have the option to browse them or just sign up for that awesome mailing list so you can receive that free e-book at your own peril.

So What Difference Does it Make?

I guess it depends on your perspective. But if you’re the entrepreneur, website owner it is highly likely that you want your terms of service to be legally binding. Often times these terms contain important information like how someone can get a refund from you, or that they must arbitrate an issue rather than take you to court. As the website owner, that is the kind of thing you want your customers to be bound to if they agreed to the terms and used your site.

I suggest that a) the content of your terms of service needs to be drafted expertly and tailored to your business.

Although this is not about the content of the terms, there are clauses and language that may allow a user out of the agreement unless drafted properly. Hire an attorney to draft your terms of service for you. Do not just copy someone else’s off the internet. If you need help, I know a great firm.

Also, b) use the best format for your site that is going to present the terms of service clearly, conspicuously and leave no room for questions as to whether or not the person agreeing to use the site, new that there were terms attached. I suggest the scroll and wrap coupled with a nice “I agree” button. I might also consider linking to the terms of service from another area from the website. Ensure that link stands out from the rest of the site. Use different colors and fonts so that there is no way a user could miss it.

Amending the Terms of Service

The final area of contention I am going to address here is amending your terms of service. Let’s be honest here, you will not always want the same return policy, or maybe you don’t feel like arbitrating disagreements. Whatever the case may be there are a few best practices for amending the terms and letting your customers know.

Courts do not like if the terms allow for the unilateral right to change. They should be written with the process you as a business will take if you chose to amend them. If you are making changes to a non subscription based site, make any changes clearly known to existing users when they log back in or place another order on your site. It is in your best interest to take the users directly to the terms, and point out clearly what changes were made. Another great way to let users known you are making changes is to provide 30 days notice via email that the terms are going to change, and allow the user to opt out of use of your site if they no longer like the terms. Be careful if email is your only notification as some spam blockers may not allow users to see, therefore they would not be held liable under the new terms of service.

Overall, when your terms are drafted clearly explain how you will give notice that the terms are changing, and stick to that policy. Ensure that each person using the site knows of the changes in one of the ways described above, or if you have an even better idea try that out. They just need to know changes were made!

Keep Great Records

In the unfortunate event that you must litigate over your sites terms of service keeping proper records is going to help tremendously. Keep all records of people who have visited the site, agreed to your terms, when they agreed, when terms were changed, and how people were notified. All of that will be important in proving mutual assent by the user.

Of course, just because a user agrees to the terms doesn’t mean they cannot litigate over the specific provisions of your terms of service. So, have them drafted by an attorney and avoid having unenforceable terms of service.

I hope this clears up some of the confusion over the terms of service issue. As you can see, they are generally a binding contract between the website owner and the site user. If you are a business that lives online, you will want an expertly drafted terms of service, that is presented to your customer base in a very clear manner, that ensures the users mutual assent to the terms.

As always, if you have more questions on the subject please feel free to reach out to me through the contact form on my website, or find me on Instagram at MontgomeryLawPllc.

Please note that this is not meant to be legal advice for you or your situation, this is merely some legal research and knowledge on the given topic.