Seller Beware – The Terms that Bind – By Rachel Hirsch

by Sara Szado on January 28, 2016


feedfront-33 cover-188x240It today’s digital age, communicating with your customers has become easier than ever. Yet, with all the ease that comes with today’s technology, is your message really coming across to customers, and more importantly, do your customers understand that message?

Whether your website is one-way information only, allows user-generated content, or sells goods or services online, you will need a set of terms and conditions that will create a binding contract with your customers while balancing against the need for a good user experience.

The exact provisions to include in terms and conditions can vary by individual business, but there are certain key provisions that online marketers should consider:

• General Disclaimers/Website-Specific Disclaimers – depending on the underlying nature of the website;
• Applicable Payment Terms – including methods for canceling accounts and obtaining refunds;
• Limitations of Liability – indicating that services or goods are being provided “as is;”
• Dispute Resolution Terms – including choice of law and venue provisions determining site and governing law of potential litigation;
• Digital Millennium Copyright Act Safe Harbor Language – if you are allowing users to post content
• Copyright and Trademark Ownership Terms – protecting your intellectual property from infringement; and
• Terms Governing Submission of User Content – including prohibitions against infringing or defamatory posts

Many online marketers also include mandatory arbitration clauses in their terms and conditions, because the Supreme Court ruled in AT&T Mobility v. Concepcion, 563 U.S. 321 (2011), that (well-written) arbitration clauses with class action waivers preclude consumers from ganging up together and suing businesses in large groups.

The enforceability of arbitration provisions, however, has been called into doubt by some courts, which require that the arbitration agreement, like any other contract, be supported by valid consideration. In other words, the arbitration provision itself, regardless of the larger contract, must be supported by an explicit mutual exchange of promises to arbitrate.

Also, calling into question the validity of arbitration clauses is the Consumer Financial Protection Bureau (CFPB), which recently announced it is considering proposing rules that would ban consumer financial companies from using “free pass” arbitration clauses to block consumers from suing as class actions and thereby avoiding big refunds while continuing to pursue profitable practices that violate the law.

Regardless of what provisions you include, your terms and conditions only make a difference if your customers actually read and understand them. Therefore, the placement and prominence of your terms and conditions are equally important, if not more so, than their actual content.

The best way of ensuring that your terms will be enforced is through evidence that the website user had notice of the agreement. Accordingly, when possible, online marketers should use scrollwrap agreements, giving their customers a realistic opportunity to review the terms, scroll through them, and affirmatively assent by clicking an “I Agree” button.

Do not simply copy and paste another website’s terms and conditions. Rather, retain qualified legal counsel to tailor your terms based on the specific goods or services you are providing.

Rachel Hirsch is a Senior Associate at Ifrah PLLC, a law firm in Washington, D.C.

This article appeared in issue 33 of FeedFront Magazine, which was published in January 2016.

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