We need to talk about them because the risks associated with operating a website with inadequate ToUs (or none at all) are huge. By “huge”, I mean that they could result in lawsuits or reputational loss that could bankrupt your business.
So, let’s briefly examine those risks and how to manage them. We can start by looking at the typical dangers of using your website as an extension of and/or marketing portal for your business.
What Could Possibly Go Wrong?
Here are just a few examples of the kind of things that can go wrong with various kinds of websites:
Also keep in mind that any services available on your websites might be interrupted either due to failure of a designated internet content provider (ICP) or a server or other hosting medium. Alternatively, the software responsible for conducting business on your website could malfunction, resulting in transactions that are not recorded, products not being delivered, and refunds not processed.
Without suitable exclusions of liability set out in ToUs, the worst possible outcome won’t just be loss of confidence in your brand; your business could be sued and held liable for any losses that customers suffer due to interruptions or failures.
However, an appropriate set of ToUs can avoid or limit the impact of all of the above risks.
How ToUs Can Protect Your Business
The primary role that ToUs play is to regulate how the website can be used and by whom. They function like the terms and conditions of a conventional written contract because they are regarded as legally enforceable contracts that you stipulate.
All websites engaged in e-commerce should contain suitable terms of sale (i.e.: addressing pricing, refunds, shipping policies, risk of loss, etc.). They should also include limited representations and warranties tailored to the business, so that potential liabilities for certain foreseeable events such as interruption/suspension of service, late delivery and/or loss of data, will be excluded.
Websites that are merely used to project an online presence for the business (but not involved with selling goods or services) still need ToUs but the scope of protections will usually be more limited because the risks associated with operating such websites are more limited.
In other words, ToUs are essentially risk management tools: by ensuring that all necessary protections are spelt out in the ToUs, you will set clear expectations for users and hopefully avoid most disputes. And, for any disputes which you cannot unavoid, the scope of liability will be reduced because users will be legally bound by your ToUs.
Online businesses need to comply with all relevant laws as well as exercise appropriate oversight over the use of their websites to ensure that the business is fully protected and not prone to embarrassing lapses that might reduce public confidence in them.
We know that you’re busy and you might not have budgeted for any legal expenses but now that we have highlighted some of the legal risks involved with operating your website, would it be prudent to take your website ‘live’ without a properly curated set of ToUs? Would you risk waiting to install a sprinkler system in your business until after it has been destroyed by fire?
In addition to helping to limit your legal risks, a set of properly drafted ToUs can also serve as an effective “blueprint” for your business, outlining the appropriate procedures that users need to follow in order to complete their purchase or other desired functions. It tells users that you are complying with the law and best practices.
If your website currently doesn’t have proper ToUs or if your business has scaled significantly since the ToUs were first prepared, now would be a good time to have them reviewed by a lawyer.