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Protect your online business with these 5 updates to your Terms of Service

Deryck Jordan

Deryck Jordan

To protect your business, the Terms of Service of your website (or mobile app) must address all relevant aspects of your marketing strategy. But which aspects are relevant? Over the last year, courts have shed light on this question and—in the process—have exposed five blunders you may have to fix in your Terms of Service.

1. “SMOMBIE” ACCIDENTS

Last month Tel Aviv joined the ranks of cities around the world (including Sydney, Melbourne, Augsburg and Bodegraven) that have installed traffic signals directly into sidewalks in an effort to reduce the number of smartphone zombie (smombie) accidents. In America, the city of Honolulu approached the underlying problem from a different angle by making it illegal for pedestrians to cross a street while looking at smartphone screens. Moreover, a recently proposed settlement for a Pokémon Go class action lawsuit signals that companies that commercialize mobile apps may be liable for the actions of their customers.

  • TIP 1: Is it foreseeable that your customers will harm themselves (or others) by recklessly using your app as they wander outdoors? If so, update your Terms of Service with wording that discourages dangerously distractive use of your app.

2. FACTS vs OPINIONS

Pay special attention to the wording of your online platform’s opinions, estimates, appraisals and subjective valuations. In a February 2019 legal decision, an appeals court found that Zillow’s use of “Zestimates” on their website did not constitute an unfair or misleading trade practice because Zestimates are only opinions. If Zillow’s home valuations were instead construed as statements of fact, that company could have faced more legal jeopardy.

  • TIP 2: If your marketing materials contain statements that can be misconstrued as fact instead of opinion, clarify that distinction in your Terms of Service.

3. EXPRESS ACCEPTANCE

How do the users of your website or app accept your Terms of Service? Implied consent by further scrolling is not sufficient! In a June 2018 legal decision, an appeals court ruled that the Terms and Conditions in Uber’s app were not reasonably communicated to the app’s users since those customers could use the app without expressly approving the Terms. As a result of that decision, Uber lost the right to compel enforcement of one of the Terms’ clauses in litigation against a group of customers.

  • TIP 3: Be certain that your online platform’s Terms of Service are reasonably communicated to your customers by giving them an opportunity to read and expressly accept the Terms before finalization of their online transaction.

4. FREE TRIAL PERIODS

Online promotions often use “negative option continuity plans,” which involve an initial trial period at a discounted price (or free), followed by a period wherein customers receive recurring shipments at higher rates. When worded properly, such plans are perfectly legal. However, if your Terms of Service are not drafted properly, the Federal Trade Commission (FTC) may file charges against your company for “illegal negative option marketing,” as it did in a complaint filed two months ago against an online technical support company. In another recent case, the nutritional supplement marketer NutraClick settled a lawsuit brought by the FTC that claimed NutraClick promoted “free” samples of their products to their customers and then violated the law by charging those customers a recurring monthly fee without the customers’ consent.

  • TIP 4: If your sales model includes a negative option continuity plan, be sure your app (or website) and Terms of Service are configured to do all of the following:
    • Clearly and conspicuously disclose all material terms of the transaction before getting your customers’ billing information
    • Get your customers’ express informed consent before charging their accounts (as described above in TIP 3)
    • Offer simple ways for your customers to cancel the plan and stop the recurring charges.

5. GUARANTEES and WARRANTIES

Your guarantee should not inadvertently promise the sun, moon and stars. In an April 2018 legal decision, an appeals court found that the mere use of the word “guarantee” on HomeAway.com did not give rise to a broad warranty since the site clearly described the limitations in scope of the disputed guarantees.

  • TIP 5: If you offer a guarantee in your Terms of Service, be absolutely certain it:
    • Clearly conveys your desired limitation in scope
    • Cannot be misinterpreted or misconstrued to cover additional assurances.

In general, remember the key to creating strong Terms of Service: transparency. Provide your customers with enough information to enable them to make informed decisions (and safely cross the road).

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