Why are Terms and Conditions Important?
Terms and Conditions are important for many reasons, including:
- They set the rules regarding how customers use and pay for your products or services
- They can allow you to enforce those rules in court
- They can limit the amount of money you have to pay in damages if you make a mistake
Terms and Conditions vs. Other Legal Documents
- What types of personal information you collect
- How you collect it
- How you share personal information
- What rights your users have over their personal information.
- California Online Privacy Protection Act (CalOPPA)
- EU General Data Protection Regulation (GDPR)
- Canada’s Protection of Personal Information and Electronic Documents Act (PIPEDA)
For more information, see our article Privacy Policies vs. Terms & Conditions.
Legal Status of Terms and Conditions
Are Terms and Conditions Legally Binding?
Yes, Terms and Conditions are legally binding. Or at least, they can be legally binding if:
- You have obtained acceptance in the proper way. This means that your customer has actively agreed to your Terms and Conditions.
- Your Terms and Conditions agreement is sufficiently clear. This means your customer understands (or it is reasonable to assume that you customer understands) what they are agreeing to.
- Your Terms and Conditions agreement is legally valid. The courts will not enforce “unfair terms” in Terms and Conditions agreements.
Are Terms and Conditions a Contract?
Terms and Conditions are a business agreement and can be a type of contract, so long as they meet the elements of a contract under law.
Some of the key elements of a contract include:
- Offer: You offer to do something (or refrain from doing something)
- Acceptance: Your customer accepts your offer
- Consideration: Your customer provides something in exchange (e.g. money or something else of value)
- Intention to be legally bound: Both parties intend the agreement to be enforceable by either party
The element of “consideration” might not always seem relevant to Terms and Conditions, as many businesses provide free software or accounts. However, sometimes the customer will be offering something of benefit in exchange, even if they aren’t paying for a service.
Are Terms and Conditions Legally Binding If Not Signed?
Terms and Conditions don’t have to be “signed” in order to be legally binding. However, there has to be some evidence that the customer has accepted the Terms and Conditions.
If you display your Terms and Conditions on your website, app, or software, you should obtain acceptance of your Terms and Conditions via a “clickwrap” prompt.
How Can I Obtain Acceptance of My Terms and Conditions?
In order for your Terms and Conditions to be legally binding on another person, that person must accept (agree to) them.
Obtaining acceptance of your Terms and Conditions is difficult if they are designed to cover the use of a website. This is typically done via two methods known as browsewrap and clickwrap.
Some businesses attempt to do this using “browsewrap.” Browsewrap involves notifying the user that they accept your Terms and Conditions by browsing your website.
Here’s an example of a browsewrap prompt from tourism website Visit Bath:
It might be unreasonable to claim that every person who has used Visit Bath’s website is bound by the company’s Terms and Condition, whether they had actually read the agreement or not.
A better way to obtain acceptance is by using a “clickwrap” prompt. This requires a person to confirm that they accept your Terms and Conditions before they use your service. You’ve likely seen this before with “I Accept” checkboxes and similar methods.
There are several circumstances in which it is appropriate to use a clickwrap prompt. For example, you can use clickwrap when a user of your service:
- Creates an account
- Makes a payment
- Installs an app