These days, it is difficult for a business to function without an online presence. In the Wild West of internet business, you can take some simple steps to make sure you are protected legally.

1. Require Active Acceptance.

Requiring users to click “I Agree”, “I Accept”, or some other form of active assent, makes it far more likely that courts will enforce the provisions of an online agreement. A few courts have enforced “browsewrap” contracts that do not require any kind of active acceptance (see Southwest Airlines Co. v. BoardFirst L.L.C. 2007 U.S. Dist. LEXIS 96230 (N.D. Tex. Sept. 12, 2007). The general inquiry is whether, as the Uniform Commercial Code puts it, the terms are “conspicuous,” which means that a reasonable person “ought to have noticed” them (U.C.C. § 1-201(b)(10) (2006)). Websites should require active acceptance because many courts have held that enforcing a contract entered into by merely using a website is unfair to users, leading the majority of courts to hold that there was never in fact any “meeting of the minds.” (See, e.g., Specht v. Netscape Commc'ns Corp., 306 F.3d 17, 35-38 (2d Cir. 2002) (invalidating a browsewrap agreement because it is unfair to consumers); Waters v. Earthlink, Inc., 91 F.App'x 697, 698 (1st Cir. 2003) (not enforcing an arbitration clause because there was not proof the consumer had seen the clause on the website); Campbell v. Gen. Dynamics Gov't Sys. Corp., 407 F.3d 546, 556-57 (1st Cir. 2005) (refusing to enforce new provisions of an employment agreement that was merely posted on the company intranet); see Mark A. Lemley, Terms of Use, 91 Minn. L. Rev. 459, 483 (2006)).

2. Reduce Liability through comprehensive disclaimers.

While catch-all lists that disclaim everything under the sun are often overly technical and unnecessary, it’s important to let users know what the site is not promising. (1) Warranty: Be clear that, while the business will provide the best service possible, it does not provide any explicit or implied warranty. (2) Errors: Clarify that the accuracy of the data on the website is not guaranteed and that the information contained in it (or in websites to which it links or refers) represents the best information available to those responsible for creating content. (3) Liability: Limit liability specifically by agreeing with the user that the website or business will not be liable for any damages under any cause of action. (4) Shutdowns: Disclaim any damages that could result from disruption of the users’ access to the website. Many professionals rely on specific websites for essential and sometimes urgent functions. They should understand that temporary unexpected shutdowns or shutdowns for maintenance will inevitably occur. (5) Validity: Courts consider a variety of issues in determining whether disclaimers are valid. For example, one court held a provision valid because it was written in capital letters and the entire agreement was sufficiently short to make it reasonable for users to read it (Recursion Software v. Interactive Intelligence, 425 P. Supp. 2d 756 (N.D. Tex. 2006)). These provisions should be emphasized to make users aware that the website is not promising more than it can actually deliver.

3. Follow Applicable Federal Regulations.

Regardless of the industry or website content, various federal regulations are certain to apply. Be familiar with the specific regulations governing the industry and include provisions in the Terms and Conditions Agreement that require users to comply where necessary. For example, websites are generally subject to special regulations under the Children’s Online Privacy Protection Act (COPPA) about what information can be collected from users under 13 years of age (http://www.business.ftc.gov/documents/bus84-childrens-online-privacy-protection-rule-six-step-compliance-plan-your-business#step2). Additionally, websites that serve as sponsors, provide advertisements, or make paid promotional statements for other products or services, are required under the 2013 FTC Update “.com Disclosures” to designate those communications by including the word “ad” or some other clear indication. These and many other regulations should be considered in drafting Terms and Conditions agreements, carefully following general guidelines as well as those specific to the industry.

4. Use Direct but Non-Technical Language.

The internet has revolutionized the way legal documents are written, promulgated, and enforced. Courts have relinquished much of the formalism that made legalistic and technical language necessary. It is more common for courts to accept a document written by a business and labeled a contract as a valid contract, with less regard for its format, language, or content (Woodrow Hartzog, The New Price to Play: Are Passive Online Media Users Bound by Terms of Use?, 15 Comm. L. & Pol'y 405, 408 (2010)). Research also indicates that contracts written in laymen’s terms are more likely to be understood by users (Id.). As these trends continue, courts are likely to enforce contracts that are simple to understand and accessible to the general user population. In drafting Terms and Conditions, consider the likelihood that users will actually become familiar with and be able to understand the agreement’s provisions. As courts’ treatment of online agreements continues to evolve, the most enforceable contracts will be those that are knowingly entered into by users.

5. Customize but Include Comprehensive Provisions.

While every business and website will have unique needs that must be covered by customized Terms and Conditions Agreements, most websites will be benefitted by including various comprehensive provisions. (1) Legal: Every business should consider including applicable law and forum selection provisions. Indicating the law that will be applied should a dispute arise allows the business to structure its activities both on and off line according to specific legal requirements that differ from location to location. Furthermore, these businesses will be able to reduce legal costs that are associated with litigation in a faraway venue by requiring plaintiffs throughout the world to bring suit in a convenient location for the business. (2) Site Content: Websites almost always include references and links to other sites, as well as substantial user-generated content over which the business may have little or no control. Terms and Conditions should include provisions that disclaim liability for content on other websites, and reference those websites’ separate Terms and Conditions. Provisions that set rules and guidelines for user-generated content are also important because they encourage appropriate use of the site and inform users that the content there is generally out of the business’s control. This allows users to take advantage of the site at their own risk, rather than exposing the business to additional liability. (3) Termination: Every Terms and Conditions Agreement should include a provision for termination such that the business and its website’s users can terminate the agreement when there is no longer a need to be bound by its terms. These provisions should be tailored to the business’s need for creating a long-term relationship with the customer (for subscription services, memberships, or interactive online communities) or for providing flexibility (for news media or informational sites).

6.Use the Terms and Conditions to Add Value.

Businesses can use the Terms and Conditions as an opportunity to inform the customer about policies and protections that benefit the customer while he or she is using the website. Many consumers have false ideas or unfounded worries about internet security and the stability of most websites. By including provisions that outline the steps taken to make the website a safe environment, businesses can eliminate some of those worries and reassure users that they can take advantage of what the site offers without dealing with the many disadvantages often associated with the internet. These provisions can include statements about the internet security that will be used to protect the website, the norms for user-generated content, or the protections provided for users’ accounts. Rather than limiting the Terms and Conditions agreement to an ominous list of imposing requirements on the user or disclaimers in favor of the business, take advantage of the opportunity to build the customer relationship.

7. Provide Protections for Intellectual Property.

Websites generally include substantial intellectual property or proprietary information that is exclusively owned by or licensed to the business behind the website. Terms and Conditions agreements are an excellent place to define the limitations on that intellectual property and to put users on notice that their use of the site is limited. Businesses are more and more likely to use Terms and Conditions agreements to preserve their competitive advantage in the marketplace and, as a result, intellectual property provisions are becoming more expansive through attempts to carve out intellectual property that may or may not be justified (Mark A. Lemley, Terms of Use, 91 Minn. L. Rev. 459, 479, note 71 (2006)). As a general principle, businesses should confine the intellectual property provisions in these agreements to the content of the website itself, rather than extending to intellectual property owned by the business which is irrelevant to the relationship with the website user. They should also avoid unrealistic and expansive limitations on intellectual property litigation that are likely to be held invalid by courts, which creates ambiguity and reduces the enforceability of intellectual property provisions (Id. at 476-77; also see Mark A. Lemley, Beyond Preemption: The Law and Policy of Intellectual Property Licensing, 87 Cal. L. Rev. 111, 136-44 (1999)).

If you have any questions, please feel free to contact us.

7 Steps to Enforceable and Comrehensive Online Agreements

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