Practical Ecommerce

6 Key ‘Terms and Conditions’ for Ecommerce Merchants

If you are selling goods or services over the Internet, it is important to have terms and conditions on your website. A terms and conditions page or language throughout the website about how you will treat certain transactions creates a contract between you and your customers. Having carefully crafted terms on your website gives you the opportunity to dictate how conflicts will be resolved, limit your liability, protect intellectual property, and advise customers of special processes involved in transacting business on your website. The following is a list of terms that ecommerce merchants should have on their websites to protect their businesses.

Billing; Special Fees

Any special billing charges, such as shipping, taxes, or other fees should be described and set forth in the terms and conditions. Also, it is not enough just to post such billing terms on a “terms and conditions” page that is not visible or accessible at the time of checkout. A link and an affirmative agreement (e.g. by checking a box accepting the terms) should be used prior to payment for the goods or services purchased. Overstock.com learn this lesson when a class-action suit was brought against the company for charging a restocking fee. In the lawsuit, customers argued they had not agreed to the restocking fee because such terms were not easily accessible or available at checkout. See “Website Terms and Conditions: Overstock.com Case Highlights Enforceability,” my previous article on the Overstock.com case.

Intellectual Property

Many merchants may think that the only intellectual property they need to protect are the design, content, logos, product names and business names on their websites. However, many websites allow customers and users to post content about products and services purchased. This user content needs to be addressed in the terms and conditions. The merchant may want to use the content in testimonials or other advertising on the website. A person who writes something on a website automatically is the owner of that content as the author. Therefore, for an ecommerce merchant to have full use of that content, the terms and conditions need to assign such content to the merchant or grant a license for use by the merchant. If users are required to register, they should be required to agree to such terms prior to completing registration.

Limitation of Liability; Disclaimers

If you have looked at any website terms and conditions, you have most likely seen various limitations clauses and disclaimers. It is important to have clearly-written limitation-of-liability clauses because this language protects the business from the extension of liability beyond the transaction. These clauses also limit representations or warranties on the products. You may want to provide some warranty or no warranty at all. Such limitations will need to be clearly defined. Also, implied warranties that could be claimed, such as fitness for a particular purpose, should be disclaimed. Limitations on warranties and representations should apply to the content and descriptions provided, as well as the products or services being sold.

Disputes and Choice of Law

A dispute clause should be used to dictate how conflicts will be resolved and where those conflicts will be resolved. Some companies like to use arbitration or mediation and others just use the court system. In any event, the law in the location where your business is located should be applied to the transaction, and therefore, should be stated in the terms and conditions. Also, the jurisdiction of the court should be determined in this clause to protect the company from having to fight a claim in another state or multiple states or countries.

General and Specific Terms of Service

All of your terms of service should be set forth and reviewed often to assure that the terms provided on your website match the way you do business. These terms include shipping times and dates, processing of returns, out-of-stock items, risk of loss, special programs or rebates, and any other process that the customer should be aware of in your business process.

Review and Update Often

Once you have carefully crafted your terms and conditions, schedule a periodic review of those terms to assure that items that have changed are updated. This is extremely important because your customer may try to enforce your terms against you. If your website terms provide for a $5.00 restocking fee and as of the first of the year you increased it to $10.00, you must update your terms and conditions to reflect that change. Also, you should attempt to communicate these changes with your customers either on your website or by an email update. This will show that you took reasonable steps to inform your customers of material changes to your terms. If you have questions as to what particular terms mean or how to limit liability for certain items on your website, you should consult an attorney specializing in ecommerce matters. A little review and crafting upfront can save you many headaches and expensive litigation later.

Jeff Jacobson, Jd, Llm
Jeff Jacobson, Jd, Llm
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