Many people take their Terms of Service lightly; so much so that a case was heard by the U.S. Court of Appeals of the 7th Circuit, in ProCD v. Zeidenberg, where the question was: “Does a Terms of Service consented to by checking a check box create any liability for the person signing, and does the Company whose terms those are get actual protection?”
The United States Court of Appeals held that it indeed created legal rights and obligations for the parties; least of all that the Company did get legal protections, and the person signing did become legally responsible.
A common question that we are asked is: If my Terms of Service are extremely stringent, do I actually get protection for everything I claim to not be liable for?
The answer to that question is no. Even if you say that you are not liable for everything, you cannot escape the long arm of the law when the matter goes to Court. If you do something which in the eyes of the Court is unreasonable or grossly improper, you will still be liable even if your Terms of Service protect you.
So how do you design a Terms of Service that works?
Here are a few pointers which we feel might help:
a. Start with giving your complete Company name, address and other information
b. Provide information about the kind of product / service you offer
c. Outline all the situations where you might be found liable. For instance, if you are a Company selling software products, you might face liability in four cases (a) if the software does not work (b) if the product is corrupted or infected (c) if the product does not live up to the expectations of the client (d) if the product does not contain the features you promised it would contain
d. Next, say when you will not be liable. Be reasonable, but remember it is always better to strongly favour yourself. Confused? For example, you can say that you will not be liable if the software does not work or live up to expectations, but say that you may give a replacement on a case-by-case basis. That way, you are not being completely unfair, and yet protecting your interests.
e. Outline the situations where you are willing to accept liability. For example, if you have a cash-back offer, then you can mention that in your Terms of Service.
Some other things that you can add to your Terms of Service
A smartly drawn-up ToS could expressly mention where or how disputes will be settled; say by using an arbitration clause. We recommend that you have a clause that makes mediation mandatory, followed by compulsory arbitration.
In India, arbitration has failed to live up to expectations, and can be almost as expensive as going to Court. Mediation, provided the other party agrees, is a great and cost effective remedy.
So it is therefore always better to start with mediation and then proceed to arbitration.
[About the author: Contributed by Hrishikesh Datar, founder of vakilsearch.com, online legal services provider (Legal Advice, Legal Documents & more.]
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