A website is the primary medium for interacting with customers for most technology businesses. Website terms form the basis for the agreement between the website operator and any website user.
Advantages of Website Terms
You need to have website Terms – they allow you to control and exclude risks by defining the relationship with customers to your advantage. It’s easy to find website terms to copy and paste, but it’s very unlikely that they’ll cover all the issues that your particular business needs covered, in fact, you may inadvertently put yourself at higher risk. We have seen clients operating online businesses in Australia where the jurisdiction for disputes in their ‘pasted’ terms and conditions was California!
One of the most important clauses in your terms is the one that excludes and limits liabilities if you breach your obligations under the contract formed by the website terms. With the exception of certain legislative mandates that you can’t exclude, you can often limit your liability to the cost of replacement of the goods or services that you provide a user. If you don’t limit your liability in this way, your liability will be unlimited, and any dispute could send your company insolvent.
Jurisdiction for Disputes
Another important consideration is clearly defining the jurisdiction for any dispute between you and your users to the most convenient Courts. This is a significant disincentive for a customer in another country to start legal action against you, since they would need to litigate in a foreign jurisdiction. Without such a clause, there is no reason that a user cannot sue you under the laws of the United States, obtain a judgment in their favour, and then enforce the judgment against you in Australia.
New Business Models
Every business model is based on relationships between transacting parties who have certain rights and obligations. It’s important to critically assess the relationships created by your business model, particularly if it’s a new kind of business. The Internet is a vast laboratory for experimentation with new business models, but the corollary of such opportunity is that businesses need to pay attention to unusual legal risks that they might be exposing themselves to when they put up their website.
You should ask your lawyer to assess the risks of your business model. It’s important to do this, because it is not unusual for legislation to impose rights and obligations on parties that they themselves never actually agree to. A good example of this is privacy law, which will be discussed later in this series.
You should always get a lawyer to draft website terms for a website because:
- Your company needs to limit its liability; and
- the risks of new business models should be examined.