Do "Terms of Use" on a Web Site Even Matter?

When entrepreneurs in the United States start up a new small business, they often focus on launching a web site first. Inevitably, they find themselves wondering if their web site needs "Terms of Use" because they see that link at the bottom of virtually every web site of their potential competitors. Terms of Use can be an important addition to your site, but only if you understand why you have them in the first place.

The Terms of Use (sometimes called "Terms and Conditions") are a set of rules that govern the use of the web site. Often there is an assertion of rights, a way of saying, "these words, pictures, and videos belong to us, not you!" The goal of the Terms of Use is to protect these rights, and to protect the company that owns the web site from liability. There are often self-proclaimed disclaimers and limitations of liability, as well as statements about intellectual property and jurisdiction and venue. 

The importance of Terms of Use dramatically increases when the web site becomes interactive. If the web site is used to enable a financial transaction, or if visitors are empowered to contribute ideas, comments, or content to the web site, then contractual terms matter more, because a web site owner exposes herself to a greater likelihood of conflict and wants to avoid an unnecessarily adversarial relationship with visitors. When the web site is interactive, each individual clause of the Terms of Use must protect and accurately reflect the goals of the web site owner. The Terms of Use are meant to be an "Adhesion Contract," which means that it is a take-it-or-leave-it proposition to the visitor. A well-drafted Terms page will not only have the standard clauses that appear on most sites, but also clauses that specifically address that particular web site, and specific to that particular area of business or art.

As a practical matter, there have been drastically different legal outcomes when web site owners have tried to enforce the Terms of Use as binding contracts. Passive Terms of Use--those that sit at the bottom of your page waiting for a visitor to read them--are often referred to as "browse wrap," and have been often found to not be binding on a visitor if the web site owner has not demonstrated that the visitor read the terms. A contract is not binding if a party does not have adequate notice of the Terms of Use.

However, a click-through (sometimes called a "click wrap") agreement, which is often a mandatory pop-up box which demands an acknowledgment that the Terms of Use have been read, understood, and will be followed, has been recognized as a contractually binding agreement, assuming the visitor has been given the opportunity to actually read the terms of use! For instance, if you have a pop-up that appears the second a visitor lands on your site, and you require the visitor to click "I Accept" without giving him or her the chance to read the Terms of Use, you have not actually given adequate notice of the Terms of Use and have required "signature" (i.e. the click of the "I Accept" button) without allowing a visitor to be properly educated about your contractual terms.

Terms of Use are now one of a few legal elements that seem to always find their way onto web sites. Sites often provide disclaimers and a Privacy Policy, as well. The reality is, the mere presence of contractual terms or policies in a footer is usually not enough to make them enforceable in a court of law. A thorough integration of the legal links on a site with a legally sound content and user experience strategy should be vetted by a knowledgeable lawyer who can help the web site owner avoid the pitfalls that too often sink those who try to go it alone.

Related: Photography Law is Monkey Business (and other legal issues artists should ponder)