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22 August 2013

Is small print in online contracts enforceable

Terms of service online have been in the news in recent years, with Facebook, Apple and Paypal all brought into the limelight for questionable online terms of service. And the news fallout typically focuses on the risk to the consumer, or customer. If a supplier fails take account of the needs and aims of the business when putting together online terms, this can create major risks for the organisation itself, both in business terms and reputationally.

So what questions should businesses be asking themselves in structuring their online terms and conditions?

First, you need to consider how strongly to pitch your T’s & C’s. Take into account who your customers are (consumers or businesses?) the value and liability profile of the transactions you conclude online and how likely it will be that your terms will be challenged. But consider reputation as well; is it worth having stronger terms that might give you business advantage but could damage your reputation amongst consumers or your customer base? What’s more important?

If high value transactions will take place on the website or if there is potential for a major liability to arise under the contract –for example if you provide mission-critical products or services to your customers  - you will probably be more concerned about making sure your terms are enforceable. 

Secondly, make sure that terms and conditions, and particularly any liability limits or other unusual or onerous terms, are brought to your customers’ attention as clearly as possible. You need to be able to show that the customer knew what they were getting into and you might consider, for example, a dedicated tick box for something particularly significant.

It is also becoming increasingly important to draft your online contract in a user friendly way – i.e. in plain, understandable English (more easily said than done!) - and include appropriate carve-outs considering all the likely scenarios – for example those where issues might arise that clearly are not the customer’s fault.

An example of this arose last year, where the child of a customer of an online gaming company ran up a £50,000 debt over two days when the customer failed to log out. In this case, the court found that the customer was not liable because the terms & conditions made the customer responsible for his account without exception, even if it had been hacked into, so it was unfair.

However, this raises another key consideration. As an online provider, should you place all the onus on your terms and conditions? Consider what other technical safety measures might you be able to put in place to avoid having to enforce contractual terms in the first place? In the example above, the provider could have set up an automatic block on transactions above a certain £ threshold; or an enforced log-off after a specific period of inactivity; or requiring the re-input of a password after a period.  In taking these additional precautions, not only are you protecting your customer, but your business as well.

The bottom line is that – despite the fact that most of us rarely actually read online terms of service, online contracts are more complex and actually more important than they might initially appear. It is vital therefore to take advice from someone who will take the time to understand your business priorities and aims and ensure your terms are fit for purpose.

For legal advice on online terms and conditions, please contact Alex Zachary on 01753 279022 or email commercial@bpcollins.co.uk.

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