(Note: This post was initially published on LinkedIn, and the following iteration is a syndicated version of the same.)
A carefully drafted Terms and Conditions Agreement is an essential type of contract for SMBs. It sets forth the rules and expectations for business owners and their customers.
While there is no legal mandate for companies of any size to have a Terms and Conditions Agreement, such agreements are especially critical for smaller businesses because even minor disputes may cause an SMB, unlike a much larger company, to incur liability, debt, bankruptcy and even closure.
Critical Role of Terms & Conditions Agreement for SMBs
A Terms and Conditions Agreement not only provides essential liability and dispute provisions but also enhances an SMB’s professional image. It begs the question: Can a small business without a Terms and Conditions Agreement on its website be trusted?
A Terms and Condition Agreement is a contract, and as such must satisfy specific criteria including (1) the parties must enter into the agreement voluntarily; (2) customers have to give their affirmative consent to be bound by the agreement; (3) the parties need to acknowledge that they have a legal contract with defined obligations under the law; and (4) the terms of the agreement must be fair and equitable.
Essential Provisions in Small Business Agreements
Small business Terms and Conditions Agreements typically provide the following essential provisions:
#1 – An introductory statement identifying the company, the purpose of the agreement and defining the agreement as a legal contract.
#2 – Contact details in the event of questions, concerns, or disputes.
#4 – Restrictions, disclaimers and warranties regarding the company and its website (ex. hacking, cyberbullying, theft, IP infringement) and the consequences for non-compliance.
#5 – Dispute resolution with governing law and venue.
#6 – A description of how data is collected, stored and used, to comply with privacy laws and to build trust with customers.
#7 – A definition of the business’s intellectual property such as trademarks, copyrights and proprietary information.
#8 – Policies on cancellations, returns and refunds.
#9 – Consent for transactions, confirming that the customer agrees to the purchase (more on this shortly);
#10 – Reservation of the company’s right to update or change its terms and conditions with adequate notice to customers.
#11 – Payment terms.; and
#12 – A description of how the company’s content can be used, shared or reproduced by customers.
Ensuring User Consent
Importantly, there must be proof that the user read and agreed (i.e., gave consent) to the Terms and Conditions Agreement. A browsewrap method uses implicit consent as it assumes the user agrees to the terms simply by reading them. Explicit consent is favored by the courts.
While a Terms and Conditions Agreement is a critical component of an SMB’s legal and financial structure, no one size fits all. Let that sink in. A privately owned watch repair shop’s agreement may be significantly different than a franchised use car dealer’s agreement. What’s the worst that can go wrong… with a watch?
To an old car filled with people barrelling down the highway? You get the idea.
Not only do different businesses use different commercial terms (some simple, others technical), but also you must go beyond cutting and pasting or borrowing another agreement and believing you’ve successfully customized it. What worked for another business likely won’t work for you.
Importance of Professional Assistance
Our suggestion is to rely on contract management professionals who have drafted Terms and Conditions Agreements across all different kinds of industries and who know the most recent business, trade, legal and regulatory developments. Comprehensible agreements without the jargon.