Seven reasons to have terms of use, terms and conditions, master subscription agreement, licensing agreement or EULA

To keep it simple, we’ll be referring to all these agreements as terms or Terms of use (TOU). Although inaccurate from a legal standpoint, it’s perfectly acceptable for this article.

1. Fighting violations

Terms of use is a legal contract between a service provider and its users.
It sets the rules and principles that the users must accept and adhere to when using a website or mobile application.

It’s in your best interest to inform your users about the following:

  • age and/or geo-restrictions
  • content guidelines
  • KYC process
  • what misuse of the website or app entails.

These violations may involve spamming other users, spreading misleading information, using profanities, using someone else’s ID or credit card, bonus hunting, using multiple accounts, unauthorized advertising, selling accounts, sublicensing, etc.

This should result in temporary or permanent suspension, preventing those who violate the terms of use from using your website or app.

2. Addressing copyright issues

Website and app owners draw a distinction between:

  1. User-created content, for which the owners are usually not responsible, putting all responsibility for it on the users. Such is the policy of Behance, BBC, LinkedIn, etc.
  2. Intellectual property that belongs to the owners (e.g. design, logo(s), patent(s), etc.) and is protected by law, with the focus of the Terms of Use on the unauthorized use.

Use the general terms section to inform your users that the intellectual property in question belongs to you. Mention, just to be sure, what exactly is under protection here and by which laws.

3. Shutting down accounts

Aside from the aforementioned temporary suspension, websites and apps retain the right to deactivate user accounts. This results in a permanent ban of the violator, who gets blacklisted and whose remaining cash gets deducted from the balance, while the redundant data gets deleted to free up server space.

4. Determining applicable law

This issue is best left to professionals. Amateurs often recommend British law (which, by the way, is actually called the law of England and Wales). The choice here depends on the nature of legal relations, the project’s specifics, the operating company’s country of registration, the location of the user base and a number of other criteria.

5. Limiting liability

Simply specifying "we are not responsible for any damages …" in a document does not necessarily make it so.

Consider, for instance, a website that sells poor quality products with a disclaimer that it’s not responsible for said quality. It won’t work since the seller is in fact responsible for selling substandard products. However, if that website is a marketplace which third party vendors use to sell to end users, the disclaimer may be sufficient enough.

Don’t forget the marketing angle though. It’s sometimes more beneficial for a company to accept additional responsibility before its users in order to get ahead of competition. However, this requires a thorough legal assessment first.

6. Achieving integration

Financial companies, banks, platforms like Steam, Oculus Rift, Google Play and AppStore all require terms of use from websites. Terms of use are the "face" of your company.

7. Official document

Terms of use are a company’s official document used in reports and during financial audits. This document serves as the basis for invoices, receipts and deeds. Thus, if the terms contain errors, this could result in negative tax consequences, such as extra VAT charges.

The process of drafting this document from scratch involves the following:

  • Analysing the functionality of the future or existing website or application.
  • Holding a strategic meeting with the client to ask questions and discuss the project.
  • Determining the type of contract: terms of use, terms and conditions, master subscription agreement, licensing agreement or EULA.
  • Developing the document’s structure.
  • Finalizing the document.

If a document like that already exists, the first step will involve conducting a legal audit of the existing document and deciding whether it should be used as a template or discarded.

Our schtick!

We review your documents every 6 months.

  1. Firstly, there’s always room for improvement and we never stop growing as legal professionals.
  2. Secondly, trends and legislation keep changing. The terms used to be a complex legal document, but now the unicorns like Facebook and Google are trying to make them simpler and easier to understand.
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