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What is Terms of Service? | Purpose, Benefits & Legalities Explained!

Creating terms of service is quite a process. It can be intimidating, not to mention full of difficult jargon. This is why some companies often decide to forego this vital legal document altogether.

But is that an acceptable option? This article covers all the intricacies of terms of service, its benefits, legal purposes, major elements, and further answers whether a term of service is mandatory.   

Overview Of Terms Of Service

Terms of service are guidelines and regulations attached to an application, web-based service, or software by providers. It is a legal agreement between service providers and their users.

Normally, a user/client must agree to these terms of service before using the product or service. Therefore, although not legally required, having terms of service is highly recommended.

Several other names are used interchangeably with terms of service, namely:

  • Terms and Conditions

  • Terms of Use

  • Website Terms and Conditions  

  • Disclaimer

All these mean the same thing. It is also commonly abbreviated as TOS.

Terms and conditions on the laptop screen

What is the Purpose of Terms of Service?

The main purpose of terms of service is to protect both the user and service provider.

For the user, a ToS sets expectations and rules to abide by when interacting with your website or service; and outlines acceptable behavior within the site. 

A ToS offers the providers more control over the use of their service, prevents abusive users, limits legal liability, and protects intellectual property.

What are the Benefits of a Terms of Service?

A terms of service (ToS) affords many benefits to both the user and the service provider. They:

  • Protect your property against copyright infringement. This includes your website contents, its design, and its logo.

  • Manage user behavior. A web-based discussion forum, for instance, can set a zero-tolerance policy against posting objectionable content other users might find offensive.

  • Limit liability. Most websites usually notify their users that they won’t be held responsible for how information published is used or interpreted.

  • Phrases user rights, rules, and regulations that guests must adhere to.

  • Set rules of how your products or service should be used.

  • Establish governing law. For instance, if you operate your company out of Florida, a ToS must include a clause that the entire document is overseen, enforced, and interpreted by the Florida state laws and the US federal applicable law.

  • Give you the right to terminate user accounts that violate this agreement, which goes a long way to prevent abuse.

What Should Terms of Service Include?

In a nutshell, a ToS agreement should include liability provisions, accountability provisions, opt-out options, iprivacy policies, and an arbitration process. Now let’s break these further.

  • A detailed users’ rights, guidelines, and responsibilities.

  • Age limit provisions comply with the governing online child privacy laws.

  • There is an outline of prohibited behavior such as spamming, external linking, or posting pornographic content.

  • Intellectual property clause. These are clauses relating to content ownership. Normally, anything that isn’t user-generated is owned by the company/business (clearly state this). Unauthorized use constitutes copyright infringement.

  • Termination clause. This gives you the right to close users’ accounts or permanently ban abusive accounts.

  • Include a clause that you preserve the right to edit or change the TOS agreement anytime. However, it would be best if you offered prior notice to allow current service users to re-agree to the new terms of services. Failure to do so can render the entire contract unenforceable.

  • A warranty disclaimer, subscription information, payment terms (for subscription fees renewal or memberships), return policy, or licensing rights depending on your business.

  • Here is a link to how users can have their accounts canceled or opt out of subscriptions.

graphic icons of TOS

Sometimes, a privacy policy is included within the terms of services. A privacy policy protects sensitive user details like email address, phone number, billing information, shipping addresses, and other contact info. Due to its sensitive nature, network privacy policies are legally mandatory in most countries.

Do I Need a ToS?

If you are a company/business owner (which I assume you are), you most definitely need terms of service. Specifically, if you have:

  • A website

  • E-commerce business.

  • Mobile application.

  • Provide software.

While it isn’t a requirement, such legal agreements will save you headaches later on once problems begin to arise. In fact, it can prevent some problems beforehand.

To make a ToS agreement enforceable, you must obtain consent using the clickwrap method. A clickwrap method is where a user must check a box or press a clearly labeled button next to an “I agree and accept the terms and conditions” statement before accessing the websites, mobile apps, or software. The agreement becomes a legally binding contract once the user clicks agree.

a person holding finger on terms of service key on the keyboard

How to Create Terms of Service

Once it’s apparent you need a ToS, you may enlist the help of online templates. However, since the terms of use agreement are unique depending on your specific business model, jurisdiction, and business process, hiring a lawyer is advisable.

But what should you do if this is above your budget? We have a solution: create terms of service using online templates, then get a lawyer to review them. Your legal documents will still be an attorney licensed at half the price.

Where Should I Place a Terms of Service?

Always display your user terms on the website header (or footer) as a rule of thumb. Important site info is usually displayed in either of these two spots, and that’s where users will look for it first.

In addition, add a link to the terms of service page anywhere where clients are reminded of them. This can be on the software installation page, checkout page for e-commerce websites, account sign-up, and on the app download screen.

The goal is to make it as accessible as possible for the user.

Examples of Terms of Service

Terms of service don’t have to belong or be loaded with jargon. Short, readable, and easy to skim, ToS is highly favored by readers; and multi-billion companies like Google, Youtube, and Tiktok lead the charge in creating simple ToS agreements.

This updated Tiktok terms of service are the perfect example. The English language used here is simple, easy to understand, and devoid of legal jargon. The TOS agreement is also fairly short, contains an expandable table of contents for easier navigation, and is readable, which resonates with its 13years-and-above users.

Lawsuits and Criticism

Whatsapp – In 2021, Whatsapp updated its terms and conditions to include sharing personal data such as phone numbers and profile names with Facebook without opt-out. This caused global outrage as users viewed this as forceful. As a result, Whatsapp experienced a mass exodus to rivals such as Telegram and Signal, forcing them to delay the implementation of this controversial update.

Facebook – Not new to controversy themselves, Facebook’s change to its ToS indicates that: “you can remove User Content from our site at any time. Should you decide to revoke your User Content, the license permitted above automatically expires. However, you recognize that the company can retain archived files of your User Content.” This caused such an outrage that the Electronic Privacy Information Center was ready to file a complaint with the Federal Trade Commission. Fearing this, Facebook decided to revert to its original terms and conditions to calm the brewing storm. 

Instagram – In December 2012, the picture-sharing app included a controversial new clause to its existing terms of use. The clause read: "you consent that a business or another entity can pay us to display your photos, likeness, username, (along with associated metadata if any), and actions you may partake, in connection with sponsored content or promotions or paid, without any compensation to you." A public outcry forced Instagram co-founder to apologize, stating that they would remove the controversial language to clarify that it wasn’t their intention to sell user photos.   

AOL – In 1997, AOL modified its terms and conditions without notifying users. It added a new policy allowing third-party requests to access personal information, causing outrage and negative media coverage. A member informed the media of the planned changes, causing outrage and negative media coverage. As a result, most users opted out of sharing personal data with marketing lists, forcing AOL to dump this policy prematurely.

a court hammer and the person typing on laptop in the background

These lawsuits shouldn’t scare you out of creating your terms and conditions. If anything, it emphasizes the importance of using clear language, updating users on upcoming changes, and operating within the law.

Wrapping It Up

As we’ve covered, a terms of service agreement is a legally binding document between customers and service providers in the digital world. Unlike the privacy policy, this service document isn’t mandatory, although experts recommend having one.

If you have a small business, you can get away with generating one using an online service template. However, if your company is larger, an e-commerce store deals with delicate users' data like billing information, or your audience consists of children under the age of 13 years, kindly enlist the services of a qualified attorney to create a legal ToS for your company.

About Dusan Stanar

I'm the founder of VSS Monitoring. I have been both writing and working in technology in a number of roles for dozens of years and wanted to bring my experience online to make it publicly available. Visit https://www.vssmonitoring.com/about-us/ to read more about myself and the rest of the team.

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