Does My Website Need a Terms of Use and Privacy Policy?

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New businesses and well-established ones often spend a lot of time, money, and effort producing fantastic web presences to advertise their products, services, and brand. With that web presence comes the need to manage the interaction of customers and customers-to-be with the company’s website, web apps, and social media pages. While Facebook, Twitter, Instagram, and other social media outlets already manage the legal risks associated with visitors through use of their own terms of service and privacy policies. However, a prudent business should also consider creating a terms of use and privacy policy for the websites and web applications they develop on their own. Here are a few considerations for the use of such agreements.

A Terms of Use, Like Any Contract, Can Limit Your Liability

The point of having a terms of use for a website is to limit your liability.  This limitation on liability extends from the fact that a terms of use is just like any contract, ostensibly creating private law between your company and the user of your website.  Like any contract, it can reduce liability by dictating the manner in which people might use your website, the warranties or promises it might give rise to, and the way you might remedy disputes related to it. For instance, will you arbitrate or go to court in a particular jurisdiction if a dispute arises?  What kinds of responsibilities might each party have to the other?  These are the kinds of things a terms of use can spell out.  But, that leads to the next principle…

Be Strategic About How Your Website Presents a Terms of Use

A business has to present a terms of use to a user in a manner that actually makes it legally binding.  For a contract to be enforceable, a meeting of the minds exchanging “consideration,” must exist.  That is, for a user to be bound by a terms of use, he must receive the terms in a manner that legally establishes consent and agreement with the terms of use.  Many websites err when they simply provide a link to “terms of use” buried in a link at the bottom of a website, often with a legal disclaimer and privacy policy.  This terms of use is probably not enforceable–if it were, think of all the silly things you might “agree” to without your assent.  At a minimum, the agreement should be presented to the user as a condition of using the website–not just claimed in the terms of use, but as an actual functional impediment to use of the website if the user does not agree.  A privacy policy would have the same issues of enforceability.  And speaking of which…

Consider Carefully Whether You Should Bind Yourself by a Privacy Policy

Many websites, web applications, and smart phone apps include a “privacy policy,” or statement of terms on how the company will use information provided to it.  Many businesses come to us believing that having such a policy is required in general.  We often caution businesses to carefully consider what it might bind itself to with such a policy, which usually is a one-way promise from the business to the user.  That said, many users reasonably expect assurances that their information will not be sold to third parties or used in an otherwise unreasonable manner.  Moreover, certain third party marketplaces, like the Apple App Store, require app providers to have a privacy policy that accompanies their app (along with a terms of use).  These are some of the things a business should consider in determining whether to have a privacy policy.

A Terms of Use Might Really Act as an End User License Agreement

Those terms of use might also really function as an End User License Agreement (EULA), an agreement used with a software application meant to convey certain intellectual property rights to the user in exchange for certain promises, fees, or other things of value.  An EULA is particularly useful for web applications, mobile applications, and any other kind of software that performs particular functions beyond simply presenting a brand image.  For instance, a website that accepts reservations and payment might be the kind of website that really needs an EULA presented at the time of payment.

A Terms of Use Might Also Include a Digital Millennium Copyright Act Policy

Finally, any website allowing users to upload content, communicate on forums, or provide other information might require a Digital Millennium Copyright Act (DMCA) policy as part of its terms of use.  A DMCA policy may insulate your business from the risk of liability associated with copyright infringement caused by user-provided content.