How to Make Your Online Business Successful with Terms and Conditions

Terms and conditions are the most important document a business website has. They cover everything from payment terms, delivery of goods or services through to liability. Investing in good terms and conditions improves a business’ success.

This article will give you some key terms you need in your terms and conditions, how to make sure your customers are aware of your terms and whether you need a separate privacy policy.

Key Terms You Need

1. Reduce Your Liability

Terms and conditions can do a great job of reducing your liability. This can be by either reducing the type of liability or reducing the quantum of liability. It is important to be aware that these clauses work only to the extent required by the law. For example, claims of negligence cannot be completely reduced which means that liability waivers for negligence are unlikely to be enforceable.

The best clauses to reduce your liability are those which are specific to your business and the goods and services you offer. A template clause you could adjust would be: “You agree to release and indemnify our business from all damages, claims, demands and proceedings relating to our engagement and these terms and conditions.”

2. Protect Your Intellectual Property

It is integral for a business selling its goods or services to protect its ownership of them. It is even more important when that business is trading online and has a lot of value in its website and branding.

Protecting your intellectual property means making sure you retain ownership and that it is not distributed for free or without your consent.

An example of an intellectual property clause is: “All copyright, trademarks, patents, designs and other rights arising from intellectual property (whether registered or not) in the goods, services and this website belongs to us, unless otherwise expressly indicated.”

 3. Indemnity costs clause

If a customer breaches your terms and conditions, an indemnity clause allows your business to recover its legal costs in pursuing that breach. Without an indemnity costs clause, the courts generally allow a successful party to recover its legal costs on the court scale. This is roughly equivalent to 60% of out-of-pocket legal costs. This only covers costs spent once the legal proceeding is issued.

An indemnity costs clause allows all reasonably incurred costs to be recovered. This equates to approximately 80% of out of pocket legal costs. It covers costs spent both prior and after to issuing legal proceedings.

An example of an indemnity costs clause is: “You agree to indemnify us for all legal costs and expenses incurred, on a full indemnity basis, arising out of your breach and/or our enforcement of these terms and conditions.”

Accepting Terms and Conditions

To be enforceable, your terms and conditions must be accepted by your customers. The best way to do this with online terms and conditions is to have them as a pop up. On an ecommerce website design, the checkbox up must appear prior to the transaction being complete. The pop up should:

1. Have a tick box for the customer to accept them; and/or

2. Require their electronic signature.

Online businesses should also place some warranties or acknowledgements within their terms and conditions. These terms will place you in a stronger position if the terms and conditions are later the subject of an argument. Warranties you should consider including are:

• (a) An acknowledgement that the customer has read and understood your terms and conditions;
• (b) An acknowledgement that the person signing your terms and conditions has full authority to do so;
• (c) An acknowledgement that they have had an opportunity to seek legal advice before agreeing to your terms and conditions;
• (d) An acknowledgement that your terms and conditions are binding;

Is a Privacy Policy Necessary?

If your business turns over more than $3 million, it needs a privacy policy and is regulated by the Privacy Act 1988 (Cth). Businesses with less than $3 million in turn over can also opt in to the Act or be governed by it if it falls within a certain exception. For example, if it is providing or holding health information.

If you need a privacy policy, it should contain:

• (a) which personal information your business collects and keeps;
• (b) how the business will collect and hold the personal information;
• (c) why the personal information is collected, used, kept and divulged;
• (d) how the business will facilitate someone accessing personal information about themselves and get that information corrected;
• (e) how a person can complain about a breach of the Australian Privacy Principles, and how the business deals with that complaint; and
• (f) if and where that personal information is possibly to be disclosed to overseas recipients.

Your privacy policy does not need to be as prominent as your terms and conditions. It can be included in the pop up or simply sit in a link at the foot of your website.

If you do not need a full privacy policy, it is a good idea to include a few simple privacy terms in your terms and conditions.