Terms of Use and Privacy Policy for Website… 2 Must Have Contracts for Your Online Business

Do you have a Terms of Use and Privacy Policy for Your Website? Did you know that one is legally required in all 50 states and in Europe, and the other, while not required by law, is strongly encouraged to prevent intellectual property theft and protect other important legal rights.

In today's video, we are going to talk about each of these contracts, why they are so important, and you how you get one of each for your website through our legal template store.

Do you know the difference between a website terms of sale and a website terms of service? Today, we're going to review the main differences between these two very important legal documents that as an online business owner you must have on your website.

I've done a lot of work with online entrepreneurs, and one of the most common questions that I get, and it's not even a question really, it's just a mistake that I see online entrepreneurs make, and that is they don't truly understand the difference between a website terms of service on the one hand and a website terms of sale on the other.

Now, dealing with these important contracts is part of pillar two of my LOCK it Down (legal) Protection System. I want you to know that these are both incredibly important contracts that you must have with regards to your website. But they serve two very different purposes, and we're going to go through those differences here today.

What many online entrepreneurs do is they go to a website, maybe it's one of their competitors, maybe it's someone else, and they copy or, honestly, steal a copy of the terms of service from somebody else's website. And then they paste it onto their website, and they think, “I got that done. Nothing more to worry about there.”

It's a huge mistake. You can't do that. Both the website terms of service and the website terms of sale are two very different documents, and they serve two completely different roles.

Not only that, but the copyright infringement issues aside, you can't be stealing other people's stuff and putting it on your website, that's just Law School 101.

Now, what some people will do is they can incorporate the terms of sale into the terms of service. That is okay, you can do that. But the language that's going to come from that terms of sale document is completely different from the language of those terms of service documents.

So I recommend that you have two completely separate documents.

To be quite honest with you, a lot of the people that I've worked with, they don't even have a terms of service on their website, let alone a terms of sale, and that in and of itself can lead to huge problems for online entrepreneurs.

What Could Happen if You don't have a Terms of Use and Privacy Policy for Your Website

So before we get into the big differences, let's talk about, practically speaking, what's at stake if you don't have one or both of these documents on your website:

  • it could expose you to potential liability for copyright infringement
  • it could allow your IP to get stolen
  • could open you up to unforeseen damages
  • you are failing to have appropriate boundaries in place with visitors to your website and people that buy your products or services
  • you will have no recourse if somebody purchases your products and services and then ask for a refund or request a charge back
  • you're not going to have any legal mechanism in place to enforce your contractual rights if somebody should violate those rights by visiting your website or, again, purchasing one of your products or services.

There's a whole lot more at stake than just this short little laundry list that I put in here too.

Who the Contract is With – Difference #1

The first main difference is who the contract is with. The website terms of service is a contract between you and anyone who visits your website. By visiting your website, that visitor presumably will have read your terms of service.

I realize nobody ever does that. But they would have presumably read that terms of service, and then they're bound by those terms of service if they should do something that they're not supposed to be doing with the information on your website or on the website itself versus a website terms of sale.

A website terms of sale is a legal document that is between you and anyone that would purchase one of your products or services through your website. Completely different contract.

Now that you know that, you should realize that these are two completely different contracts. They serve not the same purpose in the slightest. Does that make sense?

Purpose of the Contract – Difference #2

So let's get into number two, what is the purpose of the contract? Well, the purpose of the website terms of service, which is between you and the visitor to your website, is to help limit your liability for known or unforeseen damages.

If you use the proper language, I should say, it provides you with a safe harbor for copyright infringement claims, and it can help to disclaim you from any potential liability that visitors to your website may incur.

A good example of this would be if you are providing information about financial things on your website or health or fitness or stock trading or legal or professional advice, anything like that.

If somebody visits your website and then acts on the information provided on your website, and then they get hurt as a result, they can't come back and sue you for damages related to that information you provided because you have a terms of service in place that's going to disclaim you from any future liability.

The purpose of the website terms of sale, like I said, it's again for a contractual relationship between you and somebody who purchases your goods or services on your website. So it might include:

  • a refund policy
  • a mechanism for collections in the event somebody doesn't pay under a payment plan
  • a charge-back policy, so what happens if somebody tries a charge back with your website
  • it can protect your intellectual property and people a license to use whatever products they're purchasing from you in certain ways
  • it can establish clear boundaries of your professional relationship

There's a whole lot more issues that can be included in that contract, that terms a sale, which I'm going to talk about in another video. But for starters, just understand that these are the biggies that you need to include in your website terms of sale.

When the Contract is Triggered – Difference #3

All right, so the third big difference is when the contract is actually triggered. The website terms of service is triggered when somebody visits your website.

So if somebody visits your website and you have that terms of service in place, they have constructive knowledge of that terms of service, and they are presumed to have read and gone through that contract and, therefore, are bound by the terms of that contract.

Versus the website terms of sale is triggered when somebody initiates and completes a transaction on your website.

So if they sign up for a consultation call, if they purchase a digital downloadable product, if they purchase a course from you, if they purchase any other type of physical or digital product on your website, then that is when that contract is going to be triggered.

How You Notify the “Customer” of the Contract – Difference #4

The fourth main difference is how you notify the visitor or the customer of the existence of the contract. Well, again, as I said before, when a visitor to your site comes to your site, they're going to have constructive knowledge of that contract because they're visiting your site. Assuming that you've included the terms of service in the footer throughout your entire site so it's easily accessible.

Oftentimes, if you go to another website, you'll see at the very bottom there's a little link that says legal information or terms of service or terms or something like that. That is the link to the terms of service that is going to bind whoever is visiting their website with the way they can and can't use your website.

On the other hand, the terms of sale, you notify the client or customer of the existence of the terms of sale when they go to complete their transaction.

Typically, the way this is done, you, number one, can have a link in the footer of every page of your website. That's fine, you can do it that way. But what I recommend and what I think best practices is with regards to the terms of sale is that you have a link in the checkout page itself, and the client or customer has to check the box acknowledging that they have received and read through the terms of sale before they complete the transaction.

I also like to include a link to my privacy policy in that checkout page as well. But that's beyond the scope of this video, we'll do that in another video.

What are the Best Practices with a Terms of Use and Privacy Policy?

Now, let's talk about the best practices with each of these documents. With regards to a website terms of service, best practice is you really want to be reviewing that contract on a regular basis, but at a minimum, I would say at least annually.

You want to make that part of your year-end checklist to go through and review that contract and make sure everything is still valid, make sure there haven't been any changes in the law that would impact that contract that you have. And if you made any changes to your terms of sale that are incorporated into that document, you definitely would want to update those.

Now, with regards to the terms of sale, you also want to be updating this quite regularly. You want to be looking at this document, but you're probably going to do it a little bit more frequently than with the terms of service because you might be adding new products to your webpage.

So whenever you launch new products on your website, you want to make sure that your terms of sale is updated to include those products. Or if you decide to change your price or your refund policy or anything else related, payment plans, anything else related to your products or services that you're offering, you want to make sure that you update the terms of sale at the same time.

And you want to actually incorporate a review of the terms of sale either through yourself personally or through the attorney that you're working with to develop that terms of sale. You want to make sure that that happens regularly as part of your process when you're creating new products and services for your online business.

So next steps is I would highly recommend you go to your website after you get done with this video and check to make sure that you have a proper terms of service or terms of sale on your website. If you don't, you need to get on this and get one in place as soon as possible.

We actually have a template store. We have a website terms of sale and a website terms of service available for purchase through our legal template store. You want to check that out.

In the meantime, here is another video that you can check out that goes through six of the main reasons that you may need to include a contract in your business

Do you want to learn more on how to properly setup your online business legally? Check out our LOCK it Down™ (legal) Toolkit. Click here for more information!

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Hawthorn Law is a Document Filing Service and CANNOT provide you with any legal or financial advice. The information provided on this website is designed to provide information in regards to the legal aspects of online business. However, it is presented with the understanding that Hawthorn Law is not engaged in rendering legal, accounting or other professional services. If legal advice or other professional assistance is required, the services of a licensed attorney, tax professional or financial advisor should be sought.