This article discusses various terms and conditions contained in many e-commerce agreements as well as related issues, pitfalls and problems. For sample e-commerce agreements, visit our legal forms section and follow the links.
If you are selling goods or services through the Internet, there are a number
of items that should be included on your web site to protect your business.
For example, you should identify your trademarks and copyrights, use care when
modifiable, ensure that terms and conditions contain the appropriate
jurisdiction, disclaimer of liability, limitation of damages and arbitration
A "legend" is one or
more statements regarding ownership, etc. that appear on your web site. Almost
always these should be placed on the main page of the web site so they are
prominent; often they appear at the bottom of the main page.
Notice. Although copyright notices are not required, they are strongly
recommended so that others cannot claim an "innocent infringer" defense by
saying that they thought the work had been released into the public domain.
A copyright notice should be in the following
Copyright 2003-2005 Bruce E. Methven. All Rights
You can also use the © symbol in place of
"Copyright", but do not use just (c).
The first year that the work was created must
be included. (Designating a first year later than the real one can invalidate
copyright rights, so error on the side of the earlier year.) Subsequent years
where substantial changes were made can be added either as a range (2000-2003)
or singly (2000, 2002).
The "All Rights Reserved" provides
additional protection in several South American countries.
for Other Parties’ Material. If you are going to mention other
parties’ trademarks or use other parties’ material on your site, it’s best
to provide a legend stating that the names and material are the property of
their respective owners, that you have no affiliation with them, and that they
have not approved your site.
The purpose is to prevent accusations by those
parties that you are implying they are endorsing your goods or services.
Of course, if you are mentioning other
parties’ trademarks, be sure to use the superscript SM or TM
or the ® just the way they do with their trademarks.
Material. You also want a legend stating that you hold all other rights
to the site, that your material and trademarks are not in the public domain and
that unauthorized use of your material or trademarks is forbidden.
Particularly if you are going to be linking to other sites that may be
problematic, you may well want a legend stating that you are not responsible for
the content on these other sites.
Protecting Your Trademarks.
You definitely will want to protect your trademarks on your web site by indicating
that you are laying claim to them.
Registered Names. If and only if you have a federally registered mark, an
® must be used after the mark
to get the full legal benefits of registration. This symbol can ONLY be used for
marks registered with the federal government. (Registration on a state register
is not sufficient, nor is a pending federal application where the registration
has not yet issued.)
Names. For names that have not received federal registration, your rights
can be strengthened by adding a superscript TM(standing for "trademark" for goods) ora superscript SM (standing for "service mark" for
services) after the name.
Using Other Parties’ Material and Names.
Issues. Just because someone else's web page does not contain a copyright
notice does not mean that the material is in the public domain. The only way you
can be certain you are safe is by either getting express permission from the
owner to use the material or finding a statement on that site that allows you to
use the material. (Many sites allow you to use their material for non-commercial
There is a "fair use" exception to the
copyright law that allows you to use part of another’s person’s work (not
the entire work) without consent for purposes of review, comment, etc.,
particularly if the use is non-commercial. Basically, the more of the work that
is taken and the more commercial the use to which it is put, the less likely
that this exception applies. Because this can be complicated, talk to an
attorney before trying to use the "fair use" exception.
With Competitors. Note that you are perfectly free to refer to
competitor’s products for comparison purposes as long as what you say is true.
What you cannot do is use a competitor’s name
or trademark in your site’s metatags or do anything that misleads purchasers
into believing you are affiliated with that competitor.
Similarly, you can’t link to other sites or
use frames in such a way that it seems like someone else's web page is part of
your website or material. In other words, it needs to be clear when a user is
accessing material on another site.
Privacy policies are not required but many sites have them and some users actively look for them.
live by it. All privacy policies should have a provision stating that you may
amend them by posting the changes on the web site for a minimum period of time
(often 30 days) before they take effect – and if the user continues to use the
site beyond that point, the user is bound by the new provisions.
If you are going to be providing your users with chat rooms, message
boards, e-mail server lists or other community services, you will want to have
threaten or harass another user, post or transmit ads (unless the site allows
that), impersonate another user, post false information, or do post anything
that is pornographic, defamatory or that infringes on another party’s
intellectual property rights. Obviously, the terms should state that the site
owner can ban a user for any violation.
owner for any violations.
The terms and conditions should make it clear that the site owner is not
responsible for the truthfulness or accuracy of posts made by users.
guarantee that the real-life identity of the user will not become known.
Domain. In most cases the site owner will want the user to agree that any
comments you post to any bulletin boards, blogs, chat rooms, email server lists,
etc. associated with the site become part of the public domain.
Millennium Copyright Act. The site owner can help avoid liability for
copyright violations by others using the site by registering under the Digital
Millennium Copyright Act. (See http://www.copyright.gov/onlinesp/.)
the owner may amend them by posting the changes on the web site for a minium
period of time (often 30 days) before they take effect – and if the user
continues to use the site beyond that point, the user is bound by the new
Ownership of Work on the
Versus Independent Contractors. If your webmaster/mistress is your
employee when your site is created or updated, you own the work. That is not
true with independent contractors: the contractor owns the work unless there is
a written agreement to the contrary. (Without a written agreement, you have only
a non-exclusive license to use the work.)
Your agreements with independent contractors should not only state that you own
the work, they should also include an assignment of ownership rights in the
resulting product to your company. "Work for hire" clauses alone may not be
In California many
companies forego the "work made for hire" language because California Labor
Code Section 3351.5(c) and California Unemployment Insurance Code Sections
621(d) and 686 treat anyone working under such a clause as an employee for
unemployment and disability insurance purposes.
You may want to
give yourself a power of attorney to sign copyright documents on behalf of the
contractor as well.
It’s fine to let
a web contractor retain the rights to any underlying software or scripts that
operate your site, so long as you have an irrevocable, royalty-free license to
Children's Online Privacy
The Children's Online
Privacy Protection Act ("COPPA") requires websites to obtain a parent's
permission before children under 13 disclose information. (Children under 18
should not be permitted to view information which is adult in nature.) Also note
that children under 18 may not be bound by any agreements that you have. You ARE
entitled to rely on a user’s statement that he/she is over 18 unless you have
some reason to believe they are not telling the truth.
Agreements. If you have an agreement for your purchasers on the web site,
it is best to force them to step through a "click-through" agreement. These
are the ones where the purchaser, as part of the purchase process, must scroll
through the agreement and click a button at the bottom that says the user agrees
to these terms. Alternatively, you can have the purchaser click a page that
states that the user agrees to the site’s terms and conditions, as long as it
provides a link to those right there and a way for the purchaser to exit the
purchase process if those terms are not accepted. If you do not do something
like this but only post your agreement or terms and conditions on another page,
you run the risk that the customer may later claim that they are not bound by
Warranties. Unless care is taken, implied warranties can arise from
material on the web site, other advertisements, brochures, etc. Because in many
situations software is considered "goods", the Uniform Commercial Code may
also automatically create warranties of merchantability (a vague warranty of
good, fair quality) and fitness for a particular purpose.
One way a purchase agreement can minimize or eliminate this problem is if it
states that there are no other warranties except as expressly set out in the
agreement, including any warranties of merchantability or fitness for a
particular purpose. (The latter two have to be specifically rejected.)
language generally must be conspicuous, e.g., in capital letters or bold type;
otherwise consumers (and others) may not be bound by it.
of Liability. Because claims by a disgruntled purchaser may be large
relative to the amount of money the site owner is making from the transaction,
the owner will frequently want to include various provisions to limit the
Repair. One provision that can be used expressly limits the purchaser’s
remedy to replacement or repair of the goods or services at the seller’s
option. If this is not done, the purchaser may go out on his/her/its own and
replace or repair – at prices far higher than the owner would incur – and
then try to force the site owner to pay for it.
Damages. Another provision that can be added states that in no circumstances
will the site owner be liable for special or consequential damages or lost
profits (or lost data). Often the consequential damages (alleged lost profits,
etc.) will be vastly more than the direct damage.
Yet another provision can state that in no case will the site owner’s
liability exceed the amount paid by the purchaser. Obviously, this is to prevent
damages that could otherwise exceed the amount the site owner receives from the
This should be a
separate paragraph from the disclaimers of warranty, since some courts that
strike a disclaimer clause will also strike a limitation of liability clause if
they are part of the same paragraph.
Because some states (and countries) have laws limiting what can be done with
disclaimers and limitations of liability (particularly with consumers), the
agreement should include a provision saying language along the lines that if any
provision is found to be void or unenforceable, then the narrowest portion
possible is removed and the remainder of the agreement continues to apply.
and Choice of Law.
The site owner should definitely have a paragraph stating that lawsuits (and
arbitration) may only be brought where the owner’s headquarters is located;
otherwise often the purchaser can bring litigation where the purchaser is
located. Particularly if the owner is selling to purchasers who are widely
scattered, the licensor will not want the risk of being sued all over the
Choice of Law.
The site owner also should have a provision stating that the law of its state
will govern any disputes.
In doing this it
is important to say that the state’s law – excepting
its conflicts of laws provisions – governs the agreement. Otherwise the
state’s law regarding contracts made across state lines may put the litigation
in the purchaser’s state.
Arbitration, also known as "private judging", is where an arbitrator is
appointed to hear evidence and make a decision that is generally binding on the
Disadvantages. Arbitration is often faster and less expensive than
litigation. In addition, while court cases are a matter of public record,
arbitrations are private. Some also feel that arbitration tends to favor
defendants somewhat more than litigation does, which may be an advantage to a
seller. In any case, if arbitration (and/or mediation) is desired, it must be
specified in the agreement.
Arbitration. The site owner may well want to ensure that the arbitration
clause states that class-action arbitration is not allowed. Otherwise if there
is arbitration, a number of other purchasers may join in.
If the seller is selling goods to people or entities in other countries, the
agreement should expressly exclude application of the United Nations Convention
on Contracts for the International Sale of Goods (sometimes called the
International UCC), which imposes a number of terms that the seller may not
want. It applies automatically otherwise (at least in those cases where the
"goods" are involved).
Note that different countries have different rules about cancellation of
credit-card charges; some have much easier payment-cancellation policies than
Arbitration. Where a U.S. company selling to people or businesses with no
assets in the United States and there is a chance that the seller will have to
take collection actions for a substantial amount of money, the agreement should
include an international arbitration provision.
It is much easier
to get a foreign court to enforce an arbitration award than a judgment obtained
in the U.S. court system.
arbitration is desired, the agreement needs to state that the New York
Convention on the Recognition and Enforcement of Foreign Arbitral Awards will
apply. Otherwise enforcement can be difficult.
A list of countries
that have signed the Convention may be found at http://arbiter.wipo.int/arbitration/ny-convention/parties.html
Note that some
countries do not recognize this Convention – and some countries make it
impossible to obtain enforcement in any case.