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Why Contracts Matter in eCommerce
In an online business, many customer interactions happen without direct conversation. Instead, contracts — particularly your Terms of Service (ToS) — define the rules of engagement. They protect your business, set expectations, and reduce disputes.
Terms of Service (ToS): The Online Contract
A Terms of Service agreement (sometimes called Terms & Conditions) is a legally binding contract between your business and your customers. While not required by law, courts regularly uphold ToS agreements if they are properly presented.
Essential Clauses to Include:
- Limitation of Liability – Protects your business from excessive claims.
- Dispute Resolution – Requires arbitration or mediation instead of costly litigation.
- Intellectual Property (IP) Rights – Clarifies ownership of your content, brand, and user-generated content.
- User Obligations – Sets rules on how customers can use your site.
- Termination Clause – Allows you to suspend or close user accounts if necessary.
Clickwrap vs. Browsewrap Agreements
- Clickwrap – Customers must affirmatively click “I agree” before purchase or signup. (Most enforceable in court.)
- Browsewrap – Terms are posted on your site but customers aren’t required to click. (Less enforceable, often rejected by courts.)
Always use clickwrap for key agreements, especially for online sales and subscriptions.
Return, Refund, and Shipping Policies
Separate from your ToS, you should also have clear, standalone policies that customers can easily find. Courts often require businesses to honor what they’ve promised in these documents.
Key Takeaways
- Terms of Service function as your business’s legal shield.
- Clickwrap agreements are the gold standard for enforceability.
- Transparency reduces customer disputes and legal exposure.
Review your site’s ToS. If customers aren’t required to “agree,” update your checkout or signup process to include a clickwrap agreement.
If you want to read more about online contracts & terms of service, please see Recommended Books.
