It’s likely that every website, blog, mobile app and ecommerce store has a Terms and Conditions agreement posted, and for good reasons.

The Terms and Conditions agreement explains appropriate and allowed use of the website or app, what users can and can’t do on the site, what user rights are, and what information legally belongs to the company. In order to use the product or service, you must agree to abide by its Terms and Conditions.

Here, we’ll take a closer look at what a Terms and Conditions agreement is and why it’s important to have one for your online business.

By the time you’re finished reading this article, you’ll have a better understanding of the different clauses that should be considered when creating your Terms and Conditions agreement, why they’re important, and how different businesses display Terms and Conditions on their sites.

Understanding a Terms and Conditions Agreement

A Terms and Conditions agreement (also known as a Terms of Use or Terms of Service agreement) is a legally enforceable agreement that lays out the rules users must abide by in order to use a website, mobile app, or service.

After a user agrees to the Terms and Conditions, both the company and the user are in a position to enforce the terms of the agreement. The company can do so by refusing their service to customers who fail to comply with the agreement. Customers can file a lawsuit if they’re able to prove a breach in the Terms and Conditions they agreed to.

Typically, a Terms and Conditions agreement will contain sections and clauses that define and clarify key terminology and phrases, the end user’s rights and responsibilities, disclaimers, and information on how the user will be notified if the Terms and Conditions are modified.

For example, GitHub’s Terms of Service page has a section on the definition of the terms used throughout the agreement.

Simply put, without a Terms and Conditions agreement you would have no way of legally defining or enforcing how people can use the services you’re offering, or what they can and cannot do with them.

With a Terms and Conditions agreement in place, business owners can rest assured that their customers and clients won’t violate the terms of the agreement. In the event that they do, the rules should clearly define the procedure that will be followed.

Let’s look at an example. If, for instance, you are running a private forum and don’t want your site’s users to be posting content that’s in violation of copyright law, you could include a clause in your Terms of Conditions agreement that states the procedure you’ve adopted if a user posts content that violates copyright law. You might temporarily suspend the account or even terminate it, for example.

Terms and Conditions are useful for most websites – especially those with some sort of login or registration requirement and those operating in the e-commerce space.

Here are a few more reasons why it’s a good idea to establish rules and guidelines in your Terms and Conditions:

1. You Can Define Rights and Ownership

First and foremost, the rules you specify in your Terms and Conditions agreement can help you protect your business by making sure there isn’t any form of uncertainty or confusion between you and your customers. They allow both parties of the agreement to understand their rights and responsibilities.

In addition to this, a Terms and Conditions agreement gives you the opportunity to declare which content belongs to you.

For instance, as the owner of a web application, you would want to state that the site’s branding elements, design, content, and web application software belong to you and are protected by copyright law.

2. You Can Limit Your Own Liability

Another reason a Terms of Conditions agreement is useful is that it lets you legally limit your liability in cases where, for example, your content isn’t accurate or your services become unavailable.

The purpose of this clause is to let your customers know that you cannot be held responsible in case of any potential liability issues pertaining to the customer’s privacy, auto-renewal of subscription fees, unauthorized screen/data scraping or other mishaps.

3. You Can Establish the Governing Law

Suppose you run an online store for a business that’s registered in California but caters to a global audience. If a customer in the United Kingdom wants to file a lawsuit against you, would the laws of the United Kingdom apply or would the laws of the United States and the laws of the State of California be applicable?

Including a governing law clause in your Terms and Conditions agreement clearly states which laws will apply in the event of any legal disputes.

Some companies – especially those with more geographic reach – define multiple governing laws for users based in different locations. This is incredibly important and, therefore, should be carefully considered because one country’s law is often considerably different from another’s.