Terms of Service for Websites and SaaS Companies:
Covering Your Assent

Authored by Bryan Springmeyer, a California business law attorney. The information on this page should not be construed as legal advice.

A quick note about terminology - terms of service usually contain terms & conditions for use and, in the case that the service is software (i.e., SaaS), a license to use the software. The license component of the terms of service often mirrors the language of an end-user license agreement (EULA). Agreements may be referred to by different names, but the goal is the same - to establish the terms under which the company is willing to license use of the website. For the sake of this article, I'll refer to these agreements as "Terms of Service" Agreements.

A Terms of Service agreement is a contract between the website's owner and the website's individual users governing use of the site. This particular variety of contract is referred to as an adhesion contract, as the user is forced to adhere to the terms of the agreement if they want to use the service. This is different than contracts where both parties have the opportunity to negotiate terms.

The same laws that govern adhesion contracts in general govern terms of service agreements. Companies are generally allowed to dictate the terms of usage, select the state law to use in interpreting the contract, and perhaps set the forum for lawsuits. There are limitations, however, and agreements may not contain provisions that are not permitted by statute, violate public policy, or are unconscionable (so unfair that they shock the conscious).

Apart from the actual terms of the agreement, an important component is making sure that the user agrees, or assents, to the terms. Similar to contracts written on paper, certain provisions may have problems with enforceability if the font size is too small or the language is otherwise hidden in the agreement. Additionally, certain requirements must be met in order to establish that a user has had the opportunity to assent to the agreement on the webpages themselves. American courts have typically held that Terms of Service agreements are enforceable when the terms, or a hyperlink to them, are prominently displayed on the website, and require the user to click a button asserting that they assent to the terms of the agreement.

Related Pages:

Safe Harbor Certification and Internet Privacy Laws