Practical Rules for Drafting E-Contracts- (Part 1) – Femi Daniel

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Online Terms and Conditions

The Business Dictionary defined terms and conditions as general and special arrangements, provisions, requirements, rules, specifications, and standards that form an integral part of an agreement or contract.[1] Terms and conditions are fundamental to a successful online business. The following are tips for drafting a good terms and condition.

  1. State the title of the Terms and Conditions eg. Zeros Service Terms and Conditions.
  1. Agreement and application clause: These terms and conditions constitute your Agreement with XYZ Limited (state your corporate identity) and will apply to your access and use of ABC (product name) services provided via www.abc.com, the ABC application (App), and any other medium indicated by XYZ Ltd. in future
  1. Definition of terms: This may come immediately after the introduction or at the end of the document. It is important to clearly state certain words that recur or specially construed for the purpose of the contract. For example, it is good practice to define the product/service to avoid any ambiguity.
  1. State product or service capabilities. As much as possible explain the various deliverables on the product or service. This is where you identify the service features and explain it in the simplest and most concise manner. Eg. Loan Services: with XYZ You can access automated loan services with hassle free, online verification capabilities
  1. State how a contract is established. You must state how your company enters a contract with the service user. Is it by enrolling on your site through a pre-defined process?, is it by installing the App?, is it by integrating your platforms through an Application Programming Interface (API) or other technical means? Any or all of the above could be your preferred contracting model. The question to be asked here is, what is the status of a consumer who merely subscribes to the platform without actually making a purchase? It is a classic principle of common law of contracts that, a promise not under seal is enforceable only if it is made in return for another promise or an act; whether a positive act or forbearance . Except otherwise decided by the courts, this position remains. However, in the context of electronic commerce, this existing contracting framework is seriously challenged. It is one thing to subscribe to Konga.com a popular e-commerce site. This subscription allows Konga to send you promotional materials, qualify you for rebates, coupons etc. it could also mean automatic or non-automatic update of the software which could affect the device being used. It is however a different issue if a subscriber now clicks on a product or service of interest, fills the required information fields, enters payment details and clicks to send the instruction to the site owner. At this point, the subscriber has made a valid offer to the service provider. The provider still has the right to accept or reject. If the offer is rejected, the money paid is refunded. If accepted, the service provider is under obligation to make good the service promise.
  1. State Authorisations: It is important for the service provider to state its statutory and corporate authorisation to provide the service. It is also important to extract requisite authorisation from the prospective user, any action that may be construed as infringing or breach of good faith. For example, You authorise us to, directly or through third parties, make any inquiries we consider necessary to verify your identity. This may include verifying the information you provide against third party databases.
  1. Warranty Promise: A service may be provided on ‘as is’ or ‘as available’ basis. This implies that the service provider gives no warranty for such service. Giving warranty could be an impressionable marketing strategy by service providers. In drafting your T & C this issue must be addressed in no uncertain terms. Aside from the omnibus ‘No Warranty’ provision, it is important to further state some specific issues for which you would not be giving warranty.
  1. Limitation of liability: It is important to state the extent of your liability in the event of loss of income, profits, business, opportunity, contracts or any indirect, special, incidental or consequential damages arising out of or in connection with the service. Where you agree to be liable state the maximum liable amount or a clear scenario to calculate the said sum. Eg. Our liability to you or any third party in any circumstance of proven liability by us, shall not exceed the fees paid or payable to us in respect of the specific transaction that gave rise to the claim or liability.
  1. Indemnification: The service user should indemnify or ‘hold harmless’ the service provider from any claim or demand arising from unlawful or negligent use of the service.
  1. State obligations of parties: State particular obligations imposed on the user and the service provider for the service to be consummated. It is a dangerous practice to ‘copy and paste’ obligations from another site. The peculiarity of your service offering would determine the contents of this clause. For example if your application requires the user’s phone to have certain functionalities to perform optimally, it is important to state this to reduce service delivery complaints and possibility of administrative or court action.
  1. Service support mechanism: The Service provider should state its support mechanism such as contact email, phone number, USSD, website or any other mechanism it wishes to use in addressing customer issues. This information is crucial both as a conflict prevention and liability avoidance strategy.
  1. Commercials: The service provider is expected to state the fees for transactions. As discussed under consideration, what makes the contract valid is the exchange of valuable consideration. Also state whether the fees are inclusive or exclusive of applicable taxes. If this is not explicitly stated, the service provider would be liable for the tax payment. However for convenience, it is usually advisable to factor in the value-added tax into the cost price. Also ensure your electronic receipt shows any tax deduction you have made for accountability purposes. Another important point is to reserve the right to change fees. It is however important to give current and prospective customers a notice period for them to decide on continuing or discontinuing with the service.
  1. State your acceptable use and unacceptable use policies. Your site should ordinarily be used for legal purposes. It is however important to specifically declare your stance on certain kind of activities e.g pornography, Ponzi scheme, mala fide sales or purchase of goods and services, banned drugs and substances etc. This clause must be drafted generally with some specific examples. This clause is most important as platform uses are becoming more converged. You can use a site to buy news, airtime, render services and offer payment services. A good draftsman would envisage the possible abuses that can be made on the product and service offering, then make a general statement or principles and give examples fit for the particular area of business interest.
  1. Unpermitted Access, interference and cybercrime: in this clause you must extract a promise from the user that he/she would not use any technical or manual device to process, monitor, copy, deface or alter the codes or Application interface of the platform. Users must also not engage in any activity that would amount to unreasonable overloading of the platform. Also cybercriminal activities like spamming, introducing viruses, illegal hacking etc. should be expressly disallowed. You may also state here whether you permit copying of your intellectual property with or without permit.
  1. State Service Provider’s remedies and right to terminate or restrict activities. It is very important as a service provider to hold the ace in terminating or restricting service to customers. You should state the basis for unilateral termination e.g breach of agreement, invalid information, significant risk of fraud, legal liability etc. however it would be illegal for you to terminate service to customers on the basis of religious, ideological differences or sexual orientation.
  1. Confidentiality: state your promise to protect confidential information of the customer while also stating your confidentiality expectation from the customer.
  1. Intellectual Property Rights: An online platform unlike its physical expression is majorly comprised of intellectual capital. The domain name, application interface, programming, source code etc. are all intellectual properties that must be protected. The use of the service or platform does not automatic grant the customer right to use the intellectual property. This clause should also state the major intellectual properties in the platform e.g domain, trademarks, service marks, patents etc.
  1. Dispute Resolution: You should state the governing law, jurisdiction and dispute resolution procedure. These are core components of a good online agreement. Choosing your governing law and jurisdiction are key business decisions. You don’t want to choose a jurisdiction that is harsh towards online businesses neither should you pick a location that would make dispute resolution costly and ineffectual.
  1. Force Majeure: Situations beyond your control may arise in which service delivery would be impossible. These are called force majeure The components of this clause broad. For an online business in addition to other standards incidents you should also add issues such as critical national power failure, internet and communication link failure, cybercriminal attack, cyber-terrorism etc.
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[1] www.businessdictionary.com/definition/terms-and-conditions.html

Femi Daniel Esq. LL.M; B.L
Technology Lawyer; Author- COMPUTER LAW IN NIGERIA (2015)

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