What Should a Terms and Conditions Agreement Include?

A Terms and Conditions (T&C) agreement should include basic clauses, such as Introduction and Acceptance of Terms, Age Limitation, Disclaimers and Warranties, Governing Law, Payment Terms, and Termination of Account.

This article discusses what a T&C agreement is, how it helps your business website or app, and what clauses and information it should include.

What Is a Terms and Conditions Agreement?

A T&C agreement is a document that outlines the rules and principles governing the relationship between a business and customers. It is also referred to as Terms of Service (ToS) or Terms of Use.

Simply put, a T&C agreement is where you set the rules and boundaries for using your website or mobile app. Customers must agree to the set rules and conditions before entering into business.

While a T&C agreement is not a legal requirement for your business under any law, the document is legally binding on you and your customers.

Why Do You Need a Terms and Conditions Agreement?

Having a well-crafted T&C agreement has many benefits for your business and customers. A T&C agreement helps to:

• Protect your business and intellectual property
• Set expectations and responsibilities for you and your clients
• Enhance customer trust
• Limit your legal liability
• Provide an amicable dispute resolution procedure
• Terminate abusive users

What Clauses Should You Include in a Terms and Conditions Agreement?

Some clauses are typical in almost all T&C agreements. Essentially, a T&C agreement should include these clauses:

Introduction and Acceptance of Terms

Your Terms and Conditions should begin with an introduction to the business and the purpose of the agreement. It should also inform the user that using the services offered means accepting the terms and conditions.

The introduction should also explain to the user how the rest of the details and principles of the agreement will shape their relationship with your website or app.

This is how Codeless Interactive introduces its business at the beginning of the Terms and Conditions document. It also informs users that theTerms are binding and accessing the site means agreeing to the Terms:

Governing Law

A T&C agreement should contain a clause that informs the users what jurisdiction will enforce the regulations and terms of the agreement. This clause, also referred to as the Applicable Law, protects your business from being sued for breaching laws outside your jurisdiction.

The Governing Law clause is especially crucial when dealing with disputes that involve international clients.

Here is an example of how Notion indicates that the laws of California will apply in all disputes:

Limitations of Liability and Warranty Disclaimer

Limitation of Liability and Warranty Disclaimer protects your business. This clause shields your business from being held accountable for any loss, data theft, or personal injury incurred while using your website.

A well-crafted Limitation of Liability and Warranty Disclaimer should be fair to both parties. It should offer ample security to help you build trust with your customers.

It’s advisable to include a disclaimer for:

• Data loss and device malfunctions
• Computer malware and spyware
• Product or service satisfaction guarantees
• Downtime due to server crashes or connectivity problems

Here is how Microsoft has structured its "Disclaimer of Warranties and Liability" clause:

You can also use the Limitation of Liability and Warranty Disclaimer clause to set a damages cap. Setting a damages cap means there is a limit to the amount of money a user can pursue in case of a lawsuit against your business.

Again, here is how Microsoft limits the amount payable in case of a lawsuit against the company:

Acceptable Use

This clause clarifies how users should interact with your app or website in the process of doing business.

The Acceptable Use section also allows you to prohibit fraud and other unacceptable activities. Such activities may include phishing, spamming, data scraping, posting sexually explicit content, or revealing other users’ personal information.

Here is how DatingAdvice protects its platform and users from abuse:

This clause may also include a sub-clause outlining the consequences customers can face if they violate the set rules. Such consequences may include:

• A warning
• Temporary suspension of account
• Removal of content
• Limitations of privileges

This is how Fiverr informs its users of the consequences of violating restrictions or abusing the Terms:

Intellectual Property

The Intellectual Property clause should address the rights to intellectual property belonging to your website or app. Intellectual property refers to anything intangible that belongs to your business.

This clause informs your customers that they are not allowed to use your intellectual property in any way. The clause prevents the sharing, distribution, and sale of any of your intellectual property, such as:

• Trademarks
• Copyrights
• Domain address
• Business name and logo
• Proprietary information

Here is an excellent example of an ‘Intellectual Property Rights’ clause from Apple Media Services:

Privacy Policy

Global privacy laws grant consumers some rights over their personal data, including correction and access to such data and opt-out rights. Therefore, your app or website must outline how you use and share the personal information you collect from customers.

You can do this by making reference to the Privacy Policy document in your T&C agreement. The aim is to inform your customers that there is another important document they should be aware of.

You can provide a link to the entire Privacy Policy document like Reddit does here:

Age Limitation

Your T&C agreement should have an Age Limitation clause that defines the age of persons allowed access to your website.The clause allows you to set the age of admissible users for legal and ethical reasons.

The Age Limitation clause should also mandate that parents and guardians of underage users agree to the terms on behalf of their kids. This means the parent or guardian is responsible for the kid’s activity on the website or mobile app.

This helps you avoid the legal consequences of breaching the Children’s Online Privacy Protection Act (COPPA), which prohibits collecting data from children under 13.

This example from YouTube sets the age limit for users and parental responsibility in its T&C agreement:

If you operate a site meant for adults only, you should set the age limit at 18.This ensures compliance with the Children's Protection Act (CIPA) and the Kid's Online Safety Act (KOSA). The two acts protect kids from harmful and dangerous online content in the United States.

Here is how Match sets the age limit or eligibility for its dating website:

Arbitration

The Arbitration clause binds signers to resolve all disputes with your business through arbitration instead of initiating a lawsuit.

An Arbitration agreement is valuable for simplifying disputes between your business and customers. It helps save time, money, and effort that would have otherwise been spent on lengthy court processes.

Arbitration involves a private process where a neutral arbiter makes a decision that is binding on both parties.

For clarity, the clause should specify the arbitration procedure, location, and exceptions (which disputes are not subject to arbitration).

Here is an example of an arbitration clause from Outlier.ai:

User-Generated Content

Your T&C agreement should contain a User-Generated Content section if your business website or app allows user-generated content like videos or photos.

Here, you give your users the right to upload content and extract information from content created by another user. 

This clause helps to avoid copyright-related issues and disputes. It should explain to your customers that your business does not own the user-generated content. Instead, your business gains a non-exclusive license to share the content uploaded on your app or website with other users.

Since user-generated content doesn’t belong to your business, you should issue a disclaimer to inform customers that access to the content from other users is at their own risk.

Here is an example of a "User-Generated Content" section from Instagram. Through this clause, Instagram explains its right to ownership of user-generated content. It further informs the user that the company gains non-exclusive rights to the uploaded content:

Payment Terms

A T&C agreement should contain a Payment Terms clause, especially if you operate a subscription business or an ecommerce website. Clear payment terms help your business maintain a steady cash flow.

This clause should go beyond merely stating the price of products or services. It should also contain the following information:

• Methods of billing and payment
• Applicable taxes and other charges
• Payment schedule and process
• Penalties for late payments
• Refund policy

ClearScope has done an excellent job here. The clause provides the billing method, payment dates, and applicable penalties:

Termination of Account

You should include the Termination of Account clause to protect your business from liability. This clause also helps you to remove abusive and non-compliant users from your app or website.

Here, you can also outline the reasons that can require you to terminate an account.

 Common reasons for termination of a contract include:

• Impossibility of performance (when either party fails to perform the required duties)
• Violation of contract
• Changes in governing law
• Misrepresentation (including impersonation)
• Irreconcilable disputes
• Unforeseen events such as war and global pandemics

Additionally, this clause should explain how customers can delete accounts if they wish to end their commitment to your business’ Terms of Service.

For the sake of transparency, it’s fair to provide a link to your Privacy Policy to let customers know what happens to their data after the termination of the contract.

Take a look at this screenshot from Stripe explaining the reasons for and procedure for the termination of the contract:

Here is another example of a Termination of Terms clause from The Hoth. It clearly outlines the reasons why the business may terminate a user account:

Non-Disclosure and Confidentiality

Your T&C agreement should include a Non-Disclosure and Confidentiality clause to protect sensitive business information you may share while interacting with customers.

The clause protects private business information, such as pricing strategies and customer lists. This information could harm your business if revealed to the wrong people.

A well-crafted Non-Disclosure and Confidentiality clause should define what your business considers sensitive information. It should also outline how such information should be used and who can access it.

Take a look at this screenshot from MetroOpinion to help you understand what the wording of a well-crafted confidentiality clause should look like:

Renewal of Term

Renewal of Term clause specifies how an agreement or user contract can continue beyond the initially agreed period.

This clause should clearly outline the conditions for automatic extension or renewal of the contract. It should also notify users about any changes that may apply to subsequent terms.

Renewal of Term clause allows your business to foster long-term relationships with users by providing flexibility to extend the contract period when necessary.

Here is an example of a Renewal of Term clause from ProBlogger:

Modification of the Terms

A Modification of the Terms clause, also referred to as Changes to Terms, is necessary to inform customers of any changes to the Terms and Conditions agreement.

This clause should inform your customers that you have the right to amend the terms. Because changes to terms may affect your customers, you must inform every account holder of any modifications to the Terms and the effective date to avoid disputes.

The clause should contain guidelines regarding how users will be notified if there are any changes to the Terms. You may choose to do so through an email or a banner announcement.

Here is an excerpt from Yahoo addressing issues regarding the modification of the contract terms:

Summary

A Terms and Conditions agreement has benefits for both you (the business) and your customers. A T&C agreement boosts customers' confidence and trust in your business by shaping the business relationship.

While a T&C is not a legal requirement, it shields your business from legal battles and losses that may ensue in the absence of clear guidelines. An agreement also confers better control over your website or mobile app.

The information to include in a T&C agreement depends on the nature of the business. However, a well-crafted agreement should have the necessary information to promote smooth business operations.

In your T&C agreement, you should include dispute arbitration guidelines, information-sharing procedures, laws that apply in case disputes, payment procedures, extension of term, and much more.