Do I need terms of service for my website or app?
Takeaway: Yes, your Terms of Service is the fundamental, legally binding contract between your company and its users; it is an essential document that sets the rules of the road and provides critical liability protection for your business.
If your privacy policy is the document that governs your relationship with your users' data, your Terms of Service (TOS)—also known as Terms of Use or Terms and Conditions—is the document that governs your relationship with your users themselves. For any startup that offers a website, an application, or any online service, a well-drafted TOS is a non-negotiable legal requirement.
The TOS is the formal, legally binding contract between your company and every person who uses your product. It sets the ground rules for your service and provides a powerful set of legal protections for your business. Without a TOS, you are operating in a legal vacuum, with no clear rules governing your user relationships, which exposes your company to significant and unnecessary risk.
What is the Purpose of a Terms of Service?
Your TOS serves several critical functions:
It's a Binding Contract: The TOS establishes a legal contract. By using your service, the user agrees to be bound by your terms. This is typically achieved through a "clickwrap" agreement, where a user must actively check a box that says "I agree to the Terms of Service" before they can sign up or use your product.
It Sets the Rules of Your Platform: The TOS clearly outlines what users are and are not allowed to do on your service. This includes prohibiting illegal activities, harassment, spam, and the posting of infringing content. It gives you the clear contractual right to suspend or terminate the accounts of users who violate these rules.
It Limits Your Liability: This is one of its most important functions. A well-drafted TOS will include several key clauses designed to limit your company's legal and financial exposure. These include:
A Disclaimer of Warranties: A statement that your service is provided "as-is" without any warranties.
A Limitation of Liability Clause: A provision that caps the maximum amount of damages your company can be liable for in a dispute.
It Defines the Dispute Resolution Process: The TOS can specify how and where any legal disputes must be resolved. It will often include a mandatory arbitration clause and a class-action waiver, which can be a powerful tool for avoiding costly, large-scale litigation. It also specifies the "governing law" (e.g., the laws of the State of Delaware) that will be used to interpret the contract.
Your TOS Must Be Tailored to Your Business
While there are standard elements, you cannot simply copy and paste a TOS from another company. Your Terms of Service must be tailored to the specific risks and functionalities of your business. It is a foundational legal document that should be prepared by experienced legal counsel who understands your product and your industry. It is the rulebook for your digital world, and it is an essential shield for protecting your company.
Disclaimer: This post is for general informational purposes only and does not constitute legal, tax, or financial advice. Reading or relying on this content does not create an attorney–client relationship. Every startup’s situation is unique, and you should consult qualified legal or tax professionals before making decisions that may affect your business.