Terms of Use: Do they have to be Fair?

Who knows what fair is, anyway.  But, under certain circumstances, your terms of use cannot be completely unconscionable.

When drafting terms of use for your Website, you are probably inclined to make them as favorable to you as possible, thinking it is a "take it or leave it" proposition.  If visitors don’t like your terms of use, they can take their web surfing elsewhere.

Unfortunately, this approach may cause your terms of use to be unenforceable when brought into court by a disgruntled web site visitor.

As blogged about by E-commerce and TechLaw, Linden Research, the creator of Second Life, had to learn this the hard way in federal court recently.

The terms of use on Second Life provided that anybody who wanted to fight a legal dispute over the use of Second Life had to do it by arbitration and could not take Second Life to court.

Well, someone did take them to court and the federal court decided that the arbitration provision was unenforceable, because it was procedurally and substantively unconscionable ( Bragg v. Linden Research Inc., No. 06-4925 (E.D. Pa. May 30, 2007).

Some of the court’s reasons:

  • There is no second Second Life.  Thus, Second Life had "superior bargaining power" over its users.
  • The arbitration provision was hidden in a long provision with no descriptive heading.
  • The rest of the terms of use were  very one-sided and in favor of Second Life.
  • Second Life could not prove to the court that its one-sided terms of use were necessary for its business.

Thus, resist the urge to be a jerk and put yourself into the shoes of your web site visitors.  Clearly, you want to protect your own, but try to be somewhat fair.

**This post is for informational purposes only and does not constitute legal advice**

About Imke Ratschko


Imke Ratschko is a New York Attorney helping small businesses, business owners and entrepreneurs with all things "Small Business Law," such as litigation, contracts, business owner disputes, shareholder and operating agreements, sale or purchase of a business, investors, and starting a business. You can reach her at 212.253.1027.

5 comments

  1. Tell it like it is! Spoken like a true gentleman.
    (And Linden Labs deserves to lose HARD).

  2. This is very well written.Thanks

  3. I was wondering how much power your TOS would hold up. You just answered my question about if you could still take a site to court even if the TOS said you could not. TY!

  4. Very nice post, far much better than most that I have read. I like the way you mentioned the facts of the matter and the sequence that you followed because that is where it all is. Basically you will be a winner when you draft your terms of use leting everybody include you to be a winner. Win – win is the best way to go.

  5. Good post. I have never really bothered about “terms of use”.Never bothered about them.
    So, terms of use on websites arent sufficient detrerrent. Interesting! But seriously, every user is solely responsible for his actions.
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