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Terms of service traps - issues for merchants and consumers

Do you read the terms of service and agreements before signing up for anything online.. and then review them regularly? Are you developing terms of service for your business? Whether you're an online merchant, shopper or mixture of both; there's some things you need to know.

1. The terms of service are not there to protect the consumer - they are to protect the provider and are designed with this primarily in mind. 

2. Service providers know that many people won't bother reading the terms, and therefore some bury their "gotchas" in that document. For example, the "money back guarantee" offered may come with strings attached - those strings will likely be buried in the terms. It's pure and simple deception when it's done with intent. Proving that intent is another matter.

3. Most terms will include verbage that states your account or the relationship can be terminated by the provider at any time and for any reason. This is an unfortunate, but a legal and necessary inclusion; but the merchant knows that exercising this can backfire.

4. In many terms of service statements, you'll notice something along the lines of this:

"X reserves the right to change this policy at any time and without notice"

... so the terms you originally signed up under may change drastically and without your knowledge.


Unconscionability and contracts

While some service providers are of the opinion that anything they put in their Terms is legally binding as the customer agrees to it; that's definitely not the case. 

It's always wise to consult with a legal professional when developing your terms of service. When doing so, remember that the legal professional will only advise based on the information you present to them. For example, if your on-site or off-site marketing promises consumers something entirely different to what your terms reflect, you may be on shakey ground should it come to a legal challenge.

In most countries there are laws concerning what's known as an "unconscionable" contract. Unconscionability is a defense against the enforcement of a contract based on the inclusion of terms that are illegal, grossly inadequate, deceptive or unfair to one party.

While that's all well and good; mounting a case based on unconscionability is stressful, time consuming and expensive. 

The bluff parade

Simply threatening legal action won't scare the provider in many instances as consumers often use this as a bluff, it's a strategy that's been well and truly abused. The provider will simply bluff in return.

The bluffs then go back and forth until the consumer gives up or the provider gets some sort of indication (from a lawyer) you really mean business. Don't waste your time threatening legal action unless you are determined to go through with it. 

If you fully intend on bringing in your lawyer, you'll get some indication within the first couple of exchanges with the provider whether this may be necessary. Minimize the back and forth before arriving at the decision to bring in legal counsel; otherwise you're just again wasting more time. 

In fact, if it's a small amount being contested; simply give up after the first couple of exchanges and move on. It's simply not worth it. However, where larger amounts are involved; bear this in mind: unless the provider is particularly stupid or gung-ho; they *won't* want the dispute escalating into a court case.

An ounce of prevention

A wiser alternative is to avoid all this unpleasantness - do yourself a favor in the first place and always read the terms to avoid such a scenario and check them again occasionally throughout the relationship. If in doubt about what terms mean, ask the provider for clarification and keep a copy of those communications - if they are hesitant or dance around the issue; is this someone you really want to do business with? An ethical provider should be more than happy to lay their cards on the table.

On the flip side, service providers should also take note that while most unhappy consumers you've locked into a contract with "gotchas" will rattle their sabers for a while yet not escalate past that point, there are those who will. One ruffled consumer with the time and resources to invest in a challenge may land your business in a stack of hot water and incurring huge legal expenses. Carefully evaluate if the customer has a valid point before puffing up your chest and engaging in what could become a protracted, nasty battle you may lose. 


Enforcing harsh terms and backlash

Additionally, and ethical considerations aside, in a world where word-of-mouth marketing is so important - who needs the sort of bad publicity that one (rightfully) angry consumer can generate? Remember that "all publicity is good publicity" is a dangerous myth. Imagine what sort of impact may occur if when searching for your business on a search engine, a slew of negativity turns up on the first page of results.

Marketing vs. deception

Play fair, stay sweet. Effective marketing and deliberate deception are not the same beasties. While some consumers are freeloaders or vindictive by nature, most aren't. Honest naivety is common. If you need to trick people into signing up or staying on with your service through the inclusion of questionable terms, you need to take a closer look at your product rather than blame the consumer. They've simply fallen victim to your marketing which likely promised or inferred something it simply couldn't deliver.

Related articles:

Customer complaints and the Streisand effect

Developing a privacy policy

Dealing with aggressive clients

Michael Bloch
Taming the Beast
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In the interests of transparency and disclosure, please note that the owner of Taming the Beast.net often receives goods and services mentioned in reviews for free, or may receive payments or affiliate commissions for advertising or referring others to merchants of products and services reviewed.

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