Many startups copy their terms of service from a larger company and never look at them again. The result is often a document that promises things the product does not do and describes processes the team does not follow, so when a customer complains, the support team cannot apply the terms and the company cannot rely on them.
Good terms describe the service in the way the company actually sells and delivers it. The customer should be able to understand what they are getting and what it costs, as well as how to leave if the service does not suit them, and the team should be able to apply the same terms to every customer. The terms should be reviewed whenever the product changes what the company charges or how customers cancel or retrieve their data.
Who provides the service
The terms should name the contracting company and explain its role. If the company runs a marketplace that connects buyers with independent providers, the terms should say who supplies the underlying service and who is responsible for payment and refunds, and if the company takes direct responsibility at checkout, the terms should say that clearly.
The terms should also explain who may open an account and what authority is needed to sign up on behalf of an organisation. They should set out user roles and responsibility for activity on the account, with a clear way to report compromised access and for an administrator to remove a former employee.
Business customers who negotiate pricing or scope should have an order form that overrides the online terms where it says so, and the company should keep a record of those exceptions for the team managing the account.
Explain the bill before the customer agrees
The terms should state the currency, the billing cycle, VAT and any usage charges. For a free trial, they should explain when payment begins and how to cancel before it does, and automatic renewal, together with the notice needed to avoid it, should be made clear before purchase.
The terms should also explain what happens when a payment fails, including any grace period and suspension, and set out credits and refunds in a way the support team can apply consistently. Refund terms should be checked against the Federal Competition and Consumer Protection Act and the FCCPC's guidance on consumer rights before the company relies on a general "no refunds" clause, because consumers have rights that a contract cannot remove.
A price change clause should say how much notice customers will receive and what options they will have. For a prepaid term, it should say whether the price stays fixed until renewal, and the billing system and customer notices should apply the same rule the sales team has promised.
Permissions that match how the product works
If customers upload content, the company needs a licence to host and process that content in order to deliver the service, while customers usually keep ownership of it. Any other use, such as analytics or training AI models, has to be dealt with clearly in the terms and in the company's data arrangements.
Prohibited conduct should be described in plain language, so that the support team has a consistent basis for enforcing the rules. The terms should explain moderation and suspension, including any review process and how the company will act quickly in cases of serious harm, and if the product has an API, they should cover credentials and usage limits.
The company's privacy notice and data processing terms explain how it lawfully uses personal data contained in customer content, and the content licence and the privacy terms should describe the same service and the same uses.
Describe the service honestly
The service and its real limits should be described accurately. If the company promises a level of availability in a service level agreement, it should explain how availability is measured and how customers can claim the remedy, and support hours and response times should match what the team can actually deliver.
The company should also check what its own providers promise before committing to restoration times or unlimited availability. I explain why a provider's service credit usually covers far less than the refunds a company may owe its own customers in before your business depends on another platform.
If the company gives an indemnity, for example against intellectual property claims, the terms should define the claims covered and the process for making them, as well as who controls the defence and what happens if a claim is settled without consent. The indemnity should sit next to the liability terms so that everyone can see which limits apply.
Liability and disputes in plain terms
The liability cap should be based on a clear calculation, such as the fees paid in the previous twelve months, and the terms should say whether any claims have their own cap or are excluded altogether. The treatment of indirect losses and the exceptions the law requires should also be explained, and the company should check that its limits would hold for its actual customers, especially consumers, whose protections under the FCCPA cannot be removed by contract.
The terms should provide a complaints route and a dispute process that suits the service, and they should state the governing law. A clause requiring a small Nigerian customer to bring a claim through arbitration in London is unlikely to be fair or enforceable, and local consumer protections will apply in any event.
Let customers leave cleanly
The terms should explain how either side can end the contract and what happens to any prepaid fees. Customers should have a set period to export their data in a stated format, with a note of whether help with the export costs extra, and the terms should say when access ends and when data is deleted, subject to any records the company must keep by law.
For changes to the terms, the company should explain how customers will be told and how they will accept the changes. It should keep the version each customer accepted and the evidence of that acceptance, including the original sign‑up process, because that record is what the company will rely on if there is a dispute about which terms applied.
When the product or the sales model changes, the terms and the support team's instructions should be updated together. The company should check that sign‑up, billing, cancellation and data export all follow the new terms, and keep evidence of acceptance for customers who are moved onto them.
This article is general information and not legal advice. For guidance on your specific circumstances, speak with us directly.