Article: Bob McElwain

The Small Business Library

February 21, 2001


Many products we buy are packaged with some sort of disclaimer or terms and conditions. For example, software delivered is commonly sealed in an envelope upon which conditions are printed. The claim is that in opening the envelope you agree to them. Some companies will not allow download of software. They insist on delivering. And one common reason for this approach is to be able to say in court that the customer agreed to having read the conditions upon opening the package.

In a sue-happy world such as ours, businesses must do what they can to protect themselves. A major condition in the above sort of contract is that the company can not be held liable for more than the cost of the product. That is, they require you to hold them blameless for consequential damages, and so forth.

Consequential Damages

I am not a lawyer. And do not claim any special knowledge in the field. But I have sold a lot of software. My attorney pointed out that such statements are mandatory, not because a court will be bound by one, but because my legal position is greatly weakened without one.

If I sell a piece of software that goes off track and destroys a customer's database, I will be liable, regardless of any claim about consequential damages the customer may have been forced to accept.

What This Means To You

It is likely safe to rip open a package containing new software without reading the disclaimer. For sure the company has no interest in coming at you. But there is far greater risk on the Web

A Popular Credit Card Trap

Most webmasters know they need to be able to take credit cards. But given the bewildering array of options, choosing a merchant service is an awesome task.

While not a scam, many services offer an account with no setup charge fee, but a hefty monthly fee, provided you agree to a four year term. This means if you want to change merchant services after a year, you will be billed for the remaining three years although unused. People get bit by this catch often. You can save a lot of grief by reading the terms and conditions carefully.

A Merchant Account Scam

An outfit may require they be allowed to keep your money for 180 days in the event irregularities are found in your account. They also point out that failure to provide supporting documentation upon request is grounds for termination of the account. And these two statements are buried deeply within the contract. Further they are worded with such care as to seem a situation you will never face.

While there are other approaches to this scam, one is for the company to wait until you have several thousand dollars due, then not pay come the settlement date. You will try to get your money, but find you're dealing with someone who doesn't seem to have answers. They'll ask for documentation regards recent sales. You will fax it to them. When you call back, they will say they haven't received it, and inform you your account has been canceled for non-compliance with the contract. Which is so, provided they did not receive what you sent. (How can you prove they did?)

You may or may not see the money owed. It depends upon where this outfit is in the cycle. Early on, you probably will get your money, but they will have the interest on it for 180 days. Later in the cycle, they may just disappear with your bucks and those of others, and start up again under a different name.

I don't know of a better example to demonstrate the need for reading terms and conditions with care. The above operation can cost you a ton, and possibly prevent you from getting another merchant account. Which may mean you're out of business.

Hiding The Fine Print On A Website

Most business sites present their terms and conditions. Often, however, the link to them is buried at the bottom of the page or in some obscure corner of it. Few visitors will see or click it. The terms and conditions only protect a business to the extent they can. If you are merely visiting the site, such links can be safely ignored. However, if you plan to participate with the site in some way, such as when signing up for an affiliate program, read that contract. It's a must.

Who Is Protected?

All such terms and conditions are written to protect the business, just as your attorney would write a set for you. With exceptions such as above, there is usually nothing unethical or devious in them. Just a committed effort to protect the company.

However, a fair contract will at least spell out the services to be provided. While it may offer little to protect your rights, it does *NOT* lay off on you. Any terms such as offered by GeoCities, which in effect steals content you create, should be avoided at all cost.

A Blatant Example

Some time back I was invited to submit my articles to a large outfit. The promise of wide circulation was true. And I would benefit from the exposure. But I was asked to sign a contract.

There was nothing in the document to protect me, only the company. I had to say no because of the following paragraphs, which I have edited so as not to reveal any names.

    "XYZ provides its services to you, subject to the following Terms and Conditions, which may be updated by us from time to time WITHOUT NOTICE TO YOU."

Who can be expected to return and keep up-to-date on the latest changes? While I have no desire to test it, I wonder if the above demand is even legal.

    "You agree to indemnify and hold XYZ, and its subsidiaries, affiliates, officers, agents, co-branders or other partners, harmless from any claim or demand, including reasonable attorneys' fees, made by any third party due to or arising out of articles you submit, post to, or transmit through our service."

I might have been able to ignore the first paragraph above, but this last one was a stopper. When I rejected the offer, the friend who had made it was quite surprised. "What risk are you talking about?" he asked. "You never say anything bad about anybody." My reply was that there is indeed very little risk. So why doesn't XYZ assume it? Or at least share it?

We are all liable for what we write and publish. And if you print one of my articles, I share the risk with you. Chances are slim to none there will ever be a problem, for I'm careful about what I write, and you are careful about what you publish. Libel is really the only risk, easily avoided.

But in dealing with XYZ, I'm indirectly part of a corporation. As a retired school teacher supplementing a modest pension by working the Web, I don't have sufficient assets to attract the attention of a lawyer working for a percentage.

XYZ, on the other hand, is a much better target of opportunity. A successful dot com, growing rapidly. Given a case, a lawyer could become very interested. And yet I was expected to accept *all* risks.

XYZ is not even required to inform me of a pending suit. Or to defend it in court. They can simply wait for the judgment, then come and take my home.

To me, courts seem more interested in the law than in justice. If there have been cases in which people have been nailed with such a clause, chances are I could be next. Maybe worse. I could become the center of a massive precedent setting case. Thanks. I'll pass.

Many Did Not

I followed the ezine published by XYZ for some time. And began to see familiar names on articles published. My hunch is they never did click to read the contract. They simply clicked to accept them. And added to their risk of doing business on the Web.

Why Add To Risk?

We are all at risk of a law suit. And anything we do can add to this risk. But in the general scheme of things, this risk is small. Why add to it unnecessarily? I will continue to read Terms and Conditions with care. Try it! You might just save a bundle. Even your business. Or even your home.

Article by Bob McElwain
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