Terms of Service

Terms of Service (ToS) is the contract between a company and its users governing how the product or service can be used. Also called Terms of Use or User Agreement, it covers acceptable use rules, intellectual property terms, payment terms, liability limitations, warranty disclaimers, dispute resolution mechanisms (arbitration, governing law), and termination conditions. ToS is the legal foundation of every product-customer relationship and required for any commercial product. It is the document users agree to (often by simply using the product) and that creates the legal relationship.

The standard contents:

Acceptance and modifications:

• How users accept the terms (account creation, product use).
• Right to modify terms.
• Notification of changes.

Account terms:

• Account creation requirements.
• User responsibilities for account security.
• Account suspension and termination.

Acceptable use:

• What users can do with the product.
• Prohibited activities.
• Consequences of violation.

Intellectual property:

• Company's IP rights in the product.
• User content ownership and license to company.
• IP infringement claims.

Payment terms (for paid products):

• Pricing and payment.
• Refund policies.
• Recurring billing.

Warranty disclaimers:

• Product provided "as is".
• No specific warranties (except where required by law).

Limitation of liability:

• Cap on company's liability.
• Excluded damages (consequential, special, etc.).

Indemnification:

• User indemnifies company for user's misconduct.
• Sometimes mutual indemnification.

Dispute resolution:

• Arbitration (typically).
• Class action waiver (where enforceable).
• Governing law.

Termination:

• How either party can terminate.
• Effect of termination.

Why ToS matters:

Legal foundation: defines the user-company relationship.

Risk management: limits liability, manages disputes.

IP protection: ensures company owns product IP.

Acceptable use enforcement: enables ban/termination of bad actors.

Common ToS failures:

Not jurisdictionally appropriate: missing required disclosures for specific jurisdictions.

Overly aggressive: terms users won't accept; regulators may strike down.

Inconsistent with privacy policy: contradictions create vulnerabilities.

Not updated: stale terms don't reflect current product or practices.

Hidden: users can't find or read.

What founders get wrong: Using generic boilerplate Terms of Service that don't reflect actual product or required jurisdictional disclosures. The right discipline: jurisdiction-appropriate templates, consistent with privacy policy, updated as needed.

Related: Privacy Policy · Arbitration Clause · Indemnification Clause · Mutual NDA · Master Services Agreement

FAQ

What are Terms of Service?
The contract between a company and its users governing product use. Includes acceptable use, intellectual property, payment terms, liability limitations, warranty disclaimers, and dispute resolution. The legal foundation of every product-customer relationship.

What's the difference between ToS and Privacy Policy?
ToS: contract governing product use (rules, IP, liability). Privacy Policy: disclosure of data practices. Both required but address different things. Both should be consistent with each other and with actual practices.

Do I need a lawyer to draft ToS?
For early-stage products: well-known templates (Termly, Iubenda) are reasonable starting point. For meaningful products: should have employment or commercial counsel review or draft. For complex products (financial, healthcare, regulated): definitely need legal counsel.