New court decision on Terms of Use agreements

Small business tips - SandGarden Law GroupA new decision in a New Jersey state court may soon affect your Terms of Use agreement.

Because everything is now online, many of our commercial and retail sales or services can be transactions happening in multiple states at once. So even if you are a California business, you can still be affected by new laws or court decisions in other states if you have an online presence or sales.

Recently a New Jersey court decided that a New Jersey statute (the Truth-in-Consumer Contract Warranty and Notice Act) drafted over 30 years ago, applies to the terms and conditions of modern Terms of Use contracts. Specifically they decided that the Terms of Use agreement of a New Jersey retailer violated the Truth-in-Consumer Contract act by prohibiting rights in warranties and damages that New Jersey consumers would have otherwise had under New Jersey law.

So far this ruling hasn’t been applied specifically to online Terms of Use agreements, but if it does, it could be a game-changer. Many modern Terms of Use agreements have much more limited liability and warranties clauses than the rights that consumers have under state laws. Especially if the business owner operates in one state and is not conforming their Terms of Use to other state’s laws.

Best practices for now, until we see further developments in this area, is to make sure you are not using boiler plate Terms of Use and that your Terms of Use are not so strict as to prohibit rights given to consumers under state’s law; all state’s laws, not just your home state.

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