Category Archives: End User License Agreement

Implementing Terms of Service and Other Electronic Agreements

All too frequently, Terms of Service, Terms of Use and End User License Agreements (see our post on the differences between each) are found unenforceable when challenged in court because the agreements are not properly implemented.

To simply describe the implementation process (see our post on the technical aspects):

  1.  Present the agreement to the user; then
  2.  Require the user to affirmatively agree, usually through a click, to the agreement.

In the web context, implementation typically looks like this:

[Check box] I agree to the Startup Company Terms and Conditions (linked to the terms and Conditions)

[Continue] (or similar language, such as “Purchase” etc.)

In the above implementation approach, the user cannot proceed unless they check the box and click the button at the bottom of the page.

In the mobile context, implementation is more challenging given the need to balance legal implementation and user experience.  While the above approach can work, it may not be ideal from a UI/UX perspective.

One mobile approach is to present the agreement to the user, require that they scroll through the agreement and, once scrolled through, the user is presented with the following button at the bottom of the page:

[I agree] to the Terms and Conditions.

Given the differences between each mobile application, agreement implementation on mobile takes many forms and the above approach may not work for you.

Spending the time to determine the most effective way to implement your electronic agreements is vital as the agreements are worthless if found to be unenforceable.

Incorporating Online Agreements into a Printed Contract

While many agreements are entered into online, some online companies continue to operate partially offline.  Challenges arise when offline contracts require agreement to an additional online contract, such as a Terms of Service.  This is not to say that offline contracts can’t incorporate online contracts, rather, the online contract must be properly presented to the user signing offline to be enforceable.

When integrating an online contract into the terms of an offline contract, include a clear call-to-action on the part of the signatory.  This is a statement that signing the contract indicates acceptance of the online contract OR to only sign the contract if the signatory agrees to the online contract as well.  Ultimately, you want the signatory to indicate acceptance of the online contract clearly and in an informed fashion.

What calls-to-action don’t work?  A recent U.S. court case considered a link, above the signature line, to the terms and conditions (“Download Terms and Conditions”) and determined that this was insufficient to establish acceptance of the online contract.  As such, the mere existence of a hyperlink, without anything more to draw attention to the link, does not establish acceptance of an online contract.

Admittedly, while this post is more technical than most we put online, our goal is to remind our readers that caution should be exercised when trying to incorporate online contracts into the acceptance of an offline agreement.  While not impossible, contract language is pivotal to ensure enforceability of the online contract.

 

How to Implement Electronic Signatures

Online agreements require an electronic form of your signature, whether you click “I agree” or use a digital version of your offline signature.  Electronic signature laws in the U.S. and Canada do not address the correct signature format.  Instead, these laws focus on the correct process for creating an enforceable signature.

Three key considerations guide the electronic signature process:

1.  Identification

How do you identify the signatory?  In the case of a prospective user agreeing to a Terms of Service, identification may come in the form of an email address, first and last name and IP address.  Given the impersonal nature of online agreements, the identification challenge is establishing that signatory is, in fact, the signatory.

2.  Intention

How do you establish intention to sign?  Intention could be established through a digital version of your offline signature applied to a document or a user clicking “I agree.”  Ultimately, the user must understand what they are agreeing to and that they are, in fact, agreeing.  For example, placing the “I agree” button after the agreement provides the user an opportunity to understand the agreement before being asked to agree to it.

3. Integrity

How are electronic signature records retained to ensure originality and ease of production? Integrity may be established through a fixed user acceptance process whereby any user, in order to access a website, was required to accept certain terms.  Alternatively, in the case of a more traditional signed agreement, the agreement copy was retained in a locked file format, with date and time of signature logged.  In both cases, establish an electronic audit trail.

While there is no correct type of online signature, there is a correct process for online signatures that should be considered whenever an online agreement is required.

End User License Agreement vs Terms of Service – When does each apply?

This post aims to clear confusion surrounding two technology law terms:  Terms of Service (ToS) and End User License Agreement (EULA).  Often, clients use these terms interchangeably even though the terms refer to different business models.  Determining which term applies to your business will assist you when searching for legal counsel and  to understand your own business model.

End User License Agreement

An End User License Agreement addresses the license of copyrighted software to your users.  This agreement is used when users are installing or accessing computer code, such as on their phone/mobile device or computer.  Since users are installing/accessing code, the End User License Agreement provides users a copyright license to the code and, therein, aims to protect your rights to that code.

Example:  a mobile application, downloaded from an app store and installed on a user’s device.

Terms of Service 

A Terms of Service agreement addresses the provision of services to your users.  This agreement  is used when users are provided a service, typically accessed through a website, but users do not install or access code – Software as a Service.  While some label the provision of services as a “license” this is not always ideal as “license” is a term evoking copyright and installing/accessing computer code.  Rather, the user is provided with “access” or a “subscription” to the services (or similar language).

Example:  a SAAS service accessed from a website through a user account.

But… 

There may be instances where you combine these two documents, licensing code and providing a service.  For example, an application (installed code) that connects to your cloud service to retrieve data (the service).  Additionally, you may have a mobile application and web service that accomplish the same thing but exist separately and, in this case, both agreement types are required.

In Sum:

Understanding the differences between End User License Agreements and Terms of Service should assist you with understanding your business model (am I selling software, a service, or both?) and your legal needs.