FTC Compliance & Regulatory Requirements
Your Terms of Service must comply with FTC regulations and UDAP (Unfair or Deceptive Acts and Practices) laws. Any terms that are misleading or unfairly restrict consumer rights can trigger FTC enforcement.
Key FTC requirements:
- Clear language: Avoid dense legal jargon. Terms must be understandable to average consumers.
- Prominent disclosures: Material terms (pricing, cancellation, disputes) must be clear and conspicuous.
- Honest representations: Don't make claims in marketing that contradict your T&C.
- Consumer protection: Don't exclude consumer rights provided by law.
Limitation of Liability & Disclaimer Clauses
You can limit liability under US law, but there are limits. Courts will enforce reasonable liability caps but void unreasonable ones.
Your T&C can state:
- Liability cap: "Our total liability is limited to the fees paid in the prior 12 months (or $100 if no fees)."
- Exclude indirect damages: "We are not liable for lost profits, lost data, or lost business."
- Service warranty: "Service provided 'as is' without warranty of merchantability or fitness for purpose."
However, you CANNOT exclude liability for:
- Gross negligence or willful misconduct
- Personal injury or death
- Infringement of intellectual property rights (in some states)
- Violation of consumer protection laws
Dispute Resolution & Arbitration Clauses
Arbitration clauses are enforceable in most states, but they must be fair and transparent. If you include arbitration, state it clearly and allow consumers to opt out.
Your T&C should state:
- Opt-out provision: "You have 30 days to opt out of arbitration by submitting written notice."
- Arbitration process: "Disputes will be arbitrated under JAMS or AAA rules."
- Cost allocation: "We pay arbitration fees for claims under $10,000."
- Class action waiver: "Both parties waive the right to class actions." (This is enforceable but controversial)
Payment & Billing Terms
- Pricing: "Prices are in USD. Taxes may be added based on location."
- Auto-renewal disclosure: "Subscriptions renew automatically. You will receive reminder emails before each renewal."
- Cancellation: "You can cancel anytime via your account or by contacting support@company.com."
- Refund policy: "Refunds for cancellations are prorated based on days remaining in billing period."
Intellectual Property & User Content
- Your IP: "All platform content (designs, copy, code) is protected by copyright. Users receive a limited license for personal use only."
- User content: "Users retain ownership of uploaded content. By uploading, they grant us a license to use for service delivery."
- DMCA compliance: "We comply with the Digital Millennium Copyright Act. Report copyright infringement to legal@company.com."
Governing Law & Jurisdiction
Specify which state's laws govern your T&C. Delaware and California are common choices.
- Choice of law: "These Terms are governed by the laws of [State], without regard to conflict of law principles."
- Jurisdiction: "Disputes not subject to arbitration shall be brought in courts of [County], [State]."
Official US Resources on Terms of Service & Consumer Protection
For authoritative guidance on what US law requires in Terms of Service agreements, these federal sources are the definitive references:
- FTC Endorsement & Disclosure Guides — FTC rules on disclosures relevant to SaaS, marketplaces, and affiliate arrangements in your Terms
- FTC Privacy & Security Guidance — federal requirements for how Terms of Service must address data collection and user rights
- USA.gov: Consumer Protection Laws — overview of federal consumer protection statutes that affect what your Terms of Service can and cannot include