Basic Legal Rules When Going Online


You may have noticed that many sites post "terms and conditions" somewhere on the site. If you’re taking your business online or starting a new online business, do you need them, too? Maybe. Some sites have to post “transaction conditions” because they sell goods. In that case, you may see information about refunds, credit card use, or returns. Some sites include disclaimers — statements that inform customers that you won't be liable for certain kinds of losses they might incur. For example, a site may attempt to disclaim responsibility for losses that result if a product breaks when it is returned.

Rules for Refunds

The "30-Day Rule," created by the The Federal Trade Commission (and officially known as the Mail or Telephone Order Merchandise Rule) sets out basic refund and shipping rules. If you offer goods and don't announce when it will be shipped, the rule provides that you're supposed to ship within 30 days from when you receive the payment and all the information needed to fill the order. If your website does indicate when you plan to send merchandise — for example, within one day of getting paid — you must have a 'reasonable basis' for believing you can meet this shipping deadline.

The rule gives you two choices if there's a delay, that is, it will take longer than 30 days for you to ship (or longer than you promised):

  • You can ask for the customer's consent. If you can't get consent to the delay, you must, without being asked, refund the money the customer paid you for the unshipped merchandise
  • You can simply cancel the order, notify the customer, and refund the payment.

It's a good idea to keep records of all customer notifications and delays including when you were notified. Not every business needs an unlimited return policy, but a customer-friendly policy of some sort is the cornerstone of many successful businesses and we recommend that you create and post one for your customers. A typical policy might require the customer send back the merchandise within 10 days for a refund. Keep in mind,  you don’t have to give a refund unless:

  • you broke the sales contract — for example, your goods were defective, or
  • you have a policy that allows a refund for returns.

State Rules on Refunds

If you live in Virginia, California, Florida, or New York, there are special rules for refunds. As follows:

  • Virginia. If you don't offer a full cash refund or credit within 20 days of purchase, you must post your policy.
  • California. You must post your refund policy unless you offer a full cash refund or credit refund within seven days of purchase. If you don't post your policy as required, the customer is entitled to return the goods for a full refund within 30 days of purchase.
  • Florida. If you don't offer refunds, that fact must be posted. If the statement isn't posted, the customer can return unopened, unused goods within seven days of purchase.
  • New York. If you offer cash refunds, that policy must be posted, and you must give the refund within 20 days of purchase.

Other Terms And Conditions

Here are some other items you may want to include at your website or online store.

Disclaimers. You may want to include disclaimers — statements that inform customers that you won’t be liable for certain kinds of losses they might incur. For example, you may disclaim responsibility for losses that result if pottery breaks when a customer ships it back for return.

Privacy. If you're gathering information from your customers, including credit card information, you should post a privacy policy detailing how this information will be used or not used. Yahoo!'s privacy policy is a good example of a broad, easy-to-understand policy. Whatever policy you adopt, be consistent, and if you're going to change it, make an effort to notify your customers by email of the change.

Chats and Postings. If your website provides space for chats or postings from the Web-surfing public, you'll want to limit your liability from offensive or libelous postings or similar chat room comments. There are three things you can do. First, regularly monitor all postings and promptly take down those you think are offensive or libelous. Second, if a third party asks you to remove a posting, remove it while you investigate. If you determine — after speaking with an attorney — that you're entitled to keep the post, then you can put it back up. Third, include a disclaimer on your site that explains you don't endorse and aren't responsible for the accuracy or reliability of statements made by third parties. This won't shield you from claims, but it may minimize your financial damages if you're involved in a lawsuit over the posting.

Copyrights and Trademarks. Include notices regarding copyright and trademark — for example, "Copyright © 2011" or "DEAR RICH is a trademark of Richard Stim."

Kids. If you're catering to an audience under 13 years old, special rules apply. You should learn more about dealing with children at the Federal Trade Commission’s online privacy website.

Portions of this article are derived from Wow! I'm in Business: A Crash Course in Business Basics by Attorney Richard Stim, Lisa Guerin, J.D.