While the Website Terms of Service are something developers rush for, in order to get app store approvals, these may have holes big enough for you to fall in. We analysed the Terms of Service of over 10 fast-growing e-commerce platforms and found some glaring gaps. These insights are too valuable to keep it to ourselves. So, here we are! Your Terms of Service (“ToS”) act as your shield protecting you from unforeseen liabilities, setting clear expectations with customers, and ensuring smooth day-to-day operations. That’s why, in order to avoid a bumpy ride, or worse, a freefall, it makes sense to have your ToS airtight. Without much ado, let’s share the gaps which we found – and which you should avoid. Without much ado, let’s share the gaps which we found – and which you should avoid.
- Chargebacks and Payment Disputes
Seasonal sales and festivals are critical for e-commerce platforms, driving up transactions with exciting discounts and new collections. However, this surge often brings an increase in chargebacks, especially during high-volume periods like Diwali and Christmas sales. Consumers may file claims saying they didn’t receive an item or didn’t authorise a purchase, even if the transaction was legitimate. This friendly fraud can lead to major financial losses, sometimes costing 2.5 times the original transaction amount when factoring in fees and product losses. The rise of Buy Now, Pay Later (BNPL) services adds another layer of complexity, as customers often dispute recurring charges after impulsive buys during sales seasons. Without clear chargeback policies, platforms risk absorbing these costs, which could damage both finances and brand reputation. What we found concerning in the ToS of some well known retail platforms was that while many platforms address returns and refunds in their ToS, chargebacks are often overlooked. Even large e-commerce platforms selling premium lingerie or fashion items miss this crucial clause. This is especially important for platforms selling tech gadgets, where chargebacks can quickly escalate. It’s essential to clarify third-party liabilities related to chargebacks in your policies—without this, your platform could be stuck footing the bill for fraudulent claims.
- AI Limitations
This is the age of AI! AI is transforming e-commerce, with platforms ranging from furniture giants to wine merchants using it for chatbots and product recommendations. However, we identified a recurring gap: insufficient clarity about AI-driven features in their ToS. Yes, AI can be a game-changer, but it’s not flawless. For example, a recommendation engine might suggest irrelevant products, or a fraud detection system could mistakenly flag a customer’s account, frustrating users. There have been cases where platforms that rely on AI for personalised recommendations or dynamic pricing have faced backlash because customers felt misled or discriminated against, either due to algorithmic biases or inaccurate data processing. Even worse, chatbots collecting personal information without proper consent have resulted in privacy issues and violations of data protection laws. So, what’s the fix? Be upfront in your ToS. Clearly explain how AI works on your platform, its potential errors and limitations, and your responsibility to rectify mistakes. Include disclaimers about possible errors and give users a clear path to dispute automated decisions. At least two platforms we analysed didn’t provide this clarity.
- Platform Availability? 24/7!
E-commerce platforms selling clothes and groceries and delivering food have set the expectation of being available 24/7. Young Shoppers can browse and purchase anytime, making late-night shopping increasingly popular. However, this constant availability brings a serious risk: platform downtime. When your site goes down, it’s more than an inconvenience—it results in lost sales, frustrated users, and a damaged brand reputation. With users expecting seamless, round-the-clock service, any technical glitches, scheduled maintenance, or even unforeseen events like a cyberattack can cause frustration. However, we noticed that many platforms fail to address this in their ToS, leaving users confused about what to expect when downtime happens. Your Terms should clearly define service availability, downtime expectations, and external factors that may cause unavailability, such as third-party failures. Without these clarifications, users may assume they are entitled to uninterrupted service, which can result in legal issues or complaints. This simple point was missing in one very popular platform. Additionally, a disclaimer regarding data loss is critical. In case of an unexpected outage, users should understand that while you aim to protect their data, certain events, like system failures or cyberattacks, may result in data loss, and the platform won’t be held liable.
- Business-Specific Disclaimers
Intellectual property ownership is often one of the trickiest aspects of any MSA. Standard software created by the developer is owned by the developer. But the problems arise when creating custom software, since even that will have standard elements which the developer uses for other clients. So while the client provided materials will be client IP and custom elements created for the client will also be client IP, there is always something called “residual IP” – standard elements that the developer has deployed to create the custom IP, which will be owned by the developer. However, a lot depends on the product / service, its deployment and the agreement between the parties. You have to be very clear about what you want to retain the ownership of. And even if you are retaining the ownership, do you want to allow the use to the client? For how long? This would have to be factored into the MSA.
- Jurisdictional Nuances
E-commerce platforms must address jurisdictional issues upfront, especially when selling furniture or alcohol internationally. Failing to clarify export restrictions can lead to seized goods, frustrated customers, and legal risks. For example, furniture may be held at customs, or alcohol deliveries blocked due to local laws. To avoid blame, include clear disclaimers in your Terms of Service about import/export limits and regulatory restrictions, and remind buyers to verify local laws before purchasing.
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