What are terms of service?

Terms of service are the contract between a business and online users. Sometimes called terms of use, terms and conditions, or a user agreement, terms of service set out the rules that govern how users can access and use the service, the rights and obligations of both parties, and the legal protections the business needs to operate online. In Canada, businesses that operate websites, mobile apps, SaaS platforms, online marketplaces, or any service that interacts with users over the internet should consider having a terms of service in place. Well-drafted terms of service protect the business from legal exposure, manage user expectations, and provide a framework for resolving disputes when they arise.

Why you should consider terms of service

Limiting your legal liability. Terms of service allow a business to disclaim warranties, limit liability for losses arising out of use of the service, and exclude liability for issues outside the business’s control — such as user content, third-party services, and service interruptions. Without these protections, the business is exposed to the full range of common law liability that applies to commercial relationships.

Defining acceptable use. Terms of service set out what users can and cannot do on the platform — including prohibiting illegal conduct, abusive behaviour, scraping, reverse engineering, and any use that would interfere with the service or other users. Without an acceptable use policy, the business has limited grounds to suspend or terminate problem users.

Protecting your intellectual property. Terms of service typically reserve the business’s ownership of the platform, its content, its trademarks, and any other intellectual property. Where users contribute content, the terms also establish the license the business needs to display, distribute, and otherwise use that content.

Establishing the legal framework for disputes. Terms of service determine which province’s law governs the relationship, where disputes must be resolved, and whether disputes will be addressed through court proceedings or alternative dispute resolution. These provisions can significantly affect the cost and complexity of any future dispute.

Meeting platform and partner requirements. Many app stores, payment processors, advertising networks, and third-party integrations require businesses to maintain published terms of service as a condition of using their services. Without them, a business may be unable to access essential infrastructure.

Relevant laws and regulations

Consumer Protection Act, RSA 2000, c C-26.3. Alberta’s primary consumer protection legislation. The Consumer Protection Act regulates unfair practices in consumer transactions, imposes specific requirements on internet sales contracts and other distance contracts, and provides remedies to consumers subject to unfair or non-compliant terms.

Electronic Transactions Act, SA 2001, c E-5.5. Alberta’s legislation governing electronic contracts and signatures. The Electronic Transactions Act confirms that contracts formed electronically — including by clicking “I agree” — are not denied legal effect solely because they are in electronic form, subject to certain exceptions such as wills and powers of attorney.

Competition Act, RSC 1985, c C-34. Canada’s federal legislation governing competition and trade practices. The Competition Act prohibits false or misleading representations to the public, which can apply to claims made in terms of service, marketing materials, and on-platform representations about a service’s features or performance.

Personal Information Protection Act, SA 2003, c P-6.5. Alberta’s private-sector privacy legislation. While privacy practices are addressed in a separate privacy policy, terms of service often incorporate the privacy policy by reference. The Personal Information Protection Act and its federal counterpart govern how user personal information must be collected, used, and disclosed.

Common legal issues

Unenforceable click-wrap and browse-wrap terms. Terms of service are only enforceable if the user has reasonable notice of them and a meaningful opportunity to agree. “Click-wrap” agreements, where the user must check a box or click “I agree” before proceeding, are generally enforceable. “Browse-wrap” agreements, where the terms are merely linked at the bottom of the page, are far weaker and may not be enforceable against users who never saw them.

Failing to update terms of service. Terms of service are not a one-time document. When a business changes its features, pricing, ownership of user content, or dispute resolution procedures, the terms of service must be updated to reflect those changes — and users must be given notice of material changes. Continuing to operate under outdated terms creates uncertainty about which version applies to which user.

Overly broad limitation of liability clauses. Limitation of liability clauses are essential to terms of service, but courts will refuse to enforce clauses that are unconscionable, contrary to public policy, or that purport to exclude liability for fundamental breaches. In consumer contexts, the Consumer Protection Act further limits the extent to which a business can disclaim liability.

Improper user content licenses. When users contribute content — comments, posts, uploads, or messages — the terms of service typically grant the business a license to use that content. Licenses that are too broad (such as exclusive, perpetual, or sublicensable rights with no limits) can damage user trust and may be challenged. Licenses that are too narrow may prevent the business from operating as intended.

Inadequate termination and suspension rights. Terms of service should give the business clear rights to suspend or terminate user accounts for violations, non-payment, or any other reason consistent with applicable law. Without these rights, removing problem users can become legally risky.

Choice of law and forum issues. Terms of service should specify which province’s law governs and where disputes must be resolved. However, choice of law and forum clauses are not always enforceable against consumers, and businesses operating across multiple jurisdictions need to consider how these clauses interact with consumer protection law.

Frequently asked questions

Do I legally need terms of service for my website or app? No statute strictly requires a website or app to have terms of service, but operating without them exposes the business to significant legal risk. Terms of service are also frequently required by app stores, payment processors, and other third-party services that the business depends on.

Are terms of service legally binding? Yes, when properly presented and accepted terms of service are binding. Click-wrap agreements — where the user must affirmatively indicate agreement — are generally enforceable in Canada. Browse-wrap agreements, where terms are merely posted on the site, are weaker and may not bind users who did not see them.

What is the difference between terms of service and a privacy policy? Terms of service govern the user’s use of the platform — what they can do, the business’s rights, and how disputes are resolved. A privacy policy explains how the business collects, uses, and protects personal information. Most online businesses need both.

Can I copy terms of service from another website? It’s not advisable. Beyond the copyright concerns of copying another business’s terms of service, copied terms of service rarely reflect the specific operations, risks, and legal requirements of your business — and may be unenforceable if they refer to features or services you do not provide.

How often should I update my terms of service? Terms of service should be reviewed at least annually and updated whenever the business introduces material changes to its features, pricing, content policies, or legal structure. Users must be given notice of material changes, and the terms of service should specify how that notice will be provided.