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Before the Auction: Stating Terms of Service

Think of your terms of service (TOS) as a contract and guideline for your online auction transactions. It's a way to inform customers of what they can expect if they bid on and win one of your auction items. It provides important information such as how you handle payment, shipping, refunds, and more. Our tip outlines what you should include in your TOS--and where.

The Three Cs
First, be clear, concise, and comprehensive when stating your terms of service. Of course, you want to include all the relevant information, but don't make your TOS so long and rambling that buyers' eyes start to glaze over--after a certain point, they'll tune out. Don't force users to sift through excess verbiage before you reach the heart of the matter. Remember: Lengthy, tome-like terms of service potentially can turn off bidders.

What to Include
To follow is a rundown of the information that should be included or addressed in your terms of service:

Payment: How do you handle receiving and processing payment from buyers? Indicate which types of payment you accept or don't accept (credit cards, personal check, money order, cashier's check, C.O.D., etc.). Third-party processors are becoming increasingly commonplace. Do you accept payment through a company such as X.com/PayPal? Depending on the type of payment a buyer sends, state whether you'll hold an item for a specific number of days. (For example, will you hold merchandise for a certain period of time until a check clears? Will you ship immediately with credit card or money order purchases?) You also might indicate how long you will hold a buyer's item, after which time you will no longer honor the winning bid.

Shipping: What can the buyer expect in terms of shipping? First and foremost, indicate who is responsible for payment of shipping costs: you or the buyer? If possible, state the exact shipping charge (i.e., "$2.25 shipping for USPS standard"). You might consider offering buyers different shipping options (for instance, if they'd like next-day shipping indicate that you'll accommodate them, and who will be charged for the additional cost). Other important clarifications include whether you are willing to ship internationally, whether you will purchase insurance at an additional charge, and whether you charge handling fees.

Returns/Refunds/Guarantees: What is your policy on buyers who request returns, refunds, and/or guarantees? This is a tricky area. Some sellers will state their policy in their TOS (some using the "all sales final" disclaimer), while others won't because they believe that stating they offer refunds will encourage some bidders to take advantage of their policy. Either way, you should have a set policy regarding these issues even if you decide not to include them in your TOS. Be ready and have consistent policies in case a buyer inquires about them. (For more information on this topic, see our offering refunds and guarantees tip.)

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