Changing Online Terms For Existing Customers: Do You Need To Give Notice Or Get Consent?

Your business’s online terms and conditions can play an important role in setting the rules between you and your customers. Depending on how your business operates, they might cover payments, subscriptions, cancellations, shipping, platform use and other important parts of the customer relationship.

But what happens when those terms need to change?

Maybe you are changing your pricing model, introducing a new feature, updating cancellation rules or changing how a subscription works.

Updating the document on your website might only take a few minutes. But if customers have already agreed to an earlier version, a different question arises: does the new version actually apply to them?

Simply publishing new terms does not necessarily change an existing customer’s contract. What you need to do will usually depend on the terms they originally agreed to, what those terms say about future changes and how significant the proposed change is.

Depending on the circumstances, you may need to give customers notice, give them an opportunity to cancel or obtain their agreement before the new terms apply.

Can You Change Terms For Customers Who Have Already Agreed To Them?

If a customer has already entered into a contract with your business, the starting point is generally the version of the terms they originally accepted.

Replacing that version on your website does not necessarily replace the agreement you already have with them.

Instead, you need to look at how the existing contract deals with changes. Some online terms contain a variation clause that allows the business to update certain parts of the agreement, while others may require the customer to agree before particular terms can change.

The nature of the update matters too. Correcting an administrative detail is very different from introducing a new fee or substantially changing what the customer receives.

So, before making a change, it helps to ask two questions: does the contract allow this change, and what process do you need to follow?

If the issue is a broader amendment to a commercial agreement, our guide to changing a contract explains contract variations more generally.

What Does Your Variation Clause Actually Allow?

Variation clauses are common in online contracts because some degree of change is often unavoidable.

A platform might introduce new features, a subscription business might change how part of its service operates, or an ecommerce business may need to update its delivery process.

A well-drafted variation clause might explain when changes can be made, how customers will be notified and when the new terms take effect. It may also deal with what happens if a customer does not want to continue under a material change.

That is different from simply giving the business an unrestricted right to change anything at any time.

If you are relying on a variation clause, the key question is whether the particular change you want to make actually falls within its scope.

If your existing wording is unclear, getting your Business Terms and Conditions reviewed before rolling out the update can help establish what the contract currently allows.

When Is Notice Enough - And When Might You Need Agreement?

There is no single rule that says notice is always enough for minor changes and consent is always required for major ones.

The existing contract is the starting point.

If the agreement clearly allows a particular type of change and sets out how notice should be given, following that process may be enough.

For example, an online service may have terms that allow it to make reasonable operational changes and require customers to be notified before they take effect.

The position becomes more complicated where the change affects an important part of the original bargain.

Say an online platform charges customers $40 a month under terms that allow it to make operational updates. Six months later, the business decides to introduce an additional $15 monthly platform fee.

The question is not simply whether the business sends an email announcing the new fee. It also needs to consider whether the existing variation clause actually gives it the right to make that kind of price change.

Similar issues can arise where a business materially reduces an important service, introduces significant new customer obligations, changes cancellation rights or expands the rights it has over customer content or intellectual property.

The more substantial the change, the more carefully the business should consider whether notice alone is enough.

In some circumstances, customers may need to be given a genuine opportunity to leave before the change applies. In others, fresh agreement may be required.

Online, that could involve asking customers to actively accept the updated terms through a tick box, an “I agree” button or another clear affirmative step.

That can also provide stronger evidence of what the customer agreed to and when.

Why Can Broad Variation Clauses Be Risky?

Australian businesses also need to consider the unfair contract terms regime under the Australian Consumer Law.

These rules can apply to standard form consumer and small business contracts.

The legislation specifically identifies a term allowing one party, but not the other, to vary the contract as an example of a term that may be unfair. It also identifies terms allowing one party to vary the upfront price without giving the other party a right to terminate.

That does not mean every variation clause is unfair.

The issue is more likely to arise where the business has very broad discretion and the customer has little control over the change.

For example, a clause saying:

“We can change any part of these terms at any time for any reason.”

creates a very different balance from a clause that explains when changes may be needed, how customers will be notified and what options they have if a material change affects them.

Since the unfair contract terms reforms came into effect in November 2023, businesses can also face penalties for proposing, applying or relying on unfair terms in covered standard form contracts.

If your online terms contain broad variation rights or other one-sided provisions, an Unfair Contract Terms Review can help identify wording that may need to be changed.

Does Giving Customers A Right To Cancel Help?

It can.

If a business is making a significant change to an ongoing contract, giving customers advance notice and the option to leave before the change applies may help create a fairer variation process.

For example, there is a meaningful difference between increasing the price of a 12-month subscription and requiring the customer to keep paying, and allowing them to cancel before the new price takes effect.

However, a cancellation right does not automatically make every variation fair or enforceable.

The scope of the original variation clause, the significance of the change and the practical impact on the customer still matter.

How Should You Tell Existing Customers That Terms Have Changed?

Once you have worked out whether the change can be made, the next question is how to communicate it.

Simply uploading a new document and changing the “last updated” date may not do much to bring the change to the attention of existing customers.

Your original terms may already specify how notices need to be given. Depending on the arrangement, that might mean email, an account dashboard notification or an in-app message.

For a material change, the notice itself should also be clear.

An email saying only “we have updated our Terms and Conditions” leaves the customer to compare two lengthy documents and work out what changed themselves.

If you are changing something important, such as the price or cancellation process, it is generally much clearer to explain what is changing, when it will take effect and whether the customer needs to do anything.

You should also be careful about saying updated terms “automatically apply” or that continued use of the service amounts to acceptance if the existing contract does not support that position.

Where express agreement is appropriate, actively asking the customer to accept the new terms can provide much clearer evidence than relying on silence or continued use.

If you are planning a significant update, having the new terms and the customer notice reviewed together through a Contract Review can help make sure the communication reflects what the contract actually allows.

What About New Customers?

New customers are generally more straightforward because they can be presented with the updated terms before they enter into the relationship.

That is different from trying to apply a new version to someone who became a customer under an earlier set of terms.

It is also worth keeping clear version records so your business can work out which terms applied when a particular customer signed up and whether they later accepted an updated version.

For businesses setting up online terms from scratch, tailored Online Service Terms and Conditions can help build an appropriate variation and notification process into the contract from the beginning.

Key Takeaways

Updating the terms displayed on your website and changing an existing customer’s contract are not necessarily the same thing.

If customers have already agreed to an earlier version, start by checking that agreement and what its variation clause actually allows.

Some changes may be capable of being introduced through an agreed notice process. More substantial changes may require customers to be given an opportunity to leave, while changes outside the existing variation mechanism may require fresh agreement.

Australian businesses also need to be careful with broad unilateral variation rights because they can raise unfair contract term concerns.

If you are changing your online terms, reviewing the existing agreement, proposed changes and notification process together can help reduce uncertainty about which terms actually apply.

Sprintlaw can help with Business Terms and Conditions, Contract Reviews and Unfair Contract Terms Reviews. You can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.