Launching an NFT Project – The Essential Legal Elements Part 5 – Terms of Business
This is Part 5 of our series on the essential legal elements of an NFT project, and in it we will look at the importance of having T&Cs in place.
Define Your Project
“Read the T&Cs” is an oft used phrase, but as a litigator, I can tell you it’s very true; the Terms and Conditions of business are first place we look if there is any dispute or question as to the responsibilities and rights owed by the parties to each other.
In respect of an NFT project, you need clear Terms and Conditions in place when selling NFTs. Those T&Cs define the relationship, the rights and obligations owed between the project’s corporate entity (whatever corporate entity you decided upon) and the purchaser.
The T&Cs will typically echo the Smart Contract (as we have discussed in Part 3 of this series) however they will also appear on the website, before the minting/sale.
Why is this important? The relationship is a business to consumer (the purchaser) sale. As a ‘consumer’, the NFT purchaser will enjoy consumer protections: certain liabilities cannot be excluded when dealing with them, all terms must be clear and brought to the consumer’s attention before purchase (to name but a few).
In other words, an NFT project cannot rely on ‘caveat emptor’ being plastered in large font text all over its website. Great care must be taken at this stage, as any court battle will likely side with the consumer.
On these lines, you’ll also need to ensure your whitepaper (the document describing and promoting the project), is up to date, clearly set out and is brought to the purchaser’s attention before purchase, to avoid (or better protect against) any future allegations of mis-selling.
It is recommended that legal advice is sought in respect of the above, particularly as the above terms and policies will be NFT and crypto-specific so as to limit liability and clearly define the relationship with the NFT purchaser.
In Part 6 of this series, we will consider the branding element of the project, and how vital IP belonging to the project can be protected.