The Two Most Common Legal Documents: Terms of Use and Privacy Policy
Intro
The Terms of Use and Privacy Policy are two of the most essential documents for any commercial software product.
Terms of Use
What it is
A Terms of Use is a contract between the software provider and its users. It governs how the software can be used, what is prohibited, what rights users have, and how disputes are handled.
Why we need it
Legal Protection
- Helps define and limit your legal liability
- Sets clear boundaries to avoid misuse
- Can enforce user bans or access limitations if needed
Privacy Policy
What it is
A Privacy Policy is a legal document that explains how a company collects, uses, stores, shares, and protects user data. It outlines what kind of personal and non-personal information is gathered and for what purposes.
Why we need it
Most countries (e.g., under GDPR in the EU, CCPA in California, Privacy Act in Australia) require a clear, accessible privacy policy if you collect any kind of personal information.
Summary
You cannot launch a commercial SaaS product without both documents. Even for MVPs, having boilerplate versions tailored to your service is essential.
| Aspect | Terms of Use | Privacy Policy |
|---|---|---|
| Focus | How the service/product can be used | How user data is handled |
| Audience | Users, partners, developers | Governments, users, regulators |
| Legal requirement? | Not always mandatory, but highly recommended | Yes, if collecting personal data |
| Risk managed | Misuse of product, intellectual property infringement | Data misuse, user trust, legal penalties |
| Trust and Transparency | Shows accountability and seriousness | Shows ethical handling of data |