The art is complete and you are ready to launch your NFT project. Whether this is your 1st or 10th NFT project, you probably still have questions about terms and conditions that NFT projects need. Here are some things to keep in mind when looking over your terms and conditions. Now updated for 2024.
1. What rights do you want included in your project?
The rights buyers and creators hold in NFTs are contentious, and rightfully so. The holder of certain rights directly dictates how the NFTs can be used, monetized, or even revoked so it is important that both you and your buyers have a clear understanding of what rights you are selling with your NFTs.
Yuga Labs Bored Ape Yacht Club famously granted their holders full commercial rights to BAYC and MAYC holders. However, many other projects have not, and there are legitimate reasons many artists may not want to grant their NFT holders full commercial rights. Typically, a buyer of a traditional painting or physical piece of art does not acquire commercial rights to that painting. They cannot sell t-shirts with prints of the art or put it in commercials—those rights remain with the artist, and NFT creators may also want to retain these rights for themselves.
With this bit of background, you can see how important clear communication of IP rights are for your NFT project.
2. If your NFT gives access to other opportunities, has the ability to be redeemed for something else, or is connected to physical objects, you must ensure that your terms and conditions clearly cover this.
If your NFTs are being sold as a way to give holders some form of access, rights to royalties, or really anything similar, you must ensure that your terms and conditions form a binding contract for this “perk”. You want your terms and conditions to not only protect you as the NFT seller from buyers who may have misunderstood what perks came with the NFT, but also, you want your buyers to have confidence that you will deliver what you are promising. You also have to be careful with securities law when your NFT could be seen as an investment contract, but that is beyond the scope of this article.
3. Price and payment terms.
Your terms and conditions should also include price and payment terms, including any royalty payments the seller receives if the NFTs are resold.
4. Choice of law provision & arbitration agreement.
Your terms and conditions should include a choice of law provision, and possibly even an arbitration agreement. Executed properly, these terms will be beneficial and will hopefully prevent you from being sued in far-away jurisdictions if any disputes arise in the future.
5. Fractionalization
DAOs and other entities have fractionalized NFTs, selling off fractionalized shares of the entire NFT. Clear language banning the ability of a purchaser to fractionalize interest in the NFTs should be included if you wish to avoid this.
6. Definitions
You’ll want to define the parties and any other terms or websites involved.
7. Protecting Against Unauthorized Reproduction and Usage
NFT creators should include specific language in the terms to protect their work from unauthorized reproduction or use. While NFTs are typically governed by blockchain’s secure transaction history, additional legal language can reinforce the boundaries for buyers, especially if the project has brand elements or other intellectual property that could be commercially valuable. Clear terms can outline that buyers cannot duplicate, alter, or create derivative works unless granted explicit permission, helping to protect the artist’s or project’s unique brand identity.
8. Consider Privacy Implications
NFT projects often involve direct interaction between creators and buyers, sometimes requiring email addresses, wallet addresses, or other personal information. Given the increasing scrutiny around digital privacy, it’s prudent to include a privacy policy as part of the terms and conditions. Specify what data you collect, how it will be used, and any third-party partnerships that may involve sharing this data. Privacy terms not only build trust but also ensure compliance with regulations, especially if buyers are located in regions with stringent privacy laws, such as the GDPR in Europe or the CCPA in California.
9. Refunds and Returns Policy
While digital assets like NFTs are typically considered non-refundable, stating this clearly in your terms can prevent confusion. Outline any conditions under which a refund may or may not be issued, such as errors in transactions or technical issues with the NFT platform. A transparent returns policy, even if the default is “no refunds,” can prevent disputes and set realistic expectations for buyers.
10. Security and Risk Disclosures
With the inherent risks in blockchain transactions, including wallet security and the potential for market volatility, it’s wise to include a security disclaimer in the terms and conditions. State that buyers are responsible for their wallet security and that the project is not liable for lost funds due to third-party hacks or losses due to market fluctuations. This serves as a layer of protection for the project while informing buyers about the risks associated with digital assets.
Of course, this is not a comprehensive list of terms, but aims to provide a list of things to think about before launching your NFT project. Be sure to reach out by email or on twitter with any questions and check out my legal resource guide.
