TechCrunch by Sarah Perez | September 19, 2014

Popular crowdfunding destination Kickstarter updated its Terms of Use today to clarify what specifically needs to happen if a project runs into trouble and creators are unable to deliver. Though Kickstarter itself is obviously not an online retailer, it does provide a platform where products are sold.

In Section 4 of Kickstarter’s revised Terms of Use, the company now explains that when customers are backing a project, they’re creating a legal agreement between themselves and the project creators, not with Kickstarter.

That alone could help to absolve Kickstarter from any legal action from backers who want to sue when projects go south, the product never ships, and their money effectively disappears.

Related: Crowdfunding Insights from 400K Kickstarter and Indiegogo Campaigns

However, Kickstarter took things a bit further in order to spell out exactly what is expected from creators when projects fail. For the most part, this involves communicating with the community of backers to explain what happened and why, documenting how the funds were used up or how they’ll be put to use to complete the project in alternate form, and offering a revised timeline.

Kickstarter also reminds creators that they need to be “honest” and not make “material misrepresentations in their communication to backers.” (In other words, scammers beware.)

View also:

• Kickstarter fraud: Washington files first consumer protection lawsuit involving crowdfunding

• In Crowdfunding, Who is Responsible for Preventing Fraud?

• Kickstarter Backer Allegedly Scams Over One Hundred Projects

Additionally, the terms now state that creators who are unable to stand by the promises they made in their project may be subject to legal action by backers. (The possibility of legal action has always existed, but that part was not spelled out clearly in the previous terms.)

The new Terms of Use will go into effect for all projects launched on or after October 19, 2014, the company says. View the Kickstarter's Terms of Use here.

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