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Kickstarter Tightens Terms Of Service, Warns Projects Of Legal Liability

by Mike Futter on Sep 22, 2014 at 10:35 AM

Backing a Kickstarter project is a risky endeavor. You’re putting your faith in personnel and a project concept so early that there is a chance that the end product (if it’s ever delivered) doesn’t match lofty expectations. Now, Kickstarter is taking another step to hold project managers accountable.

Today, Kickstarter co-founder and CEO Yancey Strickler announced an update to the site’s terms of services. The new terms detail remedies should a project manager fail to deliver the promised end product and rewards.

When a project is successfully funded, the creator must complete the project and fulfill each reward. Once a creator has done so, they’ve satisfied their obligation to their backers.

Throughout the process, creators owe their backers a high standard of effort, honest communication, and a dedication to bringing the project to life. At the same time, backers must understand that when they back a project, they’re helping to create something new — not ordering something that already exists. There may be changes or delays, and there’s a chance something could happen that prevents the creator from being able to finish the project as promised.

If a creator is unable to complete their project and fulfill rewards, they’ve failed to live up to the basic obligations of this agreement. To right this, they must make every reasonable effort to find another way of bringing the project to the best possible conclusion for backers. A creator in this position has only remedied the situation and met their obligations to backers if:

  • they post an update that explains what work has been done, how funds were used, and what prevents them from finishing the project as planned;
  • they work diligently and in good faith to bring the project to the best possible conclusion in a timeframe that’s communicated to backers;
  • they’re able to demonstrate that they’ve used funds appropriately and made every reasonable effort to complete the project as promised;
  • they’ve been honest, and have made no material misrepresentations in their communication to backers; and
  • they offer to return any remaining funds to backers who have not received their reward (in proportion to the amounts pledged), or else explain how those funds will be used to complete the project in some alternate form.
  • The creator is solely responsible for fulfilling the promises made in their project. If they’re unable to satisfy the terms of this agreement, they may be subject to legal action by backers.

It’s important to recognize that this is not a change from Kickstarter distancing itself from disputes between backers and managers. Rather, it spells out a set of obligations and remedies and labels them a contract.

Recently, Neal Stephenson’s beleaguered Clang sword-fighting game drifted from “on pause” to fully canceled. The company behind the project, Subutai Corporation, states that it made good faith efforts to deliver rewards to backers. 

In May, the State of Washington filed suit against Altius Management for failing to deliver on a $25,000 campaign for custom playing cards. Kickstarter’s latest changes may give more teeth to backers looking to recover lost funds, but until tested, the strength of the terms of service remain unclear.

[Source: Kickstarter (1), (2) via Joystiq]


Our Take
While Kickstarter uses the word “contract” in its new Terms of Service, the framing is less than concrete. There is too much room for interpretation about what a “good faith effort” consists of and whether the remedies satisfy the obligation. Until this is tested, I'm not convinced anything has really changed.