The problem is that if that provision were actually enforced, kickstarter would be of much less use to those people it was originally conceived of to help. If you are a small independent games company, film maker, or musician, the threat of failing to complete your project (e.g. it was too ambitious, you set your funding goal too low, you run into legal issues you hadn't anticipated, etc.) and being required to pay back tens of thousands of dollars you have already spent is enough disincentive to not use kickstarter in the first place.

In other words, if kickstarter campaigns have to repay backers if they fail, kickstarter becomes radically less useful and interesting as a proposition.

They have to fulfill the rewards it says. Which really means that you shouldn't promise a version of your product if you can't deliver it. Rather it might be better to make the rewards things that are easy to deliver such as shirts, stickers, etc... Definitely some projects like Ouya that have promised a console will technically have to refund people potentially millions of dollars if they can't ship the device.

>will technically have to refund people potentially millions of dollars //

Presumably OUYA is a company with some limitation of liability for the owners, I don't know much about USA company formation but it seems that the company would fold and there would no longer be a legal entity to hold to account. IFF this is the case then "technically" they won't have to refund anyone beyond what liquidation of the company requires.

This is where someone with knowledge of company law steps in and corrects me ...

If you use Kickstarter to advertise "if you contribute $foo, I will give you bar" without an explicit disclaimer that there's some chance that bar might not come to be, and someone contributes that $foo in the expectation that they'll ultimately receive bar, haven't you entered into a legally-binding contract with the contributor, irrespective of anything Kickstarter might or might not do?

>Kickstarter reserves the right to reject, cancel, interrupt, remove, or suspend a campaign at any time and for any reason. Kickstarter is not liable for any damages as a result of any of those actions. Kickstarter’s policy is not to comment on the reasons for any of those actions. //

This is the get-out-of-jail-free card [that's a Monopoly board game reference]. They can cut off pledgers or project creators for any reason and don't have to tell you what it is; of course the law [which?] still applies.

There is an interesting glitch in the T&C. Kickstarter make a distinction between refunding a pledge and cancelling a pledge. The meaning of "cancel" is thus unclear, it doesn't appear to mean refunding money as that's what "refund" means. This is shown in the phrase "Project Creators may cancel or refund a Backer’s pledge at any time and for any reason". If a project creator receives the money then 'cancels' the pledge it appears they're in the clear WRT the terms and conditions ...?

But the T&C sets up the relationship between the people running the campaign and Kickstarter themselves. The project creators and the contributors still have a direct relationship with each other, irrespective of Kickstarter as an organization - the fact that Kickstarter's website is their medium of interaction doesn't necessarily make the Kickstarter organization a party to their agreement.

If the project creators promise to deliver a particular product to a contributor when certain conditions are met, and those conditions are subsequently met, wouldn't that constitute a contract? Sure, if the Kickstarter admins terminate the project before it's funded, then the conditions of the contract can never be met; but once they are met - i.e. once the project has reached its funding goal - then no action on the part of Kickstarter admins - who are not themselves a party to the contract - can invalidate the contract.

By way of analogy, if you and I arrive at an agreement via a conversation on HN, and PG comes along and decides for whatever reason to delete the thread containing our discussion, the agreement is still valid.