I've given a TOS some consideration when I wrote up mine and thought I'd share some of my insights on the subject.
When writing up a page with information of commissions you want to be clear about your Terms of Service without being too negative or you'll risk turning the customer off.
Don't just mention what you can't/won't draw, if at all, highlight what you can/will draw. Mention what your past experience is. If a customer wants something that isn't listed amongst your can's they'll probably mail you and ask, if they ask for something that offends you, be polite and say "Sorry, I do not want to draw that subjectmatter."
If they persist after being politely turned down you've dodged a bullet, they were probably annoying to work with. In any case they won't have a foot to stand on to badmouth you to other people if they're particularly childish.
If they're decent people and accept your decision without issue you were polite enough that they may still consider you for a commission with different subject matter.
If a customer likes your stuff enough that they want to commission you before they know what they want a list of can's might help them make up their mind.
"Oh they say they're good at drawing X, I'll commission them to draw X!"
If they need a lot of time to come up with what they want they might forget about it and you'll lose them as a customer.
But artists, always add a disclaimer that you reserve the right to reject any commission for any reason without providing said reason. You can tell them why you rejected a commission if you want but if the customer persists that your reasons aren't good enough just point out the disclaimer and withdraw from the argument.
After all, you're not getting paid to exchange insults with some buffoon. Don't let them waste your time you could be spending on making nice customers happy.
You can usually tell what an artist can/will draw by looking at their gallery. If you want something you don't see in their gallery don't be afraid to contact them, they might be up for the challenge! Just be polite and if you're asking for kinky stuff, don't be offended if they turn you down. Not everyone shares your kink, they're not persecuting you, they're just not interested.
Commissioning an artist for something they can/like drawing usually gets you the best results.
Important reminder, if you use Paypal don't put porn on your site or mention that you will draw porn.
Try not to mention exact prices.
If you ask $25,- for a single character commission, digital colouring, with a simple background then you might have something like this in mind but the customer might be thinking about something like this.
You could put up a sample to show what you mean, but if people ask for a single character drawing and that single character is wearing a lavish victorian hoop skirt dress with lots of frills and lace you'll wish you asked for more.
It's best to give a rough indication of your prices and explicity mention that the eventual price will depend on the complexity of the desired image. If you're unsure of what you should charge, determine the cost of the supplies, then a flat fee and an hourly wage on top of that. The longer it will take you to complete an image the more you should charge.
Charge extra for additional work; if the customer wants more than three or four revisions of the sketch for example.
Also, charge more if the customer wants the rights to the image. I'll explain why in...
With the standard commission a customer pays you to create the artwork to his/her specifications, they usually receive the original, a digital copy if it's purely digital work or maybe a hi-res version (through mail or on CD) or a print.
That means the artist retains all rights to the image, they can edit, copy or sell copies of the image, if these rights were included in the commission by default it would mean the customer could sell copies and make a profit off the commission, and as most commissions cost between 25 and 200 dollars the profit made off a good print could easily exceed the price of the commission (depending on subject, artist etc.)
If a customer wants to buy these rights (to copy, edit, sell) the artist generally charges him/her a portion of the profits he or she would make if they themselves would sell prints (or derivative products; mugs, magnets etc.)
A lot of artists don't mind if a customer reposts the image, makes an icon out of it or prints out a copy to hang on their own wall but that's a courtesy and not a right.
I would advise getting at least half the payment up front, and then the other half when you're halfway through the work.
Full payment up front is ideal if you can motivate yourself not to slack off after receiving payment (and if you can't, you shouldn't be taking commissions) but some customers have been burnt in the past and will be apprehensive.
They obviously like your stuff enough to give commissions another try despite bad past experiences, be nice and understanding, but don't let anyone take advantage of you.
Don't give them something for nothing.
Hint: promises don't pay the bills. If they promise to pay you next month, promise them you'll work on the commission after you receive the payment next month.
Just as you may have been burned, so the artist probably has been too.
Refunds aren't just for when the customer asks for them.
If anytime during the work (which starts after payment, remember?) the customer becomes impossible to work with (they're trying to get you to draw material you didn't agree to, they want a multitude of revisions without paying extra, they become stalkerish or just plain rude etc.) you can stop the work and give a refund.
Charge the customer for the work completed up to that point, transaction costs and shipping and send the rest of the money back along with the work you have done for them up to that point.
But be sure to reserve this right in the disclaimer, it can be a lifesaver.
Deadlines and updates
Mention up front how long a commission can take. If you know you need a little extra encouragement suggest a (soft) deadline to the customer.
Let customers know if there's going to be a delay, don't post about it in some obscure place where they'll probably never see it. Contacting them directly is ideal, if you are unable to do so, post it in your own LJ, your homepage, an art archive account you have. If it shows up on Google when you do a search for your name it's a good place to post it.
Don't ignore e-mails or notes.
If you'll be unable to complete the work in a timely manner (due to artblock for example) offer a refund. Customers may want to want to stick with you but appreciate being offered a way out even if they don't accept it.
It's hard to find a perfect balance between giving the artist freedom and not having to wait 3 years for your commission. It's true you usually get the best result if you give the artist time to produce something they themselves are really happy with, but customers are usually excited and impatient to see the finished product. As a customer you can lay down a "soft deadline" if you don't want to pressure the artist too much but fear you'll get frustrated with waiting, ask them if they can finish it in 2 months/6 months/whatever.
Also, tell them in advance "I'll send you a note every 2 weeks/3 weeks to ask about the commission." or "I'd appreciate it if you could send me an update and maybe a scan every week/2 weeks." that way an artist knows ahead of time that you'll be contacting them and won't be surprised/annoyed if you contact them 2 weeks after payment with "Hi, so what's the news on my commission?" and gives them the oppertunity to tell you "Could you make it once every 3 weeks, I have school/work etc." if they haven't mentioned that up front (though they should).
From the moment you agree on a commission and accept the money you are expected to behave in a professional manner.
It doesn't matter if you're 15 or 95, if you have work or school, regardless of what you make and how you make it.
Think, if you couldn't get away with your behaviour in a store as a clerk you probably shouldn't be behaving like that to your art customer either.
If you behave like ass it could come back later to haunt you and you could lose good customers who are merely looking in on a scene from the outside.
Be polite, preferably even to rude people.
Similarly, customers should be polite as well.
You're buying art, not the artist's soul. They will have work or school or social obligations and can't wait on you hand and foot, even if they want to. Be satisfied in the knowledge that they do want to make you happy, if only because they want your moolah.
Make no mistake, a commission is a business transaction and doesn't make you best friends with the artist.
If you become friends during the transaction that's great, but they have no obligations to you outside of your commission.