I'm planning to create a module for my directory which would fetch images from user's website using Google Image Search via this scenario:
Am I allowed to do that, and would it breach any copyrights?
UPDATE
I presume that person created account in my business directory is owner of that website (it states in Terms and Conditions) and as an owner he is accessing his website. Application would display thumbnails and fetch original image from his website using links from Google results. Does it make any difference?
Disclaimer: IANAL
As long as you only use thumbnails of maximum 80 to 200 pixels in size, then it is considered fair use. I also advise linking the image the source page and mentioning somewhere that the images may be copyright material.
Make sure to use the API, rather than scraping the results page.
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