I talk about the privacy file a lot because that was the document in my inbox. Terms of Use failed for the same structural reason: I did not have a public page, so I could not put a functional link on the paywall or in the listing.
Apple will take the standard EULA
If you use Apple's standard terms, linking that EULA from the app description is accepted. Custom terms need a URL or an upload in Connect. I learned this next to 5.1.1 and 3.1.2.
The paywall still needs a link
Standard EULA in the listing does not remove the paywall requirement. The purchase screen still needs a working Terms link. Same as privacy: two surfaces.
What I ask the client for
A hosted privacy URL and a decision on terms — standard EULA or their page — before I build the paywall. On Speech Route I asked after review. Hangar had both before submit. That difference is in Hangar's first submission.