It is imperative to be clear from the off to your customer when entering into a contract so you reduce the risk of misinterpretation and you protect your business in the long run.
You must ensure that particularly onerous clauses in their terms and conditions are sufficiently well sign-posted to the other party when concluding business to business contracts.
You also need to ask yourself if you review your terms & conditions regularly. Do you know where best to include them in documentation? These are also important factors you must have covered to avoid legal and costly comebacks should a dispute ever arise. A recent High Court decision highlights their importance.
Background to the claim – what happened?
Blu-Sky Solutions Limited (“the claimant”), a company supplying mobile phones and telecommunication services, agreed to provide its customer, Be Caring Limited (“the defendant”) with connections for 800 mobile phones for use by the defendant’s staff members (“the contract”).
The defendant had e-signed and returned the claimant’s order form which contained a short paragraph at the bottom which referred to the contract being subject to the claimant’s terms and conditions. The order form stated that by signing the document the defendant was confirming that it had visited the claimant’s website, read and fully understood the terms and conditions and agreed to be bound by the same.
The defendant had in fact failed to view the terms and conditions on the claimant’s website before returning the signed order form and was proceeding on the assumption that the order form they were signing was not an immediately binding agreement.
The defendant subsequently sought to cancel the contract before any services had been provided as it wanted to delay whilst it made a final decision as to whether to proceed with the claimant or stay with its existing provider. In response, the claimant sought to claim £180,000 plus VAT from the defendant in respect of administration charges for the early cancellation of the contract, purportedly in line with a clause contained in the T&Cs incorporated into the contract.
The primary issues which arose for determination were (1) whether the signed order form had contractual force (2) whether the claimant’s T&Cs had been incorporated into the contract at all and (3) whether the clause imposing the early cancellation charges was incorporated into the contract as an allegedly unusual and onerous term.
Whether the signed order form had contractual force:
The Judge ruled that the signed order form did have contractual effect. On an objective analysis, whether or not they had a full understanding, a person in the position of the defendant would have known that by signing and returning the order form they were entering into a contractual relationship with the claimant and that specific T&Cs applied to that contractual relationship.
Incorporation of the claimant’s T&Cs generally:
Similarly, the Judge determined that the claimant’s T&Cs had been incorporated into the contract. Where, as here, the T&Cs are incorporated by reference rather than expressly contained in the signed contract, the question is whether those T&Cs were sufficiently brought to the attention of the defendant prior to signing. In his Judgment, the Judge found that ‘had [the defendant] accessed and had a reasonably quick look at the STCs [it] would have had no reason to think that they were not indeed applicable.’ Fundamentally, the defendant’s naivety in failing to access the T&Cs on the claimant’s website prior to signing the order form could not operate as a valid reason for finding that the T&Cs had not been incorporated in the contract.
Incorporation of the onerous clause:
On this central question, the Judge determined that the clause imposing the cancellation fee was not incorporated into the contract and therefore could not be enforced by the claimant. In making his finding, the Judge reasoned that the clause was particularly onerous because the amount of £180,000 being claimed as a cancellation fee was out of all proportion to any reasonable estimate of loss resulting from the defendant’s cancellation.
Moreover, the clause had not been fairly and reasonably brought to the defendant’s attention, because crucially, no attempt was made by the claimant to highlight the clause which imposed a substantial financial obligation on the Defendant as a consequence of cancellation. In the Judge’s words, the cancellation clause was ‘cunningly concealed in the middle of a dense thicket which none but the most dedicated could have been expected to discover and extricate…’
This case highlights the importance of being clear with any onerous clauses in terms and conditions
The learning points
- Ensure that you review your standard terms and conditions on a regular basis, and do so objectively, remembering that those clauses deemed to be particularly onerous will likely require much clearer signposting to the other party. If they are not clear enough and are not brought to the attention of the other party, there is a risk that they will not be incorporated and will provide no protection.
- Where possible, include the T&Cs in the body of the order form or other contractual document, rather than incorporating the T&Cs by reference to a link on a website. This can assist with illustrating to the other party that a contract includes complex terms which require proper consideration prior to agreement.
- From a customer’s perspective, ensure you carefully read all contractual documentation prior to signing, including any T&Cs incorporated by reference on the other party’s website. Pay particular attention to termination rights and cancellation charges and seek clarification in writing from the other party where any terms appear unclear and leave you in doubt as to your precise rights and obligations.
If you need any advice on the enforceability of your standard terms and conditions or your rights and obligations under a particular contract, we’re here to help – get in touch.