Onerous term buried in standard terms incorporated by reference not enforceable
Blu-Sky Solutions v Be Caring (High Court) [2021]
Organisations who routinely contract on standard terms published on a web site and who seek to incorporate such terms by referring to them in a sales document or order form should be aware of the perhaps little known principle of English law which featured in this case.
Facts:
The High Court has considered whether a supplier's standard terms and conditions (T&Cs) were incorporated into a B2B contract by reference and subsequently, whether a supposedly onerous clause relating to early cancellation fees within the T&Cs was incorporated.
The case concerned a claim by a provider of mobile telecommunication services, against their customer, a social care provider. The claim was made under a contract relating to the provision of connections for 800 mobile phones for a minimum period of 48 months for a monthly rental of £9,600.
The customer, via an e-signing system, signed a purchase order which contained these words:
"by signing this document I agree I have logged on to the [supplier's] website at [weblink], have read, agree and fully understand all terms and conditions regarding the contract and am bound by the same."
Clause 4.6 of the standard terms provided that in the event of cancellation before connection, the provider was entitled to an “administration charge” of £225 per connection. It was common ground that cancellation took place before connection, thus the provider argued that it was entitled to £180,000, being a £225 administration charge for each of the 800 connections.
The customer did not actually access or read the T&Cs before signing (they seem to have thought they were signing heads of terms as opposed to an immediately binding agreement).
The customer argued that the clause requiring it to pay early cancellation fees within those T&Cs was not incorporated on the basis that it was an onerous provision, and the supplier had failed to draw sufficient attention to it.
Decision:
The judge deemed the fact that the customer thought they were signing heads of terms as opposed to an immediately binding agreement irrelevant. By signing the order form the customer was - on an objective analysis - accepting that it had entered into a contractual relationship.
The customer's argument that the T&Cs were not incorporated also failed; on the facts, the T&Cs were incorporated. They were sufficiently brought to the attention of the customer as they were accessible had the customer gone to the supplier's website, navigated to the bottom and clicked on the applicable link. Given that there were more than one set of contract terms (one for mobile customers and one for landline customers) it was important that they were correctly described as “without even needing to open the links, it would have been reasonably clear to the defendant which [set] would most obviously be applicable”.
On the facts, the clause was deemed ‘onerous’ so the supplier should have taken extra measures to draw the customer's attention to it. The judge criticised the T&Cs, saying they were "not in any way user-friendly to any reader, let alone a non-legal reader". Importantly, he said the offending 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…". That clause was therefore not incorporated into the contract, even though the remainder of the T&Cs were.
The provision in question was an unduly onerous clause which was not fairly and reasonably drawn to the customer’s attention. The judge proposed a ‘sliding scale’ between, at one end, a term included in a signed written contract (“where it is reasonably straightforward to understand why a term included in a signed contract will have been adequately brought to the signing party’s notice in all but extreme cases”) and, at the other, a situation where a signed contract simply incorporates T&Cs by reference. The fact that a party is prepared to sign a contractual document must always be a powerful factor against a conclusion that terms expressly incorporated into it were not sufficiently brought to its attention. [However,] the weight given to that factor in an individual case will be fact-sensitive. It [the weighting] is likely to be very strong if there is a short form signed contract which refers to the term itself, and is likely to be relatively weak if the order form is signed but the term is “buried away” in detailed T&Cs which are incorporated as a matter of law but which are neither found in the signed contract nor provided with the signed contract”.
The court emphasised that “the fact that such clauses are not unusual does not of itself mean that they are not onerous”. The clause was thought to be particularly onerous because:
(i) The “administration charge” bore no relationship to any actual administration costs.
(ii) The amount was out of all proportion to any reasonable estimate of loss resulting from cancellation.
(iii) The fact such clauses may not be unusual in the industry cannot hold much weight.
The clause was not fairly and reasonably brought to the defendant’s attention because:
(i) The claimant made no real attempt to comply with the relevant industry Code of Practice governing sales.
(ii) The order form positively obfuscated the nature of the contract.
(iii) It would have been perfectly feasible to include the relevant provisions as part of the order form. This would have illustrated that they were voluminous and complex terms and would almost undoubtedly have taken up more than one page, in paper or electronic form, thus bringing home to the defendant the need to read them carefully [query if that necessarily follows?].
(vi) No attempt whatsoever was made to highlight the relevant clause. [On] the contrary, the clause was buried within the section innocuously titled “cancellation and returns policy”.
Even if it had been sufficiently prominent, the clause was held to be penal and therefore void. That finding was not particularly surprising given the size of the sum payable compared with the analysis carried out by the judge regarding the scale of the loss incurred. What is probably more surprising is the conclusion that this was a penalty payable in respect of a breach as opposed to a sum payable conditional upon exercising a contractual right (i.e. not to proceed to enter into an associated services contract with EE). In the latter case, the rule on penalties would not have applied as the rule only has application to sums payable in respect of breaches of contract.
Points to Note:
- This decision should remind suppliers and service providers that when seeking to incorporate standard terms only by reference (such as pointing to terms on a web site), they should at least consider what additional steps they might need to take in respect of clauses which impose potentially burdensome obligations on customers in order to sufficiently bring them to their attention.