High Court finds an “onerous” term not incorporated into a contract as it was “buried” in standard terms and conditions


19th October 2021

A recent case highlights the importance of making clauses which impose burdensome obligations on customers (in this case a B2B relationship) to be made obvious by suppliers.

In Blu-Sky Solutions Ltd v Be Caring Ltd [2021] EWHC 2619 (Comm), the High Court held that a supplier's standard terms were incorporated by reference to when the customer signed an electronic purchase order that contained wording that the customer acknowledged that it had accessed and read those terms on the supplier's website. However, a clause within those terms that required the customer to pay early cancellation fees was held not to have been incorporated, on grounds that it was onerous and the supplier had not done enough to draw the customer's attention to it.

Judgment

The High Court’s decision, delivered by His Honour Judge Stephen Davies, found in favour of a customer on issues arising out of a clause which imposed burdensome obligations on a customer, which was not made obvious by the supplier.

A mobile phone supplier was not entitled to enforce a cancellation clause in its standard terms, since it was an unduly onerous term which had not been fairly and reasonably drawn to the purchaser’s attention before it had signed an order form for 800 mobile phone connections with a monthly rental fee, and then cancelled it prior to connection to the network. The clause had been positively concealed within detailed terms and conditions, and a cancellation charge of £225 per connection was not in proportion to any reasonable estimate of its loss.

The High Court held in favour of the customer and made the following comments:

Incorporation of Standard Terms and Conditions

By signing the order form the customer had, on an objective analysis, accepted that it had entered into a contractual relationship with the claimant. Further, the standard terms and conditions were accessible from the claimant’s website by navigating to and clicking on the “terms and conditions – mobile” link.

Had the customer accessed and looked at the standard terms and conditions, it would have had no reason to think that they were not applicable. Overall, the claimant had taken sufficient steps to incorporate the standard terms and conditions into the resulting contract.

Onerous terms

It is a well-established principle of common law that, even if a person signing a contract knew that standard conditions were provided as part of the tender, a condition which was particularly onerous or unusual would not be incorporated unless it had fairly and reasonably been brought to their attention.

Although it remained undecided whether that principle could apply where the term was contained in standard conditions incorporated under a signed contract, in any event a party who had signed a document was bound by its terms except in an extreme case.

However, in Bates v Post Office Ltd (No.3: Common Issues) [2019] EWHC 606, [2019] 3 WLUK 260, the judge had drawn a clear distinction between where the terms were contained in the signed contract and where they were not; the principle applied to the latter but not the former; and that as regards the former, specific notice of terms found to be onerous and unusual was required.

Outcome

HHJ Davies held that the clause was particularly onerous since the amount of the administration charge bore no relationship to any administration costs incurred and, it was out of proportion to any reasonable estimate of the supplier’s loss resulting from a cancellation.

Further, it was held that the clause had not been fairly and reasonably brought to the customer’s attention, taking into account factors including that it had not been told, prior to receiving the order form, of its potential exposure to a substantial contractual liability if it decided not to continue with the contract.

Implications

There are important take away points from this judgment mainly, that it should remind suppliers that clauses within standard terms that are incorporated by reference and which impose burdensome obligations on the customer should be made obvious.

This, for example, can be done by using words in large bold font such as “the customer’s attention is particularly drawn to clause X”.

If you have any questions regarding the incorporation of standard terms and conditions into a contract, or contractual disputes generally, please get in touch with our experts who shall be pleased to help.

Contract Law specialists

We have expert dispute resolution lawyers who advise both businesses and consumers on contractual disputes.

ARRANGE A CALL WITH AN EXPERT

Enjoy That? You Might Like These:


articles

30 June -
The Intellectual Property Office (IPO) has come under criticism recently for allowing a number of commonplace Welsh words to be registered as trade marks. This article is available to read... Read More

articles

29 June -
Blake Morgan has a long and distinguished record of conducting appeals and applications to the Judicial Committee of the Privy Council (JCPC). This year, 2022, has seen the retirement of... Read More

articles

25 May -
One in four people experience mental health problems of some kind each year in England, and as many as one in six people experiencing a common mental health problem in... Read More