Man with magnifying glass looking at small print in contract

Don’t bury onerous terms deep into the small print of commercial contracts – they’re unlikely to be enforceable

The High Court has recently 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 (Blu-Sky Solutions v Be Caring Limited)

This was a claim by the claimant, a supplier of mobile phones and telecommunication services, against the defendant, a social care provider, in which it claimed the sum of £180,000 plus VAT. The claim was made under a contract relating to the supply to the defendant of a mobile network service ( MNS ) by the well-known MNS provider, EE. The contract involved the provision of connections for 800 mobile phones for a minimum period of 48 months for a monthly rental of £9,600.

In summary, the claimant contended that the contract was concluded by the defendant’s signature of its order form ( the order form ), that the contract incorporated its standard terms and conditions for mobile services ( STCs ) and that, pursuant to clause 4.6 of those STCs, in the event of cancellation before connection it was entitled to what was described as an “administration charge” of £225 per connection.

The defendant cancelled before connection, thus the claimant contended that it was entitled to £180,000, being a £225 administration charges for each of the 800 connections.

The defendant denied that there was a binding contract between the parties, denied the incorporation of the STCs into any contract, denied that clause 4.6 was incorporated as an unusual or onerous term, asserted that clause 4.6 is a penalty clause and thus void, and denied that the claimant had suffered any loss because of the cancellation of its order.

The customer, via an e-signing system, signed the 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 the policy protection scheme & free trial (*where applicable) and am bound by the same.”

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…”.

Quote from the Judgment

The clause was therefore not incorporated into the contract, even though the T&Cs were.

The case was obviously decided on the basis of its own facts, but builds on existing case law which says

“It is a well-established principle of common law that, even if A knows that there are standard conditions provided as part of B’s tender, a condition which is “particularly onerous or unusual” will not be incorporated into the contract, unless it has been fairly and reasonably brought to A’s attention.”

Goodlife Foods Ltd v Hall Fire Protection Ltd [2018] EWCA Civ 1371 

This decision 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, for example, by using words in large bold font such as

THE CUSTOMER’S ATTENTION IS PARTICULARLY DRAWN TO CLAUSE X

If you need your commercial contracts or terms and conditions reviewing, then get in touch today.

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