Onerous clause not incorporated into contract

Key Contact: Rachelle Selleck

Where terms and conditions are not directly attached to a contract, reasonable steps must be taken to bring the other party’s attention to the existence of the terms and conditions.

The recent case of Blu-Sky Solutions Limited v Be Caring Limited demonstrates the importance of taking care when attempting to incorporate onerous clauses into contracts, particularly when they are hidden within standard terms and conditions.

Background

Blu-Sky Solutions Limited (“Blu-Sky”), a supplier of mobile phones and telecommunications services, brought a case against Be Caring Limited (“Be Caring”), a social care provider. A contract had been entered into for Blu-Sky to provide a mobile network service to Be Caring. Blu-Sky was to provide 800 mobile phones for a minimum period of 48 months for a monthly rental of £9,600.

On 13 February 2020, Blu-Sky sent their order form to Be Caring. The order form noted “All orders and contracts are subject to and incorporate our standard terms and conditions by signing this document I agree I have logged on to the Blu Sky website at www.bluskysolutions.co.uk, have read 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.

Be Caring signed the order form and returned it to Blu-Sky on 14 February 2020. Ms Lowrie, who signed the form, believed she was signing the equivalent of a heads of terms rather than a binding agreement and therefore did not review the terms and conditions on the website.

Be Caring had second thoughts after signing the order form and sought to cancel the order on 26 February 2020. In doing so, Blu-Sky sought to rely on clause 4.6 within the terms and conditions which stated that if the customer cancelled the contract, there would be an administration fee of £225 per connection. Blu-Sky subsequently sent their invoice for the cancellation fee and when Be Caring didn’t pay, they issued court proceedings.

Judgement

It was first considered whether the signed order form had contractual force. HJJ Stephen Davies, giving judgement in this case, found that by signing the order form, Be Caring was entering into a contractual relationship with Blu-Sky.

It was then considered whether the standard terms and conditions had been incorporated into the contract, because they were only referred to in the order form, rather than being attached. The Court found that the terms and conditions were accessible from the website, and it was clear the link labelled “terms and conditions – mobile” was the applicable link. Therefore, the terms and conditions had been sufficiently brought to the attention of Be Caring and they were incorporated into the contract.

It was considered whether the relevant clauses were incorporated into the contract. HHJ Stephen Davies referred to the judgement of Goodlife Foods Ltd v Hall Fire Protection Ltd [2018] EWCA Civ 1371 which noted “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.”

The Court decided clause 4.6 was particularly onerous because the amount of the administration charge showed no relationship to any actual administration costs, and the amount is out of proportion to any loss which would result from cancelling the contract. It was also noted that even though similar clauses are not unusual in the industry, this does not mean that these clauses are not onerous.

The Court also found that the clause was not fairly and reasonably brought to Be Caring’s attention for several reasons including, Be Caring was not informed that it would be exposed to a substantial contractual liability from Blu-Sky should it choose not to enter into the contract, and the order form did not make it clear, and actually obscured the nature of the contract. It was also noted that it would have been feasible to include the terms and conditions as part of the order form.

It was concluded that the claim failed as the relevant clauses were not incorporated into the contract because they were unduly onerous and had not been fairly and reasonably brought to Be Caring’s attention. Even if the clause had been incorporated, the Court found that the clause would have been void because it was a penalty clause.

What does this mean?

This case will be of interest to businesses, many of whom incorporate their standard terms and conditions by referring to their websites. It is clear that courts will intervene, even with business-to-business contracts, when a clause is particularly onerous.

To ensure standard terms and conditions are incorporated into contracts, suppliers should consider attaching them as a schedule or appendix to their contract and onerous clauses should be brought to the customer’s attention, for example, by using the following words in bold “the customer’s attention is particularly drawn to clause x.”

For further information and assistance with your commercial contracts, please contact our Commercial and Technology Team.

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