Incorporating onerous terms fairly into contracts
Written By Alex Needham, Trainee Solicitor
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.
Therefore, when adding onerous obligations to contracts or standard terms and conditions, you should always draw attention to these provisions so that it is clear what terms apply. This was recently emphasised in the case of Blu-Sky Solutions Ltd v Be Caring Ltd [2021] EWHC 2619 (Comm).
Background to the case
Blu-Sky Solutions LTD, a supplier of mobile phones and telecommunication services, (Claimant Company), claimed £180,000 plus VAT in respect of administration charges allegedly owed by Be Caring Ltd (Defendant Company) for cancelling a contract for the provision of 800 mobile phone connections with a monthly rental fee.
The Claimant Company was relying on a clause within its terms and conditions (Conditions) relating to the requirement to pay early cancellation fees of £225 per connection.
The Defendant Company’s view
The Defendant Company disputed the fact that it owed the early cancellation fees on the basis that:
(a) it did not believe the Conditions were incorporated into the contract between the parties as the Defendant Company did not access nor read the Conditions before signing the purchase order.
This argument was dismissed by the Court as at the bottom of the purchase order form, there was a statement claiming that all orders and contracts were subject to the Claimant Company’s standard Conditions, and that by signing the document, the signatory agreed that they it had read, agreed and understood the Conditions. The Conditions were also made available on the Claimant Company’s website.
(b) the clause requiring it to pay early cancellation fees was not incorporated into the Contract on the basis that it was onerous, and the Claimant Company had failed to draw sufficient attention to it.
Applying the common law principle
When applying the common law principle on onerous provisions to this case, it was held that the clause should have been brought to the Defendant Company’s attention as the clause was onerous since:
– the amount of the administration charge bore no relationship to any administration costs incurred;
– it was out of proportion to any reasonable estimate of the Claimant Company’s loss resulting from a cancellation; and
– it had not been told, prior to receiving the purchase order form, of its potential exposure to substantial contractual liability.
The decision taken by the court serves as a useful example of the application of the general rules on incorporation into a contract of onerous terms by reference.
Burdensome obligations on a customer should be made obvious and this can be done by using large bold font such as, “The customer’s attention is particularly drawn to clause X”.
Should you require any assistance with reviewing or drafting your terms and conditions, please get in touch with the Commercial Team.