Phone supplier not entitled to enforce onerous contract term

A phone supplier has been told it cannot enforce a cancellation clause in a contract with a customer because the terms are “too onerous”.

Sam Lyon Head of Corporate & Commercial reports on this recent case.

The case involved Blu-Sky Solutions Ltd and Be Caring Ltd.

Be Caring, a social care provider, had a contract for a mobile network service (MNS) to provide mobile telephone handsets for its staff.

It was cold-called by Blue-Sky offering a cheaper monthly line rental with a different network operator.

Be Caring agreed to switch and Blue-Sky emailed its order form for the provision of 800 connections for mobile phones at a monthly rental fee of £9,600.

At the bottom of the form was a statement that all orders and contracts were subject to and incorporated into its standard terms and conditions (STCs), and that by signing the document, the signer agreed that they had logged on to Blue Sky’s website and had read, agreed and understood the STCs.

Also included in the email was the MNS contract on behalf of the operator for Blue Sky to complete.

Be Caring’s business support manager forwarded the order form to its chief executive who signed it.

They did not log on to the website to read the STCs. They did not return the MNS contract with the order form, and they subsequently informed Blue-Sky that they were cancelling to ensure they understood the contract before signing it.

Blue-Sky responded by saying the contract had been concluded by the signature on its order form, that the contract incorporated its STCs, including cl.4.6 which stated that it was entitled to a £225 administration charge per connection in the event of cancellation before connection to the network.

It sent an invoice for £180,000 plus VAT. Be Caring refused to pay on the basis that there was no binding contract between them, that the STCs had not been incorporated into any contract, and that cl.4.6 and cl.4.8, which reiterated that the customer agreed to pay £225 per connection not completed, were not incorporated as they were onerous terms.

The High Court found in favour of Be Caring.

It acknowledged that by signing the order form, Be Caring had accepted that it had entered into a contractual relationship. Further, the STCs were accessible from the website by clicking on the “terms and conditions – mobile” link. Overall, Blue-Sky had done enough to incorporate the STCs.

However, it was 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.

Clause 4.6 was particularly 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 Blue-Sky’s loss resulting from a cancellation.

The clause had not been fairly and reasonably brought to Be Caring’s attention and had been buried within section four. It came close to being a misrepresentation case, in that the offending terms had been positively concealed within detailed terms and conditions, making it difficult to distinguish the important from the unimportant.

If you would like more information about the issues raised in this article or any aspect of contract law please contact Sam on 01228 516634 or click here to send him an email.