Draw attention to onerous clauses in standard terms and conditions to rely on them: Blu-Sky Solutions v Be Caring

HHJ Stephen Davies held that Blu-Sky Solutions Ltd ("Blu Sky") was not entitled to enforce cancellation provisions within its terms and conditions because the clause was onerous and had not been drawn to the counterparty's attention, and therefore it was not incorporated into the contract.

Background

Blu Sky, a supplier of mobile phones and telecommunication services, brought proceedings against Be Caring Ltd ("Be Caring"), a social care provider, under a contract for the supply of a mobile network service to Be Caring.

Following a meeting between Blu Sky and Be Caring, Blu Sky sent an electronic order form (the "Order Form") for 800 mobile phones for a minimum period of 48 months for a monthly rental of £9,600 to Be Caring on 13 February 2020. The Order Form stated:

"[a]ll 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 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. I give Blu Sky permission to have third party access to my account. I am duly authorised to sign on the company’s behalf."

Although Be Caring did not review the terms of the order form or log on to Blu Sky's website as indicated to read the terms and conditions, they did return a signed Order Form the following day, on 14 February 2020.

The terms and conditions, which were not labelled as such on their face, totalled: "just over a page of detailed text, in closely spaced small type and with no separate clause headings. It is quite clear that they are not in any way user-friendly to any reader, let alone a non-legal reader."

Within the terms and conditions was a clause reading:

“4.6 In the event that a customer cancels an order prior to connection following a purchase order is sent, disconnects a connections prior to the expiry of the minimum term (without consent from Blu-Sky-Solutions Ltd) or a connection is downward migrated during the minimum term without written consent from Blu-Sky-Solutions Ltd), then Blu-Sky-Solutions Ltd shall be entitled to charge the customer an administration charge of £225 per connection. This £225 will also be applied to each connection if the customer upgrades with another supplier but on the same mobile network within the minimum contractual term agreed. For the avoidance of doubt if you are a business customer there is no 14 day cooling off period unlike consumer regulations.”

Be Caring emailed Blu Sky to cancel on 26 February 2020, not believing there to be any applicable cancellation fee. Blu Sky immediately responded setting out the terms of clause 4.6, threatening immediate legal action and sent an invoice for a cancellation fee of £180,000.

Blu Sky then commenced proceedings under the Shorter Trials Scheme in July 2020.

The Judgment

HHJ Stephen Davies determined the following key questions:

1. Did the Order Form have contractual force?

Although Be Caring attempted to argue that it did not, the Judge found that the Order Form as signed did indeed have contractual force.

2. Were the terms and conditions incorporated into the contract?

 The parties agreed that because the terms and conditions were referred to rather than contained within the Order Form, the key question here was whether the terms and conditions were sufficiently brought to Be Caring's attention to be incorporated into the contract.

Although Be Caring did not in fact look on Blu Sky's website and try to access the terms and conditions, HHJ Stephen Davies found that Blu Sky had: "albeit only by a small margin, discharged the burden of proving that the [terms and conditions] upon which it relies were accessible by navigating to the bottom of the website home page and clicking the link marked “terms and conditions - mobile” and that they were incorporated into the contract.

3. Were the relevant clauses of the terms and conditions incorporated into the contract as allegedly unusual and onerous terms?

HHJ Stephen Davies referred to Goodlife Foods Ltd v Hall Fire Protection Ltd [2018] EWCA Civ 1371:

“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.”

HHJ Stephen Davies found that the relevant clauses were particularly onerous as:

a) The sum of the “administration charge” bore no relationship to any administration costs incurred or likely to be incurred; and

b) The sum under the relevant clause was out of all proportion to any reasonable pre-estimate of its loss resulting from a cancellation.

He emphasised that the fact that such clauses may also be used by others in the industry did not mean that they were not onerous.

He also found that the relevant clauses had not been fairly and reasonably brought to Be Caring's attention:

a) Blu Sky had made no real attempt to comply with the Code of Practice for the sales and marketing of subscriptions to mobile networks;

b) Prior to receiving the Order Form, Blu Sky did not tell Be Caring that it would be exposed to a very substantial liability should it decide to cancel its order;

c) The Order Form obfuscated the nature of the contract;

d) Although the Order Form did refer to Blu Sky's terms and conditions, it did not explain their purpose or give any warning that they imposed potentially substantial obligations;

e) It would have been perfectly feasible to include the terms and conditions as part of the Order Form or at least with the orders alongside an explanation; and

f) Blu Sky made no attempt to highlight the relevant clauses; instead they were "cunningly concealed in the middle of a dense thicket which none but the most dedicated could have been expected to discover".

As a result of these findings, HHJ Stephen Davies concluded that the clause under which Blu Sky purported to be entitled to its cancellation fee was not incorporated into the contract and Blu Sky's claim failed.

Comment

It is well established that in consumer contracts, terms and notices must be transparent and fair (see our article here on the recent decision in Green v Petfre (Gibraltar) Ltd). This judgment reinforces the need for businesses to consider very carefully their terms and conditions and how they are communicated to counterparties, even when dealing with another commercial entity. Prudent steps which can be taken in this regard include:
 

• Annexing a copy of the terms and conditions to the contract where possible;
• Bringing potentially onerous provisions to the counterparty's attention (e.g. by use of capitalisation or large font and sing-posting drawing the relevant clause to the attention of the counterparty in the contract itself); and
• Ensuring compliance with any relevant Codes of Practice.