Onerous terms: Are my terms and conditions binding?
Earlier this year in Andrew Green v Petfre (Gibraltar) Limited (trading as Betfred) the High Court heralded a warning to businesses with consumer clients about the need to be even-handed when dealing with their customers and to ensure that any onerous terms are clearly brought to their attention. Please see our full analysis (here).
The recent case of Blu-Sky Solutions Ltd v Be Caring Ltd  now provides an example of the courts' approach with regard to business to business contracts. Though less regulated than consumer contracts, businesses operating in this space should be mindful that any potentially onerous clauses should be clearly signposted to their counterparty before they enter the contract. Failure to do so runs the risk of such clauses being found unenforceable (i.e. not incorporated into the contract).
As with the Betfred case, this ruling is fact specific, but the underlying legal principles remain highly relevant to companies contracting with other businesses.
Be Caring Limited (Be Caring) a provider of social care services entered negotiations with Blu-Sky Solutions Limited (Blu Sky), a telecommunications supplier, to receive their mobile network offering. As part of this process, Be Caring completed an order form which sought to incorporate Blu Sky's terms and conditions as hosted on their website (but not included on the order form itself). When Be Caring wished to move to another supplier, they were informed by Blu Sky of expensive cancellation costs for them to do so and as outlined in the terms and conditions.
Be Caring was found by the trial judge to have entered a contract with Blu Sky despite them purportedly being unaware that the form they were signing was a binding agreement rather than heads of terms. The terms and conditions that the agreement referred to were also found to be binding, as they were accessible on Blu Sky's website.
Despite the terms and conditions being seemingly incorporated into the agreement between the parties, the cancellation costs clauses were found not to be enforceable by the judge.
It is a well-established legal principle that any "onerous or unusual" conditions in a contract (including terms and conditions) will not be incorporated unless they have been brought to the counterparty's attention. Lawyers often refer to a "sliding scale" of how much notice needs be given. Where the clause is more burdensome or unusual there will equally be a greater obligation of notice.
In this case, the cancellation clauses were found to be particularly onerous because, amongst other factors, the costs incurred bore very little relation to and were out of proportion to the actual costs that would be incurred by Blu Sky for Be Caring's cancellation. Therefore, Blu Sky should have taken care to ensure that these clauses were clearly flagged to Be Caring. However, instead the judge found that the onerous clauses had been "cunningly concealed in the middle of a dense thicket which none but the most dedicated could have been expected to discover and extricate". The clauses were consequentially found not to be incorporated.
Therefore, it is important that businesses review their terms and conditions (especially where these are incorporated by reference) to ensure that clauses that impose significant burdens on the counterparty are adequately emphasised.
Best practice tips when drafting B2B terms and conditions:
- Set out any terms and conditions in clear, plain language that can be clearly understood by non-legal readers.
- Ensure that all terms and conditions are formatted in a way that can be easily read by another user. For instance consider font, spacing, text size, optical character recognition and appropriate use of typographical emphasis (i.e. bold and italics).
- Clearly mark and signpost any onerous terms (i.e. terms that would cause the counterparty to incur significant financial or other liability). For example by inserting "the customer's attention is particularly drawn to clause x." at the start of the terms.