In Ener-G Holdings Plc v Hormell [2012] EWCA Civ 1059 (31 July 2012) the Court of Appeal had to consider whether notice had been given according to the terms of the contract. The argument arose because the outcome would determine whether subsequent proceedings had been issued in time or not. The facts of the case are interesting, but need not detain us here: the point is that the case clearly illustrates the importance of getting the "notices" clause, tucked away among the boilerplate clauses (and usually dismissed as such), right. Whatever the parties agree, they need to stick to, and both must make sure they understand clearly what the clause requires them to do.
Showing posts with label contracts. Show all posts
Showing posts with label contracts. Show all posts
Sunday, 12 August 2012
Tuesday, 10 July 2012
Beware complicated website terms and conditions!
Spreadex Ltd v Cochrane [2012] EWHC 1290 (Comm) (18 May 2012) looks at first sight as if it couldn't be of any interest to the motor industry: the claimant is an on-line spread-betting bookmaker. Moreover, it is not a long judgment, the legal principles are not novel, and the defendant acted in person. But the dispute is, in its basic features, one that any business trading on-line could run into.
The company's terms and conditions for the use of its website stated (inter alia) that the client would be "deemed to have authorised all trading under your account number...". Mr Cochrane's account was used, without his knowledge, by his girlfriend's son, who racked up significant losses. The boy's age is not mentioned in the judgment, but it does indicate that he thought he was playing games on the computer, after Mr Cochrane had explained the trading process to him in such terms.
When the claimant tried to enforce the user agreement, however, the deputy judge made several findings that could cause big problems for on-line traders. First, he considered that, largely, the terms and conditions did not form a contract but rather created a framework in which contracts would be made - which, given the nature of the claimant's business, makes sense. Was there, then, a binding contract that pre-existed the contracts for the individual trades? The claimant could not point to one. There was no consideration. The claimant argued that making the on-line trading platform available amounted to consideration, but the judge decided that this was in fact nothing more than the modern equivalent of being ready and willing to enter into a contract by telephone.
Moreover, the Unfair Terms in Consumer Contracts Regulations 1998 would make the pre-trade contract for which the claimant contended unenforceable. The regulation applies to terms which are contrary to the requirement of good faith and cause a significant imbalance in the party's rights and obligations, to the detriment of the consumer. If the pre-trade contract existed, the claimant would have no obligations and the customer would have no rights: but the customer would be liable for any trade on his account, even if it were neither made nor authorised by him. This amounted to a significant imbalance and was contrary to good faith. The judge thought that "a more appealing case" might have been made if the offending term had only applied where the customer's negligence led to the unauthorised trades, but he expressed no view about whether such a term would have been fair.
Finally, the fact that there were four documents which could be viewed by clicking the link to the terms and conditions compounded the matter. The judge thought, surely correctly, that most customers would have proceeded directly to click "agree", even though by doing so they indicated that they had read and understood the documents. Even if a customer chose to look at the documents, the customer agreement alone had 49 closely printed pages of complex legal terms. "It would have come close to a miracle if he had read the second sentence of clause 10(3), let alone appreciated its purport or implications", said the judge. "This was an entirely inadequate way to seek to make the customer liable for any potential trades which he did not authorise, and is a further factor rendering the second sentence of Clause 10(3) an unfair term."
Website terms and conditions are a trader's one chance to create legal relations with visitors to the site. There is never a guarantee that they might work, but clearly any temptation to include everything but the kitchen sink, not to mention complex legal language, might make them completely worthless. The terms and conditions are intended to manage legal risk, but if they aren't enforceable you might as well not have bothered.
The company's terms and conditions for the use of its website stated (inter alia) that the client would be "deemed to have authorised all trading under your account number...". Mr Cochrane's account was used, without his knowledge, by his girlfriend's son, who racked up significant losses. The boy's age is not mentioned in the judgment, but it does indicate that he thought he was playing games on the computer, after Mr Cochrane had explained the trading process to him in such terms.
When the claimant tried to enforce the user agreement, however, the deputy judge made several findings that could cause big problems for on-line traders. First, he considered that, largely, the terms and conditions did not form a contract but rather created a framework in which contracts would be made - which, given the nature of the claimant's business, makes sense. Was there, then, a binding contract that pre-existed the contracts for the individual trades? The claimant could not point to one. There was no consideration. The claimant argued that making the on-line trading platform available amounted to consideration, but the judge decided that this was in fact nothing more than the modern equivalent of being ready and willing to enter into a contract by telephone.
Moreover, the Unfair Terms in Consumer Contracts Regulations 1998 would make the pre-trade contract for which the claimant contended unenforceable. The regulation applies to terms which are contrary to the requirement of good faith and cause a significant imbalance in the party's rights and obligations, to the detriment of the consumer. If the pre-trade contract existed, the claimant would have no obligations and the customer would have no rights: but the customer would be liable for any trade on his account, even if it were neither made nor authorised by him. This amounted to a significant imbalance and was contrary to good faith. The judge thought that "a more appealing case" might have been made if the offending term had only applied where the customer's negligence led to the unauthorised trades, but he expressed no view about whether such a term would have been fair.
Finally, the fact that there were four documents which could be viewed by clicking the link to the terms and conditions compounded the matter. The judge thought, surely correctly, that most customers would have proceeded directly to click "agree", even though by doing so they indicated that they had read and understood the documents. Even if a customer chose to look at the documents, the customer agreement alone had 49 closely printed pages of complex legal terms. "It would have come close to a miracle if he had read the second sentence of clause 10(3), let alone appreciated its purport or implications", said the judge. "This was an entirely inadequate way to seek to make the customer liable for any potential trades which he did not authorise, and is a further factor rendering the second sentence of Clause 10(3) an unfair term."
Website terms and conditions are a trader's one chance to create legal relations with visitors to the site. There is never a guarantee that they might work, but clearly any temptation to include everything but the kitchen sink, not to mention complex legal language, might make them completely worthless. The terms and conditions are intended to manage legal risk, but if they aren't enforceable you might as well not have bothered.
Tuesday, 13 September 2011
Right of first refusal
There are many reasons why a contract might contain a right of first refusal. In a case a couple of months ago,
Astrazeneca UK Ltd v Albemarle International Corp & Anor [2011] EWHC 1574 (Comm) (21 June 2011) the Commercial Court considered such a provision in an agreement for the supply of a chemical used in the manufacture of the active ingredient of an anaesthetic. It provided that if Astrazeneca stopped distilling the active ingredient Albemarle would have "the first opportunity and right of first refusal to supply [the active ingredient] to [AstraZeneca] under mutually acceptable terms and conditions". Was that a (very weak) agreement to agree, or something stronger? No, said the court, Albemarle had the right to be allowed to match any third party offer, notwithstanding that with detailed terms to be agreed this was itself a little vague. The information about the third party offer has to be given to the party with the right of first refusal before the offer is accepted, which could be a practical difficulty. If you are in a situation where such a contractual right needs to be given, make sure it is clear in the contract - and that you understand clearly what it is that you have to do.
Astrazeneca UK Ltd v Albemarle International Corp & Anor [2011] EWHC 1574 (Comm) (21 June 2011) the Commercial Court considered such a provision in an agreement for the supply of a chemical used in the manufacture of the active ingredient of an anaesthetic. It provided that if Astrazeneca stopped distilling the active ingredient Albemarle would have "the first opportunity and right of first refusal to supply [the active ingredient] to [AstraZeneca] under mutually acceptable terms and conditions". Was that a (very weak) agreement to agree, or something stronger? No, said the court, Albemarle had the right to be allowed to match any third party offer, notwithstanding that with detailed terms to be agreed this was itself a little vague. The information about the third party offer has to be given to the party with the right of first refusal before the offer is accepted, which could be a practical difficulty. If you are in a situation where such a contractual right needs to be given, make sure it is clear in the contract - and that you understand clearly what it is that you have to do.
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