Incorporation of Onerous Terms
A recent case highlights the importance, even in business to business relationships, of bringing clauses containing onerous terms to the customer’s attention when incorporating standard terms by reference.
In Blu-Sky Solutions Ltd -v- Be Caring Ltd  EWHC 2619 the High Court held that the supplier’s standard terms had been incorporated by reference when the customer signed an electronic purchase order. The order included a statement that by entering into the order the customer had read, agreed to and fully understood the supplier’s standard terms which could be found on its website. However, the supplier’s terms contained a clause that required the customer to pay a fee of £225 per connection (a total of £180,000 on the facts) if it cancelled the order prior to connection. The customer wished to cancel the order and the supplier sought to enforce the early cancellation fee. The court held that the particular term had not been incorporated on the basis that it was onerous and the supplier had not done enough to draw the customer’s attention to it.
The judge held that:
· The terms were validly incorporated into the order by reference to the supplier’s website;
· Where terms are incorporated by reference (as opposed to where the terms are actually included in the contract documents) a clause which is particularly onerous or unusual will not be incorporated unless it has been fairly and reasonably brought to the other party’s attention;
· The early cancellation clause was particularly onerous. Amongst other things, it did not bear any relationship to the actual costs incurred by the supplier nor was it a reasonable estimate of its loss of profit;
· The clause was not fairly and reasonably brought to the customer’s attention. The supplier had made no attempt to explain the customer’s obligations or that the customer would be exposed to financial risk. The offending clauses regarding the cancellation fees were “buried” in a section titled “cancellation and returns policy” which itself was buried in the middle of lengthy terms and conditions;
· Despite the contract being a business to business transaction and the customer had the opportunity to read the terms before signing the order, there were powerful reasons for holding the early cancellation clauses onerous. The clauses were positively concealed within the detailed terms making it very hard to see the important from the unimportant.
· The case came very close to a misrepresentation case;
· Even if it had been incorporated, the early cancellation clause would have been void as it was a penalty clause.
It is becoming more common for businesses to incorporate their standard terms by reference to their websites. The court in Blu-Sky observed that a term included in a signed contract will be considered to have been adequately brought to a signing party’s attention in the vast majority of cases. It is, therefore, far safer to include the terms within order/contract documents rather than incorporate them by reference.
If you opt to incorporate terms by reference to your website, ensure that any key obligations are highlighted and any sub-headings within the terms do not disguise the effect of the clause. You could consider, for example, including a key points summary at the beginning of the terms or highlighting particularly onerous terms in bold and/or capitals.
Posted on 12 November, 2021 by Ortolan