Onerous term in "dense thicket" of Terms & Conditions not incorporated

In a time when consumers are used to signalling their agreement to a business's terms and conditions (T&Cs) by clicking a tick-box online, it is little wonder that some businesses are choosing to slim down their B2B (business to business) contracts by referring to the T&Cs on their website rather than including the full T&Cs in the contract itself.

Whilst there has been case law confirming that reference to T&Cs on a website will generally be sufficient to incorporate them, the pitfalls of that approach have been highlighted by a recent High Court judgment, which demonstrates how the courts will approach attempts to enforce onerous clauses where T&Cs are incorporated in that manner.

An onerous cancellation fee

In Blu-Sky Solutions Ltd v Be Caring Ltd [2021] EWHC 2619, Blu-Sky, a dealer of mobile network services (MNS) contracted with Be Caring Ltd (BCL), a care home provider, to obtain mobile phones and a contract for MNS. Blu-Sky sent BCL an order form for dealership services, which incorporated Blu-Sky's standard T&Cs, and which contained a statement that by signing the form, BCL had logged onto Blu-Sky's website and had read, agreed and fully understood all T&Cs regarding the contract it was entering into.

Amongst the T&Cs was a clause which obliged BCL to pay a fee to Blu-Sky in the event that it cancelled the order prior to connection. This cancellation clause was especially onerous, obliging BCL to pay a fee of £225 per connection (which amounted to a total fee of £180,000 in the event all of the prospective connections were cancelled).

BCL had second thoughts after signing the order form and sought to cancel the order, whereupon Blu-Sky sought to enforce its right to charge the cancellation fee, including by bringing a claim against BCL for the £180,000.

“Cunningly concealed”

Judge Stephen Davies, giving judgment, decided that Blu-Sky could not enforce its right to charge the cancellation fee, finding that:

• Contrary to BCL’s case, the T&Cs were validly incorporated into the order form by reference to Blu-Sky's website.
• Where T&Cs are incorporated by reference into a contract (as compared to the scenario where the T&Cs are actually included in the contract), a clause which is "particularly onerous or unusual" will not be incorporated into the contract unless it has been fairly and reasonably brought to the other party's attention.
• The cancellation clause was particularly onerous because, amongst other things, the fees said to be due did not bear any relationship to the actual costs incurred by Blu-Sky, and the amount to which Blu-Sky was entitled was out of all proportion to any reasonable estimate of its loss of profit.
• The clause was not fairly and reasonably brought to BCL's attention because, amongst other things, Blu-Sky had made no attempt to explain BCL's obligations under the T&Cs. It had taken no steps to ensure that BCL understood the key features of the contract, including in particular the risk that it would be exposed to substantial financial obligations under the T&Cs.
• The Court noted in particular that the offending clause was "buried" within the body of the T&Cs and was "cunningly concealed in the middle of a dense thicket", bringing the case into line with previous cases involving consumers where clauses hidden deep in online T&Cs were held to be unenforceable because they were not brought sufficiently to the customer's attention (such as Green v Betfred on which our analysis can be found here)
• Even if it had been incorporated, the cancellation clause would have been void because it was a penalty clause.

Key learning points

This case demonstrates that the English courts will intervene even in B2B contracts (where a higher level of sophistication and legal acumen is usually assumed) if they consider that onerous clauses are not reasonably brought to the customer's attention.

Although the contract in this case concerned MNS, this judgment will be of interest to businesses in all sectors, particularly as the practice of incorporating T&Cs by reference to webpages becomes more commonplace. The key learning points are as follows:

• Consider keeping your T&Cs as a schedule or appendix to your standard contracts, rather than (or in addition to) incorporating them by reference to your website. The Court in Blu-Sky observed that it would have been reasonable to include Blu-Sky's T&Cs with the order form for signature, and that a term included in a signed contract will be considered to have been adequately brought to a signing party's notice in all but the most extreme cases.
• Where incorporating T&Cs by reference to a website, ensure that any key obligations (and particularly any financial obligations) are clearly sign-posted, with clear sub-headings in the T&Cs that do not disguise the effect of any clause.
• Ensure that your business is compliant with any relevant industry codes of practice regulating the manner in which you contract with consumers and businesses. In this case, the Court found that Blu-Sky had not complied with the Code of Practice for the sales and marketing of subscriptions to mobile networks.