court rulings demonstrate importance of communicating terms of
business
Organisations tend to understand the need to
provide a copy of the terms and conditions on which they do
business to suppliers or customers. How, when and, indeed,
whether they provide them in practice, however, varies widely.
In the recent case of Allen Fabrications
Limited v ASD Limited, the High Court considered whether any
additional steps must be taken to bring "onerous" clauses to the
attention of the other party. The European Court of Justice
(ECJ) has also recently given guidance in the case of Content
Services Limited v Bunderarbeitskammer relating to the
provision of information to consumers.
It is well established that if a term is
contained in an unsigned document (such as a set of standard terms
and conditions), it will only form part of the contract if
reasonable steps have been taken to bring it the other party's
attention prior to the contract coming into existence. Simply
providing a copy of the standard terms may be sufficient.
However, additional steps may be required to
bring any onerous or unusual provisions to the other party's
attention, for example terms which limit or exclude a supplier's
liability.
what constitutes an unusual or onerous term?
In Allen, the judge found that the
defendant's terms were not onerous and that, although the terms had
been signed, no such additional step was required to bring them to
the other party's attention. He did, however, set out some
helpful comments in relation to what may constitute an onerous
term.
According to the judgment, it is not always
clear what amounts to an unusual or onerous term. Caselaw has
established, for example, that a provision limiting a supplier's
liability may, but will not necessarily, be onerous. The
decision in Allen supports the view that courts are
generally reluctant to treat such clauses as onerous
automatically.
Whether or not a term is onerous will depend
on the circumstances in which it is used. In particular,
regard will be had to previous dealings between the parties and
whether or not they are acting in the course of their business or
profession. A term which is commonly used, especially in
respect of commercial entities, for example, is less likely to be
regarded as onerous.
consumer issues
Where a party is acting outside the course of
his business or profession (ie is a "consumer") and enters into a
distance contract (eg an Internet purchase), he is entitled to
receive certain information about the contract and the supplier,
prescribed by law.
That information must be provided before the
conclusion of the contract in a "durable medium", otherwise the
standard seven day "cooling off period" may be extended.
Guidance published by the OFT, responsible for overseeing consumer
issues in the UK, states that information provided on a website is
not considered durable as it can be changed at any time after a
consumer has accessed it.
In Content Services, the ECJ
confirmed the OFT's opinion, stating that a durable medium "had to
be functionally equivalent to a paper format". The ECJ also
found that consumers should receive the information, rather than
being required to take any active steps (e.g. clicking a link) to
access it. There is a subtle distinction, which places a
greater onus on the supplier. It is worth noting that this
case was referred to the ECJ from an Austrian court but the ruling
is likely to apply equally in England given that the rules on
distance selling in England derive from the same EU Directive that
applies in Austria.
practical points
Terms of business should be communicated to
the other party as early as possible. This may, for example,
be at the time that an acknowledgement or acceptance of an order is
sent. Sending a copy of the relevant terms of business at the
date of invoice is unlikely to be sufficient, since, by that point,
the contract has usually been formed.
Organisations should regularly review
documentation sent to customers to ensure that it includes the most
up to date set of terms. Maintaining a record of the terms
which apply to customers and other parties is crucial.
Records should also be kept of any forms or letters which contain
additional terms.
If any terms are particularly unusual or
onerous, organisations should consider whether customers or
suppliers should be required to sign a copy of the relevant terms
in order to demonstrate that the unusual or onerous terms have been
brought to the other party's attention.
Companies which sell goods or services via
distance means (like the internet) should set out the information
required to be given to consumers in an email (or other durable
medium), ideally sent before the goods are delivered or the
services performed. A consumer should be able to store and
reproduce (eg print) the information which has been addressed to
him personally. The information should be accessible for at
least the period of the contract and should not be altered.
