Onerous Clauses in Terms and Conditions Need to be Made Clear to be Relied Upon

Terms and conditions are rarely an enjoyable read. Often frustratingly small when online or written in overly technical jargon when in print, people tend to worry they may be signing away crucial rights when they thoughtlessly tick the ‘agree’ button. Even at a business-to-business level, professionals can hurriedly gloss over crucial terms which can unwittingly leave their business at a severe disadvantage.

However, the recent case of Blu-Sky Solutions Limited v Be Caring Limited – decided in the High Court – is a welcome development for the fairness of contractual agreements, as well as a lesson for businesses who include onerous clauses and seek to rely upon them.

In this case, Blu Sky, a mobile phone supplier, brought proceedings against Be Caring Ltd (“Be Caring”), a provider of social care, under a contract for the supply of a mobile network service. Following an order of 800 mobile phones, Be Caring then cancelled their order within two weeks, believing there would be no cancellation fee or other negative consequences. Blu Sky, however, had a particularly strict cancellation clause in their terms and conditions which made them entitled them to £180,000 in cancellation fees.

The issue for the court was to decide whether this clause was incorporated into the contractual agreement, and if so whether it could be relied upon by Blu Sky. The reason for the confusion issued from the fact the terms and conditions were presented on Blu Sky’s website, and not on the order form itself. The order form merely referred clients to the website, and read as follows: ‘by signing this document I agree I have logged on to the Blu Sky website at www.bluskysolutions.co.uk, have read agree and fully understand all terms and conditions regarding the contract’.

The first key question, therefore, was whether the terms and conditions were sufficiently brought to Be Caring’s attention to be incorporated into the contract. Be Caring informed the Court they did not look at the website itself, and that more care should therefore have been taken to make this clause apparent. The judge, HHJ Stephen Davies, commented that Blu Sky had “albeit only by a small margin, discharged the burden of proving that the terms and conditions upon which it relies were accessible’, thus suggesting they were indeed incorporated.

However, there is a different rule for allegedly ‘onerous’ clauses – the definition of these differ depending on the circumstances, but an onerous cancellation clause would be one whereby the cost incurred upon cancellation is out of all proportion to any reasonable pre-estimate of its loss resulting from such a cancellation.

HHJ Stephen Davies referred to the rule from Goodlife Foods Ltd v Hall Fire Protection Ltd [2018]. This reads as follows: “It is a well-established principle of common law that, even if A knows that there are standard conditions provided as part of B’s tender, a condition which is “particularly onerous or unusual” will not be incorporated into the contract, unless it has been fairly and reasonably brought to A’s attention.”

Unsurprisingly, the clause in question was found to be onerous, both because the sum of the “administration charge” bore no relationship to any administration costs incurred or likely to be incurred; and the sum was out of all proportion to any reasonable pre-estimate of its loss resulting from a cancellation.

Having made the onerous nature of the clause clear, HHJ Stephen Davies then concluded that it had not been fairly and reasonably brought to Be Caring’s attention. He gave various reasons for this:

prior to receiving the Order Form, Blu Sky did not tell Be Caring that it would be exposed to a very substantial liability should it decide to cancel its order;

although the Order Form did refer to Blu Sky’s terms and conditions, it did not explain their purpose or give any warning that they imposed potentially substantial obligations;

it would have been perfectly reasonable to include the terms and conditions as part of the Order Form or at least with the orders alongside an explanation; and

Blu Sky made no attempt to highlight the relevant clauses; instead they were “cunningly concealed in the middle of a dense thicket which none but the most dedicated could have been expected to discover”.

Following these points, the judge then concluded that the clause in question was not incorporated into the contract meaning Blu Sky were not able to rely on it. Their claim for £180,000 therefore failed.