In Blu-Sky Solutions Ltd v Be Caring Ltd  EWHC 2619 (Comm) the High Court in England held that a supplier's standard terms and conditions ("T&Cs") are incorporated into a contract by reference if the contract provides that, upon signing the contract, the customer accepts that it has reviewed and agreed to the relevant T&Cs. However, any unduly onerous provisions in the T&Cs must be clearly drawn to the customer's attention before signing, or they will not be incorporated.
Formation of the contract
Be Caring Ltd (the customer) entered into a telecoms contract with Blu-Sky Solutions Ltd (the supplier) by electronically signing an online purchase order. The order included a link to the supplier's T&Cs on its website and contained the following text:
"…by signing this document I agree I have logged on to the [supplier's] website at [weblink], have read agree and fully understand all terms and conditions regarding the contract and the policy protection scheme & free trial (*where applicable) and am bound by the same."
The customer signed the contract, despite not having read the supplier's T&Cs. When the customer subsequently attempted to cancel the contract, the supplier charged the customer an early cancellation fee of £180,000 (plus VAT) in line with the early cancellation provision in the T&Cs. The customer refused to pay and argued that the T&Cs were not incorporated by reference.
‘Cunningly concealed’ early cancellation fee
The High Court held that the majority of the T&Cs were incorporated into the contract when the customer signed and returned the purchase order to the supplier. The court found it irrelevant that the customer did not actually review the T&Cs, as the T&Cs were easily accessible on the supplier's website and could be accessed through a hyperlink from the contract itself. Therefore, signing the contract was enough to bind the customer to the T&Cs.
However, the court refused to accept that the early cancellation provision in the T&Cs was incorporated by reference because this constitutes an unduly onerous provision due to the significant sums involved. For an unduly onerous provision to be incorporated by reference, the supplier must clearly bring this to the customer's attention before signing, which the supplier failed to do here. The court described the early cancellation provision as having been "cunningly concealed" in the midst of the supplier's T&Cs, which were in any event not user friendly. This provision was therefore not drawn to the customer's attention before signing and could not be incorporated by reference.
Key takeaways for suppliers
Suppliers may welcome this decision, which acknowledges that T&Cs can be incorporated in an electronic contract by reference. This provides suppliers with greater flexibility in deciding how best to incorporate their T&Cs, for example including these in the contract itself or referring to these as a separate online source.
However, suppliers must clearly flag any onerous provisions in the T&Cs to the customer to avoid the risk that these provisions are excluded from incorporation. For example, suppliers could include a statement in bold on the front page of the T&Cs which details any onerous provisions. It is, however, important to note that correctly incorporating T&Cs into a contract does not necessarily make them enforceable, as any T&Cs must also comply with the Unfair Contract Terms Act 1977.
Our trade and commerce team has a broad range of experience advising on standard terms and conditions. If you would like further advice on any matters raised in this bulletin, please get in touch with Alison Rochester, at firstname.lastname@example.org, or Roddy Forgie, at email@example.com, of our trade and commerce team, or your usual Shepherd and Wedderburn contact.