Are your website terms enforceable?

A recent judgement of the High Court highlights that website terms may be deemed unenforceable if they fail to form part of a binding contract or are drafted too favourably towards the website provider.

The facts of the case

The case of Spreadex Limited v Colin Cochrane ([2012] EWHC 1290) was an application for summary judgement by a spread betting bookmaker, who provided services over its website. The defendant, Mr. Cochrane, was a customer who had been subject to unauthorised use of his account with Spreadex, resulting in his account becoming substantially in deficit. Spreadex made a claim for recovery of the shortfall from Mr. Cochrane.

Spreadex sought to rely on the terms to which Mr. Cochrane had indicated his acceptance when he signed up to the website. The terms, forming part of lengthy documents relating to the process, were available to view via a link near the “Agree” button. At that stage, Mr. Cochrane did not place any bets, and Spreadex reserved the right (in its terms) not to accept any bet and to withdraw the service at any time.

The key term relied upon by Spreadex stated that Mr. Cochrane “will be deemed to have authorised all trading under [his] account number”.

The decision

The court refused the application for summary judgement and found in favour of Mr. Cochrane, on a number of grounds:

• there was no binding contract formed at the stage the terms were “accepted”, as there was no consideration given by Spreadex – it was not obliged to provide any service to Mr. Cochrane at that time;
• even if a contract had been formed, the term deeming Mr. Cochrane to have authorised all trading under his account was unfair and therefore unenforceable. The court envisaged circumstances where access may occur without fault on Mr. Cochrane; and
• enhancing the argument for the clause being unfair was the fact that it was hidden within 49 pages of a customer agreement forming part of a number of documents he was being asked to “view” and “agree”. The judge commented: “It would have come close to a miracle if he had read the [relevant provision], let alone appreciated its purport or implications, and it would have been quite irrational for the claimant to assume that he had”.

What can we take from this?

The circumstances of this case (insofar as they relate to online contractual procedures), are not, in my experience, unusual. Many websites have similar procedures for accepting terms, and similarly complex terms drafted in favour of the providers. These terms therefore risk unenforceability if they ever need to be relied upon. Some key suggestions to lower this risk:

• when terms are to be agreed by a customer, ensure the process is not just a token “accept” button referring to lengthy complex terms, but that the terms (particularly any important or onerous ones) are presented in such a way that can easily read and taken in by the customer;
• avoid drafting terms unreasonably in favour of the service provider; consider the actual likely scenarios when the relevant provisions may kick in and what would be fair in the context. For example, where provisions put responsibility or liability on the customer, can these be qualified to apply only where the customer has some control or authorisation over the situation? and
• work out appropriate timing for presentation and agreement to terms; this should be at a stage when contractual obligations or other consideration are created for both parties.

Olivia Whitcroft, principal of OBEP, 15 June 2012

This article provides general information on the subject matter and is not intended to be relied upon as legal advice. If you would like to discuss this topic, please contact Olivia Whitcroft using the contact details set out here: Contact Details