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Tuesday, 10 July 2012

Beware complicated website terms and conditions!

Spreadex Ltd v Cochrane [2012] EWHC 1290 (Comm) (18 May 2012) looks at first sight as if it couldn't be of any interest to the motor industry: the claimant is an on-line spread-betting bookmaker. Moreover, it is not a long judgment, the legal principles are not novel, and the defendant acted in person. But the dispute is, in its basic features, one that any business trading on-line could run into.

The company's terms and conditions for the use of its website stated (inter alia) that the client would be "deemed to have authorised all trading under your account number...". Mr Cochrane's account was used, without his knowledge, by his girlfriend's son, who racked up significant losses. The boy's age is not mentioned in the judgment, but it does indicate that he thought he was playing games on the computer, after Mr Cochrane had explained the trading process to him in such terms.

When the claimant tried to enforce the user agreement, however, the deputy judge made several findings that could cause big problems for on-line traders. First, he considered that, largely, the terms and conditions did not form a contract but rather created a framework in which contracts would be made - which, given the nature of the claimant's business, makes sense. Was there, then, a binding contract that pre-existed the contracts for the individual trades? The claimant could not point to one. There was no consideration. The claimant argued that making the on-line trading platform available amounted to consideration, but the judge decided that this was in fact nothing more than the modern equivalent of being ready and willing to enter into a contract by telephone.

Moreover, the Unfair Terms in Consumer Contracts Regulations 1998 would make the pre-trade contract for which the claimant contended unenforceable. The regulation applies to terms which are contrary to the requirement of good faith and cause a significant imbalance in the party's rights and obligations, to the detriment of the consumer. If the pre-trade contract existed, the claimant would have no obligations and the customer would have no rights: but the customer would be liable for any trade on his account, even if it were neither made nor authorised by him. This amounted to a significant imbalance and was contrary to good faith. The judge thought that "a more appealing case" might have been made if the offending term had only applied where the customer's negligence led to the unauthorised trades, but he expressed no view about whether such a term would have been fair.

Finally, the fact that there were four documents which could be viewed by clicking the link to the terms and conditions compounded the matter. The judge thought, surely correctly, that most customers would have proceeded directly to click "agree", even though by doing so they indicated that they had read and understood the documents. Even if a customer chose to look at the documents, the customer agreement alone had 49 closely printed pages of complex legal terms. "It would have come close to a miracle if he had read the second sentence of clause 10(3), let alone appreciated its purport or implications", said the judge.  "This was an entirely inadequate way to seek to make the customer liable for any potential trades which he did not authorise, and is a further factor rendering the second sentence of Clause 10(3) an unfair term."

Website terms and conditions are a trader's one chance to create legal relations with visitors to the site. There is never a guarantee that they might work, but clearly any temptation to include everything but the kitchen sink, not to mention complex legal language, might make them completely worthless. The terms and conditions are intended to manage legal risk, but if they aren't enforceable you might as well not have bothered.

Acceptance certificate defeats claim

Acceptance of goods will often mean that the buyer has lost the right to reject, whether the goods concerned are a tin of beans, a truck, or a Boeing 737. In consumer contracts other factors come into play, but in the general law of contract once you have accepted something you are stuck with it.

In ACG Acquisition XX LLC v Olympic Airlines [2012] EWHC 1070 (Comm) (30 April 2012) the airline leased a new plane and signed an acceptance certificate. Later it turned out to have defects, and the airline served termination and redelivery notices. The lessor argued that the aircraft was airworthy when it was delivered, but  in any case the airline was estopped from asserting that it did not comply with the certificate of airworthiness because of the acceptance. The Commercial Court, unsurprisingly, held that this was indeed the position. The airline had a chance before delivery to inspect the aircraft and have any defects remedied, and it would be inequitable to allow them to argue later that the plane did not comply at the time of delivery.

The case does not make new law, but it does serve to show that you should not sign an acceptance certificate (or anything to the same effect, whatever it's called) unless you are absolutely sure the goods are OK. If you have a chance to inspect the goods, you must take it before you accept the goods and sign to say that you have done so.

Wednesday, 4 July 2012

German authorities put GM and Peugeot under microscope

Reuters reports that the Bundeskartellamt, the German Federal Cartel Office, is going to look more closely at the proposed link-up between GM and Peugeot. It will undertake a Phase II investigation, which can take three months, as the initial investigation did not allow long enough. The Office is particularly concerned about the effect of the alliance on car parts suppliers.