To read or not to read

How often do you indicate your acceptance to online terms and conditions without ever reading them? Recent developments in both case-law and the practices of internet companies may make you think twice before doing so in future.

In December 2012, Facebook-owned photo sharing platform Instagram faced backlash from users when it was revealed that changes were being made to its terms and conditions which appeared to give Instagram the right to sell users’ photos to advertisers free of charge and without notification. Although denying that this was its intention, blaming ‘confusing’ language in the revised terms, it has arguably called into question the practice of online companies to overwhelm users with lengthy terms and conditions and complex legal jargon in an attempt to impose unfavourable terms on users.

A recent article published by BBC News (Source – BBC News – © 2013 BBC)  suggested that the terms and conditions of certain well-known internet companies have a higher word count than works of Shakespeare. Some terms and conditions, including the iTunes terms and conditions of Apple, contain terms which allow the company to modify and add to the terms and conditions at any time. It is then the user’s continued use of the service in question that is deemed acceptance of these modified terms.

But can companies get away with these practices? The Unfair Terms in Consumer Contract Regulations 1999 (UTCCR) deals with the fairness of contractual terms in consumer contracts. Regulation 5(1) sets out that a contractual term that has not been: “individually negotiated [with a consumer] shall be regarded as unfair if…it causes a significant imbalance in the parties’ rights and obligations arising under the contract”, consequently rendering it unenforceable.

In the case of Spreadex Limited v Colin Cochrane [2012], the online betting company, Spreadex, sought to rely on a “deemed authorisation” clause in its 49 page customer agreement to obtain payment from Cochrane of £50,000 of losses racked up by a 5 year old child “playing” on Cochrane’s computer.  The clause stated: “You will be deemed to have authorised all trading under your account number”. Spreadex’s claim was dismissed partly on the basis that this clause was an unfair term under UTCCR. The clause had not been individually negotiated with Cochrane and, viewed overall, did not satisfy the fairness test in Regulation 5(1) of UTCCR.

Whether a particular term in an internet company’s terms and conditions is enforceable will depend on the facts of the case and therefore must be decided on a case-by-case basis. However the need for the term to be fair must be at the forefront of these companies’ minds, especially where the term is unusual or seeks to impose liability on the consumer. It may be wise to highlight key terms or specifically draw the consumer’s attention to them, thus allowing the consumer to make an informed decision as to whether or not to accept the contract. Failure to do so may render these terms unenforceable and, as highlighted by Spreadex, could cause significant losses.

For more information on website issues, e-commerce or consumer contracts, please contact Tom Torkar, Partner in our Commercial team.