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High Court rules that online exclusion of liability terms not effective

  • United Kingdom
  • Litigation and dispute management

27-04-2021

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Businesses often seek to incorporate clauses which exclude or limit their liability in order to allocate risk between parties. Two common themes which emerge when these clauses are disputed are (i) how the exclusion clause should be interpreted and (ii) whether the exclusion clause was properly incorporated into the contract.

The recent case of Green v Petfre (Gibraltar) Ltd (t/a Betfred) [2021] EWHC 842 (QB) (7 April 2021) dealt with both of these issues in detail. In this case – which concerned a business to consumer contract – the court found that the terms relied upon by the Defendant to exclude liability did not cover the circumstances of the case and were not sufficiently drawn to the attention of the Claimant to have been incorporated into their contract.

The fact that this case concerned a consumer contract was no doubt important to the Judge’s decision, however the Judgment demonstrates the importance of drafting contracts in a way that is clear, logical and covers all the relevant eventualities. Where exclusion clauses are incorporated by reference to a business’ standard terms and conditions, the clauses should be clearly signposted, with their meaning and effect made clear to both parties. In addition, where standard terms and conditions are incorporated into the contract, they should be readily available to the parties, and the parties should be alerted when any updates are made to them.

Brief Facts

The Claimant, Mr Green, won a jackpot sum of over £1.7m on an online casino platform hosted by the gambling firm Betfred, the Defendant.

Betfred refused to pay the sum to Mr Green because there had been a technical fault in the game, which made it more likely to pay out disproportionately high sums in winnings.

Mr Green issued a claim for his winnings on the basis that Betfred had breached a clause in the terms and conditions governing the rights of customers to withdraw funds from their account. Betfred claimed that various terms in the contract between it and Mr Green excluded its liability to pay out winnings in these circumstances.

Mr Green applied for summary judgment against Betfred. Mr Green argued that the contractual terms relied on by Betfred (i) did not cover the events that happened; (ii) were not sufficiently notified to him so as to be incorporated into the contract he had with Betfred; and (iii) even if incorporated, could not be relied upon under the Consumer Rights Act 2015 and common law. The first two of these points are of particular interest to all businesses contracting with other businesses on standard terms.

Interpretation of terms

For exemption or limitation clauses to be effective, they must be drafted clearly and unambiguously and must clearly cover the type of breach or loss that has arisen.

In business to business contracts, the starting point for interpreting exclusion of liability clauses is to apply the general rules of contract interpretation. In respect of exclusion clauses which limit common law rights, “clear words” are necessary for the clause to be upheld by the court (for example, Seadrill Management Services Ltd v OAO Gazprom [2009] EWHC 1530).

In the Betfred case, the Judge agreed with Mr Green that the terms relied upon by Betfred were simply “not apt to cover the circumstances of this case”. The Judge noted that the terms did not deal with the failure to pay out winnings, nor did they cover a technical fault which was undetectable to either party.

Furthermore, the Judge criticised the drafting of the various sets of terms and conditions relied upon by Betfred, noting that the terms were iterative and repetitive, the language was “at best unclear” and contained typographical mistakes, and the numbering was inconsistent.

Incorporation of terms and conditions

To have any binding effect, exclusion clauses must be incorporated into the contract terms agreed between the parties. In business to business contracts, issues can arise when the exclusion clauses are incorporated by reference to a party’s standard terms and conditions which are not explicitly signed by the parties. For example, an unusually onerous exclusion clause which is buried in unsigned terms – particularly where such terms are long and complicated – is unlikely to have been incorporated into the contract effectively. To ensure a party is bound by such terms, sufficient notice must be given to them before the contract is made. Terms that are onerous or unusual must be fairly and reasonably brought to the parties attention.

In the Betfred case, onerous exclusion clauses were buried in two sets of terms and conditions. Mr Green agreed to the terms and conditions by ticking a box (a process known as “click wrap”). Mr Green did not dispute that in doing so, he was binding himself to some of the terms, but he argued that the clauses relied upon by Betfred were inaccessible and unclear.

The Judge found that none of the terms relied upon by Betfred were adequately raised to Mr Green’s attention and therefore were not incorporated in the contract between them. The Judge based this finding on the following combination of factors:

  • lack of signposting to significant exclusion clauses;
  • failure to highlight the meaning and effect of the terms;
  • the “unhelpful, often iterative presentation” of the terms, which meant that key terms were effectively “buried”; and
  • the fact that the player must click through and search the terms to find what is relevant.

The Judge also noted that Mr Green had agreed to one set of terms and conditions by “click wrap” four and a half years before playing the game in question, without having those terms brought to his attention since, despite various updates being made to them.

Notwithstanding this decision, the Judge made clear that acceptance of terms by way of a “click wrap” can be adequate to form a binding contract that contains limitations and exclusions of liability, provided that the terms are clearly drafted and adequately signposted.

Key takeaways

  • Care must be taken to ensure that the drafting of standard terms and conditions is clear and concise and avoids repetition. This is particularly the case in relation to clauses that seek to limit or exclude a party’s liability.
  • If standard terms and conditions are to be incorporated into a contract (but not signed by the parties), steps need to be taken to ensure that sufficient notice is drawn to those terms and that any onerous or unusual terms are specifically drawn to the party’s attention. What amounts to “sufficient notice” will depend on the particular facts of case, but parties should be aware that the court looks unfavourably upon unclear references in small print.
  • While not relevant in the Betfred case (because it concerned a consumer contract) consideration should also be given to the possible application of the Unfair Contract Terms Act 1977, which may apply further controls on the application of certain terms where businesses agree to contract on one party’s standard terms.

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