The recent High Court decision in Spreadex Limited v Cochrane acts as a warning to businesses on the enforceability of online terms.
In this case, the court ruled that there was no contract between an online business and a customer, and even if there had been, the relevant term used by Spreadex would have been deemed unfair.
Colin Cochrane registered with Spreadex, an online bookmaker and accessed his account from his girlfriend’s computer. He failed to log out correctly and was later informed by Spreadex that his account had accumulated a debt of £50,000.
He claimed that his girlfriend’s young son had used the account without his permission. Spreadex were not sympathetic and demanded immediate payment. When Cochrane refused, they began proceedings and applied for summary judgment, relying on a term of their customer agreement: “You will be deemed to have authorised all trading under your account number”. Like so many websites, this formed part of lengthy terms to which consumers often click “agree” without actually reading.
There were two issues for the court to decide.
Was there a contractual relationship?
Spreadex relied on the customer agreement, and the issue of contractual consideration was dealt with by the court. Spreadex argued that access to the website was sufficient consideration. This was rejected by the court, as Spreadex reserved the right to remove or reduce the online services at any time. Also, access to the website was designed to facilitate ‘future transactions’, rather than the right of access being the contract itself.
Was the term fair?
Even if there had been a contract, the court found that the term Spreadex were relying on was too widely drawn. Its rationale would have meant Mr Cochrane was responsible for his account even if it had been hacked into by someone in a different country, and therefore it was unfair.
As online transactions in general become the norm, more cases of this nature will end up in court. As the case shows, it is vital that online agreements are drawn up properly with key terms being prominent rather than being several pages into the document. It also indicates that contracts may not necessarily be formed at the point at which the user signs up to a website but instead at the point at which they start using it to order products or services.
As always, if you need commercial and pragmatic legal advice, we’re here to help so please get in touch.
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