When reusing old contracts doesn't work

Can you sort out some terms and conditions for those new gadgets we're flogging on-line next month? We've got some similar T&Cs in the file over there. Just cobble something together with those—and any others you come across. We'll see how you get on...

Oh the joy of the word 'just'.

'Just cobble something together.'

It always sounds so innocuous. It implies that the task in hand should only take a few minutes—OK, perhaps an hour, tops—and anything longer means that you are impossibly inefficient at your job.

Cue some poor employee in a panic mashing together terms from a distribution agreement signed in 1977 together with provisions culled from a dusty set of T&Cs (last looked at during the Cuban Missile Crisis).

Not a recipe for successful T&Cs, particularly given the massive changes in drafting styles that have taken place since the turn of the century.

Nowadays, legalese is 'out' and plain English is 'in', certainly as far as consumer contracts are concerned.

Using standard 'boilerplate' provisions in contracts could result in them not being binding on consumers.

Understanding those terms which are allowed in consumer contracts (eg business to consumer agreements —B2C) as opposed to business to business agreements (B2B) is vital.

In essence, the room for manoeuvre in B2C agreements is considerably less than in B2B agreements. Why? Quite simply, B2C agreements must be in 'plain and intelligible' language under consumer laws such as the Unfair Terms in Consumer Contracts Regulations 1999 (the 'Unfair Terms Regulations'). If they are written in legalese they may well turn out to be not binding on consumers.

Given the preponderance of legal treacle and obfuscation in many business contracts, the risk is high that certain clauses in these sorts of contracts would fall foul of the Unfair Terms Regulations.

Moreover, unfair contract terms can also amount to unfair 'commercial practices' under entirely separate legislation, the Consumer Protection from Unfair Trading Regulations 2008 (the 'Unfair Trading Regulations')

So, if you need to draft standard provisions in a B2C agreement, the key, in particular, is to examine the Unfair Terms Regulations and the Unfair Trading Regulations carefully.

What sort of provisions have been allowed and what sort have been disapplied?

Here are examples of provisions which were entirely disapplied by the OFT (which is now closed—see below) in connection with B2C agreements. Make no mistake, by 'disapplied' I mean deleted in their entirely.

These are set out in the OFT's Unfair Terms Hub:

CUSTOMER REMEDIES—Microsoft's entire liability and your exclusive remedy shall be, at Microsoft's option, either a) return of the price paid or b) repair or replacement of the software or hardware that does not meet Microsoft's Limited Warranty and which is returned to Microsoft with a copy of your receipt.

and:

The Company shall be entitled to assign this agreement either in whole or in part. The Customer shall not assign, re-sell, transfer or sub-lease the Services or his/her rights under these terms and conditions.

and:

Until the Customer has paid in full for the goods, the Company will be able, at any time, to demand the return of the goods by the Customer. If  the Customer fails to return the goods, the Company will be able to enter the Customer's premises or any other persons' premises where the goods are kept and repossess the goods.

In other cases, the OFT changed certain provisions considerably. In this example, 100 words of text (set out below) were transformed to the following 12 words, 'the Company will manufacture and install the items within a reasonable time'.

Force Majeure. Time shall not be of the essence of the Contract and the Company shall not be liable for any delay in installation in the event of any strike, lock out, trade dispute, accident, fire, flood or any natural disaster or act of God or any contingency whatsoever beyond the reasonable control of the Company affecting the supply or installation of the Contract overleaf. Such suspension or cancellation shall not constitute a breach of Contract by the Company, nor will the purchaser be liable to claim for any loss or damage howsoever arising as a result of these circumstances.

'Massacre of the Provisions' or 'Invasion of the Clause Snatchers' wouldn't make especially compelling films, but that is what could easily happen to poorly drafted terms of business which are destined for consumers (for more on this, check out our previous post: Avoiding the naughty step for bad clauses).

So what is the nature of the guidance available on the Unfair Terms Hub?

The Unfair Terms Hub (now archived and stored at The National Archives site) provides some further useful examples on standard 'boilerplate' provisions and other provisions which were found to be unacceptable to the Office of Fair Trading (OFT).

It is still a useful resource for lawyers and businesses alike.

So here's what you also need to know about the OFT's snazzy, albeit archived, hub:

  • On 27 March 2014 we were informed by the OFT that its general website will 'remain in a read only state for the foreseeable future'. The OFT added that 'over time' the information on its site 'will ... be migrated to the .GOV website'. In the past couple of months this has been happening slowly and on a piecemeal basis.
  • The OFT did not have a time-scale in mind when the Competition and Markets Authority (CMA) is likely to create a successor hub (if at all?) but it confirmed that 'any moves will be signposted ahead'. It is certainly worth keeping an eye on the CMA's site for any developments.
  • Much OFT guidance will still be available through its archived website although bear in mind any relevant legislative changes when reading such material (eg until it is updated).
  • The boilerplate examples that the OFT gives are illustrative only. The examples of revised boilerplate provisions that it gives 'are not recommended as being definitely fair' (eg the OFT—or its successor bodies—cannot 'clear' terms for the purposes of the Unfair Terms Regulations).
  • To quote the OFT, 'only the courts can give a final ruling on what is definitely fair and unfair in any circumstances' and that 'though it rarely happens in practice, a term shown as having being revised [by the OFT] could in principle be found to be unfair'—'a form of words which is considered acceptable in one agreement is not necessarily fair in another'.
  • The provisions highlighted in some of the OFT guidance (eg OFT 311) is selective, in other words, they are not part of an exhaustive list.

The above warnings may make it seem that the Hub is of little use. I'd disagree. Whilst it should be used with care, it does set the mood music. It is the only guidance of its kind that is 'out there' at the moment and, in all probability, it will form the first stepping stone for the CMA creating any new guidance.

Ignore it at your peril.

So what do you think? Let us know below using the 'Leave a Reply' section below. Or just say 'hi'…


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