Are Consumer Contracts Designed to Favour Companies? It’s Time to Think Again

So easy, a child could do it… That was a nasty truth for one online spread-better when he found himself £50,000 in the red after a five-year-old got into his online spread-betting account. But as well as striking fear into the hearts of parents everywhere, the resulting court case in Spreadex Ltd v Cochrane has also delivered a wake-up call for companies who rely on contract terms that are buried in the small print.

All businesses, especially online traders, need to be sure that the terms of consumer contracts must be fair and clearly presented. The case focused on Colin Cochrane who set up an account with Spreadex, an online spread-betting bookmaker, which allows the public to bet on rises and falls in the price of stocks and shares. Soon after setting up his account, Mr Cochrane showed his girlfriend’s young son how it worked. But the demonstration was something he lived to regret, as having left his computer switched on, he returned from a trip to find his account was £50,000 in the red. It turned out that his girlfriend’s son had racked up the losses by trading in gold, oil and silver whilst he was away. Although Mr Cochrane immediately rang Spreadex and explained what had happened, Spreadex were unsympathetic and issued proceedings to recover the £50,000. They argued that Mr Cochrane had no case to answer, because a clause in their consumer contract said ‘you will be deemed to have authorised all trading under your account.’

The Judge decided that there was no contract as there was no commitment or consideration on Spreadex’s part. The terms of the Agreement gave Spreadex the right to refuse to provide any service and to refuse to accept any bet. The Agreement did no more than set out the terms which would form part of any individual contract if and when the customer made an offer for a particular trade and Spreadex accepted it. However, of wider significance, the judge ruled that, even if there was a contract, it was unfair and unenforceable under the Unfair Terms in Consumer Contracts Regulations 1999. Where consumer contracts are presented on a ‘take it or leave it’ basis, as happens with online trading, there may be a temptation for companies to load the dice against the consumer and think that covers it. But all the terms must be fair and reasonable and must make allowances. And the terms must be clear – it’s particularly important for consumer contracts – and the harsher the provisions, the clearer they must be if companies want a chance of getting the courts on their side. Terms imposing liability should not be hidden away in a long document, but should be drawn to the consumers’ attention in a clear and concise manner.

Our corporate and commercial team can advise on drafting your contracts. Contact our West London-based corporate and commercial lawyers by calling 08456 381381 or emailing corporate@ibblaw.co.uk.