Onerous terms in standard Terms and Conditions: be careful and transparent

The recent case of Blu-Sky Solutions Limited v Be Caring Limited has provided a helpful reminder regarding the risks of trading on standard Terms and Conditions (STCs). STCs are commonly used in business contracts due to their simplicity of implementation and for reducing the risk of commercial negotiation.

However in this particular case, the STCs were found to have contained an onerous term which was subsequently held to be void and unenforceable. The T&Cs contained a clause which required Blu-Sky to pay a £225 administration charge (per phone) should Be Caring Limited cancel the order after it had been signed but before connection of the telecom services for the phones (800 phones had been ordered) Blu-Sky claimed it was owed £180,000 as a result.

The court held that it was Blu-Sky’s responsibility to bring the specific clause to Be Caring Limited’s attention because of its onerous nature. In this case the Judge held that the onerous clause was ‘cunningly concealed’ within a ‘dense thicket’ making it difficult for Be Caring Limited to extract and distinguish it as an important clause in comparison to the other clauses. Blu-Sky had made no attempt to illustrate the importance of this clause and the impact it would have. As such, the court held that the clause was not incorporated into the STCs.

Furthermore, the court also considered the clause in light of the test set out in Makdessi [2015] as to whether the clause amounted to a penalty. The court held that the clause was not in proportion to the Blu-Sky’s legitimate interest in the performance of the contract and its actual loss; as such, if the clause was considered to be incorporated, it would have been considered void as a penalty clause.

Whilst STCs are commonly incorporated within contracts, they are not without risk and therefore need to be carefully considered before signing. If a condition is likely to be considered onerous, it needs to be brought to the attention of the signer in a way that is deemed reasonable and fair.