E accepted that, by a literal reading of the commission agreement, commission was not payable. Instead, he argued that the purpose of the share sale was to achieve the same result as was intended by the initially envisioned but aborted property sale, and the agreement should be read as such – that the share sale was the effective sale of the property. The High Court had initially rejected his claim.

The Court of Appeal has now agreed with the High Court’s ruling on the basis that, whatever the purchaser and L intended to achieve by the share sale agreement, it was not relevant to the construction of the commission agreement. The key to understanding the commission agreement was to look at its language, and by that interpretation, the literal meaning was clear – L did not need to pay any commission to E. Neither E nor L had considered the sale of the property by means of a share sale, so they cannot have intended the commission agreement to deal with such a situation.

Simon Weinberg, a solicitor at Matthew Arnold & Baldwin LLP and assistant editor of Upload-IT, comments: “When the High Court decision came out, we helped a number of estate agents update their terms and conditions to seek to avoid the effects of the Estafnous case. The appeal court’s decision to uphold the lower court’s ruling further emphasises the need for estate agents to make sure that their terms and conditions allow them to get commission if the shares in a company owning the property are sold rather than the property itself.”

• the service of the claim form was valid;
• its standard terms and conditions had been incorporated by the purchase order; and
• section 52 of the Sale of Goods Act 1979 applied, allowing SSL to apply for injunctive relief.

The High Court ruled that service on the director in England was valid, as the director was senior enough in TTK’s company to be served with proceedings. However, SSL’s terms and conditions had not been incorporated into the joint venture agreement by the purchase order as TTK had never seen the terms and conditions, and therefore could not be bound by them. As a result, section 52 of the Sale of Goods Act 1979 could not apply as the applicable law was Indian law, and the High Court could not grant interim relief. TTK’s business and property were all based in India, and it had no English presence, such that any order of the English court would have to be enforced only in India. The High Court saw no reason why its jurisdiction could extend to this case. It stated that the action should have been brought in India.

Particularly when dealing with foreign-based companies, businesses should make every effort to ensure that the governing law and jurisdiction of any agreement is English law, if that is your preferred route. It must be remembered that terms and conditions can only apply if they are properly incorporated, which means that all parties must have actually seen them and had a chance to read them. In this case, the claimant seemed to forget these two points and spent time and money trying to obtain a judgment when an English court had no jurisdiction over the case at all. It proved a costly mistake. It is one thing to pay for a law firm to draw up decent terms and conditions, but that is only half the battle. The other thing to make sure that the terms and conditions actually apply.

• Failed to deliver the products within the timeframe required by the Distance Selling Regulations.
• Failed to respond or otherwise comply with consumers’ decisions to exercise their statutory rights to cancel their contracts under those Regulations.
• Failed to be available in a rapid and effective manner for consumers to contact him, as required by the Electronic Commerce Regulations.
• Misled as to the availability of the products and the timeframes, contrary to the Consumer Protection from Unfair Trading Regulations.

The OFT took action under the Enterprise Act and brought proceedings against the website operator after written undertakings previously given by it to offer refunds to customers were not complied with. The OFT has said that it will continue to monitor the website’s future practices.

The High Court has agreed with the OFT that such a minimum term was unfair and designed to take advantage of the naivety and inexperience of the average consumer and were weighted in favour of the gym or health club causing a significant imbalance in the parties’ rights and obligations. Gym members would not anticipate all the events which might render the use of the gym impractical and the agreements did not address the tendency of users to overestimate the amount that they would want to use the gym when signing up. Accordingly, those provisions were unfair contrary to the Unfair Terms in Consumer Contracts Regulations 1999 and were unenforceable.

In addition, the practice of describing members who wanted to terminate their agreements as defaulters and registering or threatening to register that with credit reference agencies was an unfair commercial practice and harmed the collective interests of consumers, contrary to the Consumer Protection from Unfair Trading Regulations 2008.

In this case, S supplied goods to J with a retention of title clause. That clause stated that in the event of J becoming the subject of a formal insolvency procedure, S could by notice prevent J from selling or parting with possession of any of those goods. In the meantime, as in most contracts, it was implicit that the buyer could deal with the goods. However, J did actually go into administration. S failed to serve notice to prevent further dealing with the goods. S claimed that J’s subsequent dealings amounted to wrongful interference with its goods.

The High Court initially, and now the Court of Appeal, disagreed with S. The contract did allow S to terminate J’s right to deal with the goods if J went into an insolvency procedure, but that express termination right – that had not been exercised – clearly showed that the parties did not intend that the right should terminate automatically in an insolvency event. The Court added that it was open for the supplier to state the basis on which the buyer could deal with the supplier’s goods. They could agree that the buyer’s right to deal with the goods in the ordinary course of its business would be limited by express contractual provision, but unless the parties expressly agreed to that the court would not imply such a term. The Court said that trading in an insolvency process was not in the ordinary course of business.

Paul Gershlick, a Partner at Matthew Arnold & Baldwin LLP and editor of Upload-IT, comments: “This case shows that a court would be likely to uphold an automatic restriction in the supply contract on the buyer from dealing with the goods if the buyer goes into an insolvency type process. It is open for the supplier to agree the basis on which the buyer can deal with goods that remain owned by the supplier. Traders should look at their own standard terms and conditions and get them updated as necessary without delay.”

The High Court originally and now the Court of Appeal decided that a contract had been formed between the parties. It was a question of construction as to whether the further contract to be executed was a condition of the contract being formed or a mere expression of the contract already agreed. The Court referred to D’s acceptance of the quotation with the statement that D “hereby accept the terms of your quotation subject to your Board approval” as showing that the only condition for the contract proceeding was C’s board agreeing to the deal. This was clearly done because C accepted D’s offer. Therefore, C’s statement that a formal contract would follow in due course was merely an indication that the parties’ contractual desires would be reflected in a further document.

This case could have been decided either way. On the facts, the courts decided that the parties had intended for a contract to have been formed. It was the change in circumstances to D that led to D’s claims. However, instead of the parties spending large legal cost, wasting management time and incurring aggravation and uncertainty in going to the Court of Appeal, the situation could have been avoided if the contract wording and processes had been clearer.

On appeal, the Court of Appeal has overturned the strike-out. It said that there was a real prospect of CSE establishing at trial that the terms and conditions were incorporated into the contract. The ultimate question was whether a reasonable person in the parties’ position would have understood the words as referring to CSE’s contractual terms as being the basis for doing the work.  The Court of Appeal thought that CSE’s interpretation was a more likely interpretation of the words used. One judge added that the phrase ‘terms and conditions available upon request’ must have been intended to have had some meaning.

This was only a ruling over an interim issue. This case shows that the argument that the terms applies had a prospect of success. As to whether or not the terms and conditions were actually deemed to have been incorporated must be decided upon at the full trial. It will be interesting to see what is decided there, because the outcome of this case may impact on how clearly people need to refer to or attach their terms and conditions when they want them to apply to their contracts. It will also be interesting to see what the court says over the fact that the terms were referred to below, rather than above, the signature box. The cost and management time spent on fighting this issue could, of course, have been avoided if the supplier had had clearer processes.

If you want to obtain advice about ensuring your terms and conditions are incorporated into your contracts, please contact us.

On appeal, the Court of Appeal has now ruled that B’s argument that there should be an implied term was wrong. The contract had provided that the product would be tested by an inspector at the time of loading and that decision was final and binding unless there was a manifest error. The Court of Appeal said that the implied term would render such an inspection meaningless. It could not possibly have been impliedly agreed by the parties. The parties had clearly had a desire for contractual certainty.

However, that was a pyrrhic victory for P as it lost on the other point. The implied term of Section 14 of the Act was not excluded by Clause 18 because of the poor wording of that Clause. Under English law, there was a difference between ‘conditions’ and ‘warranties’. Section 14 of the Act was a ‘condition’, but Clause18 did not exclude ‘conditions’.

This can be the danger of using a contract not written with English law in mind. This problem often arises when people use a US-originated contract and substitute the words ‘English law’ instead of the other US governing law. Unless exclusion clauses are drafted properly to reflect English law requirements, they may not work. That’s what one of the parties found out to its cost here.

In this case, G supplied products to Ford. E was a supplier of components to G. E’s products were defective, causing G to incur big losses. G wanted to claim those losses from E. The question was whether E’s terms (which severely limited its liability), G’s terms (which required E to have unlimited liability) or some other terms applied? Each side referred to their own terms and conditions applying in their relevant order documents. However, it was clear that the parties did not agree to the other side’s terms. They were both hoping to negotiate a mutually agreeable limit on liability, but this was not done.

On these facts, the High Court ruled that neither party’s terms and conditions applied. It was clear that they were not accepting the others’ terms. There was clearly a contract, so which terms did apply to the contract? The court said that the terms implied at law – ie in the Sale of Goods Act – applied because of the clear deadlock.

Paul Gershlick, a Partner at Matthew Arnold & Baldwin LLP and editor of Upload-IT, comments: ‘This case highlights the dangers of entering a contract without agreeing the terms. Parties often hope for the best if there is a sticking point, but if and when something does go wrong and one party suffers big losses that they want to claim from another, that is generally not the best time to agree what to do. Consequently, the parties can end up in dispute, costing them management time and money.

‘In this particular case, with the court finding that neither terms apply and the underlying legal position did, that would involve no limit on liability. That means that G effectively won. Is that what E would have wanted from the stalemate?’

The High Court said that the warranty did not apply because no operating documents had been provided by the time of the contract. There was therefore a disconnect between what Red Sky provided in its contracts and its actual processes. Instead of the contractual warranty, implied warranties applied based on the Sale of Goods Act and Supply of Goods and Services Act (notwithstanding that the contract terms had purported to exclude those terms) as no other reasonable warranty applied. The software was not of satisfactory quality or fit for its purpose. In addition, the exclusions and proposed cap on liability did not apply because, in deciding upon reasonableness, the judge took account of the fact that the parties were not of equal bargaining power, the standard terms had sought to exclude the statutory implied terms without providing reasonable replacements, and Kingsway did not know of the existence of the exclusions and limitations on liability. The judge sided with the customer to a large part based on its inability to satisfy itself with the system unless there were clear demonstrations or operating documents.

Newzbin provided indexing and search services for the Usenet Internet discussion system. Usenet enables people to upload and view messages on a public bulletin board. Usenet was not designed for big files such as films, which need to be split into thousands of small parts. Any user who wants to see the film needs to piece all those bits together. Newzbin made that process much easier for users. They compiled an index of films, had 250 editors who compiled reports of the films and links to other information about the films, and provided a one-click mechanism that enabled premium paying members to readily assemble the work from its component parts without having to spend days doing so. Newzbin claimed that it was ‘content agnostic’ by indexing the entire content of Usenet with providing links where possible and any unlawful activity was done by a user of the hyperlinks.

The High Court had little time for Newzbin’s arguments. It described terms and conditions saying that its editors must not do any act to enable, incite or encourage any unlawful acts and similar terms and conditions for its users as being ‘entirely cosmetic’ and a ‘superficial attempt’ to conceal Newzbin’s purpose. Newzbin’s functionality and categorisation of content and encouragement given to editors to report films meant it had been aware for many years that copyright in the vast majority of films accessed through Newzbin were being infringed.

Newzbin had authorised the infringement. Authorisation went beyond mere enablement, assistance or even encouragement. It meant purporting to grant a right to do something, and that could be express or implied from the relevant circumstances. The circumstances included the nature of the relationship with the primary infringer, whether material supplied was used for the infringement, whether infringement was inevitable, the degree of control retained by the supplier, and whether any steps had been taken to stop infringement. Newzbin fell foul of all of those criteria. A reasonable member would have concluded that Newzbin purported to have the authority to grant the required permission and had sanctioned, approved and countenanced the copying. Newzbin provided a searchable and user-friendly facility for premium paying members, it must have known what users were doing and took no steps to stop it; instead, any contractual restrictions were window dressing.

Authorisation the infringement was sufficient to have liability to the film industry, but the High Court went further and said that Newzbin had also procured the infringement or had a common design to infringe. It went beyond mere facilitation and extended to being so involved with the infringement as to be jointly responsible. The Court said that Newzbin operated a web site designed and intended to make infringing copies of films readily available to premium members, the service was structured so as to promote infringement and inevitably did so, editors had been encouraged and induced to make reports of films, it had encouraged its members to give advice to each other about how to do it, and it had profited from the infringements.

The Court ruled that there had been a third form of copyright infringement. The facility had enabled Newzbin’s premium members to download the films from a place and at a time individually chosen by them, and when doing so the way in which Newzbin’s service worked meant that it had been actively involved with communicating the copyright work to the public by electronic transmission without permission

It was certainly a happy ending for Twentieth Century Fox and the other film makers and distributors in this case, and they will be hoping that there is no twist in the plot in the appeal courts.

Paul Gershlick, a Partner at Matthew Arnold & Baldwin LLP and editor of www.Upload-IT.com, comments: ‘This result is not particularly surprising. If Newzbin had been able to get away with what they did, it would have been open season for everyone. The case does not alter the best practice advice for genuine service providers on the Internet who do not wish to profit or encourage intellectual property infringement. They should have a good system in place to enable the reporting and rapid takedown of infringing material, and act on it.

‘There is still no reported UK case on whether web sites simply providing hyperlinks to other sites where infringing material can be found but without doing more or otherwise benefiting would be doing anything wrong. However, I’d be surprised if such a service provider was pulled up if they were simply facilitating a service to users and had no control or intention over what their users do.’

On 26 January 2010, the Technology and Construction Court in London ruled that EDS had “deceitfully induced” Sky into entering into a contract for new Customer Relationship Management technology for use in Sky’s call centres. The contract value was not a small matter either – £54 million is a lot of money by anyone’s standards. Damages payable by EDS are still to be assessed but, based on comments from Sky’s barristers, are likely to exceed £200 million.

Other postings on our website have already showcased, in other contexts, the nature of spiralling court fees due to court rules – and this case demonstrated again that, particularly in technology matters, this is ever more true.  The fees spent by each side far exceeded the value of the contract. The case itself was huge in every sense of the word, being one of the largest cases ever to come to trial in an English court. There were 70 witnesses called and over half a million documents were scrutinised.

In this case, Mr Justice Ramsey found from the evidence that:
(i) the head of the CRM practice at EDS had been dishonest (the key words) in the EDS bid to win Sky’s business;
(ii) EDS had made an actionable misrepresentation to Sky in order to induce Sky into a form of settlement agreement after the project failed;
(iii) EDS was in breach of contract for the whole time it was the systems integrator;
(iv) but for EDS’ deceit (the crucial ‘but for’ test), Sky would have contracted with PwC instead; and
(v) it was untrue that Sky had failed to mitigate its loss after EDS had been removed as systems integrator. (It is a requirement of English contract law that the innocent party to a breach of contract mitigate its loss, else it cannot recover that loss from the breaching party, to the extent of its failure to mitigate.)

So – if this is landmark IT case, why is it also of such great significance to anyone contracting for any type of goods and services? The reason is that any business that has sales-people who are “economical with the actualité ” (in the words of the late Alan Clark) when securing a deal – will be called to account if that deal goes wrong. And most crucially any caps on liability (or exclusions of liability) which were carefully placed into a contract will be ignored. Damages could (and frequently will) be huge – as in this case.

Paul Gershlick, a Partner at Matthew Arnold & Baldwin LLP and editor of www.Upload-IT.com, comments: ‘This is still a grey area of law. There has been no clear English case to rule on this, and although this American case is not binding on English courts it is interesting for its persuasive value to see how the law in this area develops in other countries. That said, English traditional contract law principles should be applied to online contracts, just as with any offline contract, and there are centuries of precedent for that.

‘There is a spectrum of risk with cases involving incorporation of web site terms. The least strong position legally for a web site owner would be not to refer to the terms and conditions at all, next best would be doing as ServiceMagic did here, next would be having a tick box (to which the user must positively opt-in) with a clear statement showing acceptance of the terms and conditions, and then finally the best method on the legal spectrum of risk would be to require the user to have to scroll through the terms in a separate pop-up box and then accept at the bottom of that box. That final method – although best legally – is clearly commercially undesirable and most sites no longer require users to open up a separate box and scroll to the end. The compromise used now is generally the positive opt-in tick-box method. That’s not guaranteed to work legally, although it has become generally accepted good practice.’

The High Court agreed with Socofi’s application and said the AEL/DAM jurisdiction clause had not been incorporated with AEL/Socofi. The matter depended on the intentions of the parties. However, the precedent cases showed that when looking at whether a jurisdiction clause had been incorporated and accepted, there was a crucial distinction. Where the clause purportedly being incorporated was contained within standard terms and conditions, the clause could be incorporated even where one party had not seen the terms and conditions; however, where it was contained within another contract, the rules were stricter and only those terms that were closely related to the parties’ agreement would be incorporated by general words of incorporation. In this case, the primary purpose of the correspondence was to identify the services and cost and there were no express words dealing with incorporating the jurisdiction clause. Therefore, it was not incorporated.

Paul Gershlick, a Partner at Matthew Arnold & Baldwin LLP and editor of www.Upload-IT.com, comments: ‘This case provides two lessons. Firstly, be absolutely clear if you are referring to another contract and you want a particular clause to apply. More widely, though, be clear what you are signing up to and don’t just refer to another contract; that other contract may contain all sorts of provisions, some of which may apply depending on the legal rules of what sort of document it is.’

• did not exclude liability for faulty or mis-described goods;
• were consistent with consumer rights under the Distance Selling Regulations;
• were drafted in plain and intelligible language;
• did not allow changes to be made after agreements had been made.

The Court of Appeal disagreed with the High Court’s analysis. The traditional analysis of offer and acceptance applied unless it was clear that their common intention was for some other terms to apply. The parties had opportunities to agree to a single set of terms and conditions but had never done so. It could not be inferred from the facts that the parties never intended for S’s terms and conditions to apply. Although a long-term relationship and parties’ conduct may displace traditional offer and acceptance analysis, that was not strong enough here.

Paul Gershlick, editor of www.Upload-IT.com and a Partner at Matthew Arnold & Baldwin LLP, comments: ‘This case shows the importance of having clear contracts so everyone knows the terms on which they are dealing. This is especially so if the contract goods or services are complex or worth significant sums of money as they are more likely to end up in dispute. Sometimes people refer in their quotations, order forms and order acknowledgements to their own terms and conditions applying, without ever getting to the bottom of which set of terms really do apply. The parties in this case have ended up incurring significant time and legal expense in going to court – time and money that could have been better used elsewhere. Far better if they would have had clear contracts instead.’