Out-Law News | 03 May 2006 | 3:47 pm | 5 min. read
The report from Ofcom, which acknowledges the changes made by 3 in response to the complaint, sheds light on the watchdog's high expectations for consumer contracts. Ofcom challenges the assumptions that many companies and their lawyers might have made about acceptable wording for terms and conditions.
Perhaps the most obviously unfair condition in 3's Cellular Service Standard Agreement was a clause which required consumers to agree to all terms in all documents produced by 3, including those that 3 might publish in future.
Throughout Ofcom's case report, reference is made to provisions of the Unfair Terms in Consumer Contracts Regulations of 1999. The Regulations include an indicative list of terms that may be regarded as unfair. Pointing to this list, Ofcom felt 3's condition was "potentially unfair" because the terms could irrevocably bind consumers to agreements with which they had no real opportunity of becoming acquainted. It also saw potential unfairness because the clause could allow 3 to bind the consumer to any changes they chose to make to the terms.
3 agreed to amend the term, removing the duty to abide by all future documents.
References to "potentially unfair" appear throughout the Ofcom report. This is an acknowledgement by Ofcom that only a court can determine whether a term is unfair under the Regulations. But Ofcom's view could be influential in the event of court proceedings.
3's terms and conditions stated that 3 might publish an acceptable use policy providing more detail about the rules for use of certain 3 Services, that, if 3 did publish such a policy, it might amend it from time to time, and that consumers could view it on 3's website or request a copy from 3 Customer Services. Ofcom was unimpressed.
This term was again regarded as potentially unfair under the Regulations: consumers had no chance to see the policy at the time of signing the contract and there was no duty to inform customers of changes to it if and when it is introduced.
3 agreed to amend the term to:
“We may publish an acceptable use policy which provides more detail about the rules for use of certain 3 Services in order to ensure that use of 3 Services is not excessive, to combat fraud and where new 3 Services we may introduce require certain rules to ensure they can be enjoyed by our customers. If we publish a policy, we will let you know – such a policy may be amended from time to time – for instance, if we discover that the 3 Services are being used fraudulently or for fraudulent purposes, or the excessive use of certain 3 Services is causing problems for 3, its systems, or for other users or if we introduce new services which may require certain rules to ensure that such new services can be enjoyed by our customers, again, we will let you know if this happens”.
Another term in 3's conditions referred to its Messaging Services and Storage Services for customers. It gave 3 the right to remove or refuse to send or store content if 3 became aware of any "issues" with customers' use of these services.
Ofcom thought this potentially unfair because it did not clarify the types of issues referred to. So 3 added a reference to a list of prohibited uses.
One clause stated that, after connection to 3's service, consumers could not end the agreement using means such as the Consumer Protection (Distance Selling) Regulations 2000. The rationale of this clause is valid; but Ofcom feared that consumers would not understand the legislative reference. The 1999 Regulations require that "any written term of a contract is expressed in plain, intelligible language" – and Ofcom disliked the legalese.
Accordingly, 3 agreed to amend the clause to:
“Once you are Connected to 3, you can only end this agreement in the ways set out in this Section 10. However, if you are a consumer, any statutory rights which you may have, which cannot be excluded or limited, will not be affected by this section. For more information on your statutory rights, contact your local authority Trading Standards Department or Citizens Advice Bureau.”
This appears to have become a small print cliché. 3's contract included a clause which stated that nothing in the agreement limited or removed 3's liability for fraud, death or personal injury caused by their negligence or for any liability which cannot be limited or excluded by applicable law, and that the consumer's statutory rights were not affected.
Ofcom regarded the phrase “your statutory rights are not affected” as potentially unfair, for not being in plain, intelligible language.
3 has agreed to amend the term to:
"Nothing in this agreement removes or limits our liability for fraud, for death or personal injury caused by our negligence or for any liability which can't be limited or excluded by applicable law. If you are a consumer, the terms of this agreement will not affect any of your statutory rights which you have, which cannot be excluded by this agreement. For more information on your statutory rights, contact your local authority Trading Standards Department or Citizens Advice Bureau."
The original conditions said 3 would consider that information updates published on 3's website or sent directly to the consumer by phone, text message, electronic messaging or email had been received by the consumer. But Ofcom said this was equivalent to the inclusion of hidden terms in the agreement and was therefore potentially unfair.
3 has agreed to amend the term to:
"Our website is a great source of information that you may find useful when using our services – it is the most up to date source of information about 3 and its services. You may find it useful to refer to when using our services."
3 has also added this further clause to the terms and conditions:
"If we need to send any notices under this agreement to you, we will do this by communicating them to you via phone, text message, electronic messaging, email or mail using your most recent contact details given to us (if any)."
Like many other consumer contracts, 3's terms and conditions stated that the agreement was governed by English law, and that the two parties agreed to only bring legal action about the agreement in a UK court.
But Ofcom said consumers should be entitled to have their legal rights considered by a local court and subject to local law, regardless of where they live in the UK. The clause therefore represented a potential breach of the 1999 Regulations which state that terms excluding or hindering the consumer's right to take legal action are potentially unfair.
3 has agreed to amend the term to:
"This agreement is governed by English law unless you live in Scotland in which case, it will be governed by Scots law. Each of us agrees to only bring legal actions about this agreement in a UK court."
Other issues are addressed in the seven-page bulletin. But the final point was on font size for the terms and conditions. Ofcom said it was noticeably smaller than that used in the rest of the documents in the information bundle given to new customers. And Ofcom considered that this could be potentially unfair – for not putting the contract in plain, intellegible language.
But in the absence of a specific complaint or evidence of consumer detriment, Ofcom opted to reserve its position on the size of the font. "Ofcom will revisit this issue in the event that any evidence arises of potential or actual unfairness to the detriment of consumers and, if necessary, take formal enforcement action under the Unfair Terms in Consumer Contract Reguations 1999," it said.
Ofcom has now closed its investigation.