Out-Law News | 11 May 2006 | 6:05 pm | 4 min. read
A consumer sparked the investigation by making a complaint about UK Online's terms and conditions. The exact nature of the complaint is not revealed; but a spokesman for Ofcom told OUT-LAW that once it decides to investigate a complaint of unfairness in a consumer contract, it is obliged to look at the whole contract. Following Ofcom's review, several changes have been made by UK Online.
The original contact said that, by subscribing to UK Online's broadband service, consumers were deemed to have both understood and accepted "the following" terms and conditions and agreed to follow them. This wording is common to many consumer contracts; but it was not to Ofcom's liking. Citing the Unfair Terms in Consumer Contracts Regulations of 1999, Ofcom observed that, "by agreeing to such a declaration at this point, the consumer may have been denied a proper opportunity to read and understand all the terms."
The Office of Fair Trading (OFT) has warned e-tailers before against telling consumers to tick a box saying "I have read and understood the terms and conditions" – as the consumer may not have read or understood them. Instead, ask them to check a box indicating that they accept the terms and conditions, suggests the OFT – and highlight the importance of reading them.
UK Online agreed with Ofcom to change the clause to refer, with links, to its Acceptable Use Policy and Fair Usage Policy and to state: "Your use of the Service will be governed by the terms of the Agreement and we expect you to read through the terms carefully."
As with the recent investigation into 3's small print, UK Online was rebuked for the clause: "These terms and conditions do not affect your statutory rights." This was legal jargon, said Ofcom, not plain, intelligible language of the sort expected by the 1999 Regulations.
The new and approved clause states that the terms "do not affect your rights under law." And if you want to know what these rights are, UK Online follows 3 in suggesting within the clause that you contact your local Citizens' Advice Bureau.
It was not acceptable to Ofcom that UK Online attempted to eliminate liability for delay in providing its service – so the exclusion was dropped.
Consumers were expected to agree to comply with an Acceptable Use Policy; but the Policy was not readily accessible to the consumer reading the contract. So UK Online added a URL for the Policy to the top of the contract.
If the customer cancelled his account, UK Online's contract said it would delete messages in the mailbox. Not good enough, said Ofcom: the destruction of data without notice potentially caused a significant imbalance between the rights of the consumer and UK Online, to the detriment of the consumer. So UK Online changed the clause to provide that, if the mailbox has not been accessed for 60 days, that will represent a cancelled account and all mail will be deleted "upon notice by us to you and no further incoming mail will be received."
For third party software provided to customers, UK Online's conditions said: "You shall indemnify us against all claims, liability, damages, costs, expenses, including legal fees, incurred or suffered by us arising out of any non-compliance" with the software licence agreements. Another clause forced consumers to indemnify UK Online for any breach of the consumer contract.
These indemnity clauses created an imbalance between UK Online's rights and obligations and the consumer's, said Ofcom. They also contained legal jargon and could have been deemed an excessive penalty. So UK Online ditched the indemnities.
Similarly, a reference to warranties was simplified after Ofcom's intervention.
A daily interest charge on late payments, at 4% above the base lending rate of Barclays Bank, was reduced by 3% for being "disproportionately high".
An attempt to exclude liability for indirect, special or consequential losses, loss of profits, business interruption and loss of data, losses caused by any virus, denial of service, spamming or hacking was deemed potentially unfair – because "it inappropriately excluded the legal rights of the consumer against UK Online." So the exclusions were deleted.
The termination clause was diluted because it allowed immediate termination without notice if either party breached the agreement. This was subsequently qualified.
UK Online was allowed to modify the contract at any time by emailing changes to consumers. But this did not give consumers a right to terminate if the changes were to their disadvantage. So the wording was amended accordingly: if the consumer reasonably considers he has been disadvantaged by a change, he can cancel.
As with 3's conditions, a reference that English law applied and that the English courts had exclusive jurisdiction was deemed potentially unfair. Now it is qualified: Scots law applies to customers in Scotland and lawsuits can be brought in England, Scotland, Wales or Northern Ireland.
Ofcom's spokesman denied that this was part of a campaign for plain English. "We're required to take a case-by-case approach," he said. "Our role is tightly defined."
He also pointed out that 3 was not the first case report of its kind. Last year, similar investigations on unfair terms were conducted into O2 and Talk Talk, for example.
Struan Robertson, editor of OUT-LAW, said: "Despite these cases, the use of some contractual wording that met with Ofcom's disapproval is common. This suggests that awareness of Ofcom's interpretation is low; yet Ofcom has no remit to change that, other than reporting its investigations on a case by case basis."
Robertson suggested that the Office of Fair Trading and the Department of Trade and Industry could liaise with Ofcom to agree a common position on best practice in consumer contracts. "They could then endeavour to bring that to the attention of the wider business community," he said.