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UK Court of Appeal decision gives firms guidance on T&Cs in digital age

The Court of Appeal in England and Wales has considered what businesses need to do to incorporate standard terms and conditions into a digital contract for online services for the first time.

In a recent case (16 pages / 270 KB), the court held that Camelot UK Lotteries Limited’s (Camelot) terms and conditions (T&Cs) were validly incorporated in the online contract between a player, Joan Parker-Grennan, and the lottery game, meaning the player was bound by them.

Mike Hawthorne, financial services expert at Pinsent Masons said: “The case outcome confirms that customers can validly accept T&Cs online even if they do not read the T&Cs. This is the market standard already because it is the practical option, so confirmation by the Court of Appeal that it works is welcome.”

The Court of Appeal also provided guidance to online businesses on what they need to do to ensure their T&Cs are validly incorporated in their online contracts within this decision, such as signposting customers to their T&Cs, and what the consumer should reasonably be expected to be aware of.

Parker-Grennan first opened an online National Lottery account in 2009. Upon doing so, she clicked a box confirming that she had read and would agree to be bound by Camelot’s T&Cs and additional interactive gaming rules.

In 2015, Parker-Grennan purchased a £5 ticket to play one of Camelot’s “instant win" games with prices ranging from £5 to £1m. The way the game works is that the game’s software generates a random pool of numbers, which are labelled the player’s numbers. The aim of the game is to then match any of the player’s numbers to a “winning number” to win a cash prize. The game also featured interactive animations which enabled a player to click on a series of pictures, behind which their numbers would be revealed. If there was a match with a “winning number”, the two matching numbers would then turn white and flash in a green circle. The animations, however, served a purely visual function and the outcome of the game was independently predetermined by Camelot’s software.

Parker-Grennan won £10, as the number 15 matched and this was reflected in the game’s animation, which showed two matching numbers as white and flashing in a green circle. However, the animations of the game showed that the number one also matched, although the numbers did not turn white and flash in a green circle. Parker-Brennan took this to mean that she had won a prize of £1m.

Camelot refused to pay out the £1m, claiming that the reason the animations had displayed two “number ones” was due to a coding error with their software. Camelot explained that a random number generator selects the number which corresponds with a specific prize. This number then determines the outcome of the game, which in this case resulted in a £10 prize, with this process entirely unconnected to the animations displayed during the game. Camelot explained there could only be one prize per game, referring Parker-Grennan to the game’s T&Cs and gaming rules, which were available for the player to review. Parker-Brennan had accepted these in 2009 when she had first opened an account, and each time they were subsequently updated.

The question before the Court of Appeal was whether the T&Cs were validly incorporated in the contract between Parker-Grennan and Camelot, which she entered into upon opening her National Lottery account. If they were incorporated, she also asked the Court of Appeal to consider whether the T&Cs were unfair under the 1999 Unfair Terms in Consumer Contracts Regulations (UTCCR) (now superseded by the 2015 Consumer Rights Act). The Court of Appeal considered whether, as a matter of construction, the relevant T&Cs and gaming rules meant that Parker-Grennan had won £1m in the online gambling game, as opposed to £10, which is what she actually won.

The Court of Appeal held that the T&Cs were validly incorporated into the online contract but the question was whether Camelot “did what was reasonably sufficient to bring the various Terms and Conditions to the notice of a player of the game”.

The Court held that the online trader is generally required to take reasonable steps to signpost onerous or unusual terms in order to incorporate them. In this case, there was nothing in Camelot’s T&Cs that was particularly onerous or unusual. The Judge pointed out that “anyone playing an [instant win game] would expect there to be some rules governing how the particular game was played and what you needed to do in order to win”. A rule that a player can only win one prize per game is “entirely reasonable and commonplace”. Furthermore, the clauses setting out that the outcome of the game is computer generated is enitrely explanatory in nature and do not impose any burden on the player.

In any event, the judge held that Camelot had done enough to reasonably draw Parker-Grennan’s attention to the relevant T&Cs and subsequent updates. The requirement to read and be bound by the T&Cs, as well as to read any updates, was clearly presented to Parker-Grennan onscreen and she would not have been able to proceed unless she agreed to be bound. Parker-Grennan could easily access the terms via hyperlink or drop-down menu, and the terms were written in plain English. Changes to those terms were also highlighted in summaries. The judge clarified that a business is only required to take “reasonable” steps to bring the T&Cs to the consumers attention, not all possible steps.

“It’s a shame for Parker-Grennan, but clarity about T&Cs is critical for online commerce to function, so the Court of Appeal made the right decision for consumers overall” Hawthorne said.

The Court of Appeal also confirmed that the terms were not unfair under the UTCCR and that, as a matter of construction, the relevant contractual provisions could not be read as entitling the player to winnings of £1m.

Most case law and judicial commentary pre-dates the digital era, with the latest Law Commission report into unfair consumer terms conducted in 2013. However, this recent Court of Appeal decision “illustrates the application of the principles of standard term incorporation within a modern digital context” said Sara Esfandyari of Pinsent Masons.

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