This is a victory for David over Goliath, and the facts are intriguing.
As its name suggests, the claimant is a spread betting bookmaker. It offered to accept bets on the movements in prices of various commodities including gold, silver and crude oil. Mr Cochrane visited the claimant’s website in October 2010. He provided brief details of his means and bank account and then specified a password and memorable question and answer. This took him to a screen that enabled him to view and therefore read various documents including the “Customer Agreement”. The screen stated “Once read and understood, please click on `Agree’ to signify your agreement to the terms”. A phone number was offered for any questions. This was followed by a button marked “Submit”.
Mr Cochrane clicked on `Agree’ and `Submit’, and was able to trade immediately. In fact, he did not do so until the following month (November 2010). However, between 9 November 2010 and 2 May 2011, Mr Cochrane made more than £60,000.
On the morning of 2 May 2011, he went online at his girlfriend’s house. As he made his trades, he explained to his girlfriend’s son that he was playing a kind of guessing game. At about 2.15pm, he went out leaving the computer on. He was unexpectedly away from the house for about two days during which time his mobile phone battery ran out. When he recharged his phone he found messages from the claimant. When he returned those calls, he was told that his account had lost almost £50,000. When he got back to his girlfriend’s house, he found that there had been numerous trades on his account in his absence. His girlfriend told him that her son had been playing games on the computer.
Spreadex applied for summary judgment contending that Mr Cochrane had no arguable defence. Spreadex said that it did not matter whether Mr Cochrane or someone else made the trades after 2.15pm on 2 May, relying on clause 10(3) of the Customer Agreement which stated:
“Your password must be declared, together with your account number, when you wish to access your account. You will be deemed to have authorised all trading under your account.”
Spreadex’s application failed for two reasons. First, Donaldson J held that clause 10(3) could only assist if it bound the customer because it formed part of a contract. The Judge found that the Customer Agreement was not a contract in itself and it did no more than set out the terms which would form part of a contract created each time a particular trade was entered into. He found that there was no contract that gave effect to clause 10(3) for those trades not carried out by Mr Cochrane. He decided this chiefly because there was no consideration for any such contract. Interestingly, the Judge found that the provision of a facility on which to offer trades was no adequate consideration, because Spreadex had a unilateral right to remove the facility.
Second, (and if the Judge was wrong about the existence of a binding contract) the relevant terms of the Customer Agreement (including clause 10(3) were unfair within the meaning of the Unfair Terms in Consumer Contracts Regulations 1999 (UTCCR) and therefore not binding on Mr Cochrane. One compounding factor on which the Judge relied was that, if a customer chose to view the Customer Agreement, he was faced with 49 pages of closely printed complex paragraphs. “It would have come close to a miracle if he had read the second sentence of Clause 10(3), let alone appreciated its purport or implications, and it would have been quite irrational for the claimant to assume that he had” (Judgment at paragraph 19).
Two points strike us. First, if there is a weakness in the Judge’s analysis, it is that the provision of the facility was not adequate consideration because Spreadex could have withdrawn that facility. The ability to withdraw a facility does not mean that it was not made available in the first place; arguably the Judge could have found that the offering of the facility did in fact amount to consideration. If Spreadex withdrew the facility, then (on the Judge’s analysis) there could be no contract, but prior to withdrawal the customer did have the ability to trade. Second, this case must be a concern for retailers who contract with customers online. The usual practice appears to be to try to incorporate the retailer’s standard terms by offering the consumer the opportunity of reading them. Experience tells us that very few consumers do so. This case seems to spell trouble for the retailer trying to enforce such terms.
Gibson & Co.
September 2012