Electronic contracts: the importance of hyperlinked T&Cs

24.07.19

The Sheriff Court recently issued a decision in Difference Corporation Limited v Unitel Direct Limited confirming that a party’s standard terms had been incorporated into an electronically signed contract. The Court also decided that a clause excluding liability was not unfair and did not need to be specifically drawn to the other party’s attention.

Background

Difference supplied automated telephone dialling software to Unitel.  The contract between the parties was an electronic contract. A purchase order was issued by Difference to Unitel who electronically signed the document on 3 July 2017 and returned it to Difference.

At an early stage in the contract, Unitel alleged a number of difficulties with the software and stopped making payments. Difference responded by advising Unitel that it considered the company to be in breach of contract.  Difference suspended its services and raised a court action for the arrears of payment and for loss of profit.

Unitel counterclaimed for repayment of sums it had paid.  It also claimed for the costs of call-out charges and for loss of profit.

Difference argued that its standard terms excluded liability for the claims made by Unitel. The court had to decide whether the standard terms were incorporated into the contract and, if so, whether the exclusion clause was enforceable.

Incorporation of terms by reference

As a matter of principle, it is not necessary for all the terms of the contract to be specifically set out in a single document and it is common to incorporate a set of standard terms by referring to them in a purchase order. Whether standard terms are incorporated is a question of fact in the circumstances. Even if the contracting party does not read the standard terms, they could still be bound by them.

Difference did not send a copy of its standard terms to Unitel. However, they were available online and a hyperlink was included in the purchase order immediately above the signing line.

In deciding that the standard terms were incorporated, the court concluded that the “terms were a click away from perusal” and it was impossible for Unitel not to have realised that they were intended to form part of the contract.

Onerous or unusual provision

Where a particularly onerous or unusual provision is included in standard terms it must be specifically drawn to the other party’s attention otherwise it will be ineffective. Difference’s standard terms contained a clause excluding liability for all losses, however caused, under the contract or in relation to the services provided.

The court commented that a clause which limits liability to some degree is not only to be expected but may be the whole purpose of including standard terms. The fact that the relevant clause excluded rather than limited Difference’s liability did not elevate it to a clause which needed to be specifically drawn to the Unitel’s attention.

The court also commented that it was not unreasonable for Difference to seek to limit its liability, given that its exposure could be disproportionately high when compared to the contract price. The contract was also a written agreement between two commercial parties of equal bargaining power. Unitel had the opportunity to read and negotiate the clause.

Comment

The use of electronic contracts is becoming more prevalent and they bring with them some novel legal issues however, it is important to bear in mind that the same basic principles of contract formation apply. The inclusion of a hyperlink in an electronic contract may be sufficient to incorporate standard terms and conditions which can have serious consequences.