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(to which Mr. Cochrane had agreed, as part of the sign-up process) that stated that he would be responsible for any and all trading that took place on his account.
As Mr. Cochrane was a consumer, dealing with a business on its standard terms, the usual analysis is whether or not a term is reasonable – and “reasonable”, in this context, is a combination of fairness and obviousness. The less fair a term is to the consumer, the more obvious it must be made to them if the court is to allow it to stand. In this case, the “standard user agreement” was a suite of four documents and the sign-up process only provided links to them, rather than the text – and the particular clause was found in one of the four documents which itself was 49 pages long. The Judge in the case remarked that he could not believe that any member of the site would have read the clause, or appreciated the point it was making – and that he considered the clause to be unfair in itself and, therefore, unreasonable. He did not, however, make his decision on that basis.
inequality between the parties in terms both of knowledge of the sports agency industry and of their relative bargaining positions. These are both reasons for which the courts have shown themselves willing to intervene in contracts in other areas, where restraint of trade does not apply, to relieve the “weaker” party of obligations which seem unfair in that context.
In entering into dealings with someone who is in a manifestly weaker bargaining position, or whose knowledge of the area is likely to be weaker (and, in both cases, particularly if they are not taking separate legal advice), an entrepreneur should take care not to take undue advantage of that person.
Striking too hard a bargain A slightly odder case concerns the possible consequences of giving oneself too much flexibility and leeway in a contract – in this case a website’s standard terms and conditions. The case concerned a financial spreadbetting website (Spreadex) to which a Mr. Cochrane had signed up as a member.
As was widely reported in the press in 2012, one bank holiday weekend Mr. Cochrane was at his girlfriend’s house in the morning and used her computer to manage his spread bets. When his girlfriend’s young son asked what he was doing, Mr. Cochrane explained that he was playing a “guessing game”. Later that day Mr. Cochrane apparently went to a friend’s house, where there was no internet access, and stayed there for a few days. Meanwhile his girlfriend’s son discovered that he was able to play the “guessing game” (as Mr. Cochrane had failed to log himself out), and did so extremely badly.
When Spreadex called Mr. Cochrane to tell him that it would no longer accept any bets from him until he cleared his by-now expansive debt, Mr. Cochrane explained what had happened and refused to pay. Spreadex took him to court for the debt, relying on a term of their standard user agreement
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In fact the Judge went even further in assessing the bargain that Spreadex had struck as being excessive. It is a fundamental principle of English contract law that, unless an agreement is entered into as a deed (which this was not) it must contain obligations on both parties or it will not be enforceable. The Judge considered the possible obligations of Spreadex under the contract and found that, in each case, they reserved the right not to fulfill them – they were not obliged to accept a bet from Mr. Cochrane, or to let him onto the website, or even to keep his account open if they chose not to do so. The Judge came to the view that, in fact, there was nothing in the agreement that Spreadex were obliged to do – and, therefore, there was no contract at all.
An entrepreneur may at times be in a position to enter into a deal that is extremely favourable to his business, and the temptation will be to do so, but this case demonstrates that it is important to ensure that your business is at least subject to some obligations. In addition, if the business deals with consumers and has them sign its standard terms, it will be important to ensure that anything in those terms which is harsh or unfair on the consumer is not buried away in pages of small print.
Conclusion
These are cases which deal with rare situations, but the principles that they consider are to a large extent applicable to everyday business as well.
The law is, in general,
reluctant to involve itself in what two parties have agreed among themselves – but it will do so where that agreement is skewed by an inequality of bargaining power, or where it seems that one party has not grasped the fundamental points of what is being agreed. Knowing where to draw the line between pursuing a good bargain and taking undue advantage of a person or situation, then, could be crucial.
David Willbe is a Counsel in the Corporate group of Crowell & Moring, an international law firm. Follow them on Twitter @CrowellLonCorp
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