Consumer complaint against Nexus Data Systems Ltd about unfair contract terms

08 August 2005

Complainant: A member of the public
Complaint against: Nexus Data Systems Ltd trading as KT Hosting
Case opened: 7 April 2005
Case closed: 5 August 2005
Issue: Alleged unfair contract terms
Relevant instrument: Unfair Terms in Consumer Contracts Regulations 1999 ("the Regulations").

Ofcom received a complaint in relation to a term in KT Hosting's web hosting terms and conditions.

Ofcom has considered KT Hosting's terms and conditions for its web hosting service.

Clause 2.3 of KT Hosting's terms and conditions stated that where the consumer was in dispute over the use of a domain name KT Hosting may, at its discretion, withhold, cancel or suspend the domain name.

Ofcom regarded this clause as potentially unfair under paragraph 1(g) of Schedule 2 of the Regulations as it enables the seller or supplier to terminate a contract of indeterminate duration without reasonable notice except where there are serious grounds for doing so.

KT Hosting has agreed to change the term to:
"We shall have no liability in respect of the use by you of any domain name; any dispute between you and any other person must be resolved between the parties concerned in such dispute."

Clause 3.2 of KT Hosting's terms and conditions stated that KT Hosting had the right to suspend the service at any time and for any reason, generally without notice.

Ofcom regarded this clause as potentially unfair under Regulation 5(1), in particular because of the imbalance created between the consumer and supplier about the grounds and notification for suspension of contracted services.

KT Hosting has agreed to change the term to:
"We shall have the right to suspend the Services at any time and for any reason. You will be given notification and you will be notified of the reason prior to suspension of Services."

Clause 4.4 of KT Hosting's terms and conditions stated that refunds would be given at the discretion of the company management.

Ofcom regarded this clause as potentially unfair under paragraph 1(f) of Schedule 2 of the Regulations, in particular permitting the seller or supplier to retain the sums paid for services not yet supplied by him where it is the seller or supplier himself who dissolves the contract

KT Hosting has agreed to change the term to:
"Refunds will be only be given if We ourselves suspend Services for any reason other than use of the Server by you in any manner which infringes any law or regulation or which infringes the rights of any third party. Due to the nature of domain name registration, all sales are final. No refunds of fees for domain name registration can be issued once a domain name is registered."

Clause 6 of KT Hosting's terms and conditions required the consumer to KT Hosting and its Directors against any action arising from the registration or use of domain names.

Ofcom regarded this clause as potentially unfair under Regulation 5(1) because of the imbalance created between the consumer and supplier because it imposes a risk on the consumer of which the supplier is better able to bear and the consumer is unlikely to be aware.

Ofcom also regarded this clause as potentially unfair Regulation 7(1), in particular the requirement to ensure that any written term of a contract is expressed in plain, intelligible language.

KT Hosting has agreed to change the term to:
"If You use the Services for illegal purposes, for example the publication of illegal, offensive or obscene material, We may be prosecuted. In such an eventuality You shall indemnify us fully and effectively from all liability, losses, costs (including legal costs) and expenses suffered or incurred by us as a result."

Clause 7.4 of KT Hosting's terms and conditions allowed KT Hosting, at its discretion, on termination of the Agreement or suspension or termination of the Services to delete the all data on the consumer's website.

Ofcom regarded this clause as potentially unfair under Regulation 5(1) because of the imbalance created between the consumer and supplier regarding the destruction of consumer data in case of service suspensions and terminations.

KT Hosting has agreed to change the term to:
"Without prejudice to our other rights and remedies under this Agreement, if any sum payable is not paid on or before the due date, we shall be entitled forthwith to suspend the provision of Services to you which will include any data held on the servers. We will make reasonable attempts to notify you of renewal period due and imminent suspension of services. We will allow you within a reasonable period to retrieve data from your website subject to payment in full of all outstanding amounts."

Clause 7.5 of KT Hosting's terms and conditions allowed it any point to cancel the account and/or terminate the services immediately.

Ofcom regarded this clause as potentially unfair under paragraph 1(f) of Schedule 2 of the Regulation, in particular authorising the seller or supplier to dissolve the contract on a discretionary basis where the same facility is not granted to the consumer, or permitting the seller or supplier to retain the sums paid for services not yet supplied by him where it is the seller or supplier himself who dissolves the contract.

KT Hosting has agreed to change the term to:
"At any point we shall have the right to cancel the account and terminate the Services and/or this Agreement immediately if your use of the Server in any manner infringes any law or regulation or which infringes the rights of any third party, nor will you authorise or permit any other person to do so. You will be given notification and you will be notified of the reason prior to suspension of Services."

Clause 8(e) of KT Hosting's terms and conditions stated that KT Hosting would not be liable non-delivery, mis-delivery, corruption, destruction, or modification of data. Clause 8 also listed other circumstances in which KT Hosting disclaimed all liability.

Ofcom regarded clause 8(e) as potentially unfair under Paragraph 1(b) of Schedule 2 of the Regulations, in particular inappropriately excluding or limiting the legal rights of the consumer vis-à-vis the seller or supplier or another party in the event of total or partial non-performance or inadequate performance by the seller or supplier of any of the contractual obligations.

KT Hosting has agreed to replace the whole of clause 8 with a new clause 8:
"Our total aggregate liability to you for any claim in contract, tort, negligence or otherwise arising out of or in connection with the provision of the Services shall be limited to the charges paid by you in respect of the Services which are the subject of any such claim. In no event shall we be liable to you for any loss of business, contracts, profits or anticipated savings or for any other indirect or consequential or economic loss whatsoever.

You must keep current backups of any data posted to our servers. You shall effect and maintain adequate insurance cover in respect of any loss or damage to data stored on the Server."

Clause 8 limits the aggregate liability of KT Hosting to the charges paid by the consumer for the relevant services. In the absence of evidence of consumer detriment Ofcom's position has been reserved in respect of this clause. Ofcom will revisit this term in the event that any evidence arises of potential or actual unfairness to the detriment of consumers and, if necessary, take formal enforcement action under the Unfair Terms in Consumer Contract Regulations 1999.

On the basis of the above, Ofcom has decided to close the investigation.

It should be noted that Ofcom does not have the power to "clear" terms under the Regulations. Only a court has the power to determine whether a term is unfair under the Regulations. Ofcom is therefore able to consider any further complaints regarding these Terms and Conditions in the light of the evidence presented to it.

Case Leader: Andrew Walker ( email:andrew.walker@ofcom.org.uk)
Case Reference: CW/00829/04/05

Text published when the case was opened

Consumer complaint against Nexus Data Systems Ltd about unfair contract terms

Complainant: A member of the public
Complaint against: Nexus Data Systems Ltd trading as KT Hosting
Case opened: 7 April 2005
Issue: Alleged unfair contract terms
Relevant instrument: Unfair Terms in Consumer Contracts Regulations 1999.

Ofcom has received a complaint about terms in KT Hosting's contract "KT Web Hosting - Terms and Conditions", and is investigating whether any terms may be unfair.


Case Leader: Andrew Walker ( e-mail:Andrew.Walker@ofcom.org.uk)
Case Reference: CW/00829/04/05