Consumer complaint against UK Online about unfair contract terms

10 May 2006

Complainant: A member of the public
Complaint against: UK Online Limited (“ UK Online”)
Case opened: 9 January 2006
Case closed: 8 May 2006
Issue : Alleged unfair contract terms
Relevant Instrument: Unfair Terms in Consumer Contracts Regulation 1999 (“the Regulations”)

Ofcom received a complaint about a term in UK Online's Product Terms and Conditions (“the Contract”).

Ofcom has considered the Contract and has now closed its investigation. UK Online has responded to the issues raised by Ofcom under the Regulations by agreeing to amend its contract to Ofcom's satisfaction.

i. Paragraph 3 of the introductory text stated that, by subscribing to the service, consumers were deemed to have both understood and accepted the following terms and conditions, and agreed to follow them. Ofcom regarded this term as potentially unfair under paragraph 1(i) of Schedule 2 of the Regulations, because by agreeing to such a declaration at this point, the consumer may have been denied a proper opportunity to read and understand all the terms.

UK Online has agreed to amend the term to:

“These terms and conditions should be read in conjunction with our Fair Usage Policy as published at www.ukonline.net/fup as updated from time to time, and our Acceptable Use Policy as published at www.ukonline.net/aup as updated from time to time (together the “Agreement”). Your use of the Service will be governed by the terms of the Agreement and we expect you to read through the terms carefully.”

ii. Paragraph 5 of the introductory text stated:

“These terms and conditions do not affect your statutory rights”.

Ofcom regarded this term as potentially unfair under Regulation 7, because the use of legal jargon such as “statutory rights” did not express the term in plain and intelligible language.

UK Online has agreed to amend the term to:

“THESE TERMS AND CONDITIONS DO NOT AFFECT YOUR RIGHTS UNDER LAW. IF YOU REQUIRE ANY ADVICE OR ASSISTANCE WE WOULD SUGGEST YOU CONTACT YOUR LOCAL BRANCH OF THE CITIZENS' ADVICE BUREAU WHO SHOULD BE ABLE TO HELP”

iii. Clause 2.4 stated that UK Online would endeavour to provide the service within given timescales, but if these timescales were not met, UK Online would not be liable. Ofcom regarded this term as potentially unfair under paragraph 1(b) of Schedule 2 of the Regulations because it sought to eliminate liability for delay in providing the service.

UK Online has agreed to amend the term to:

“We will endeavour to provide the Service within the timescales communicated to you.”

iv. Clause 2.7 (Clause 2.8 of Contract as amended) stated that, if consumers failed to take delivery of Broadband Service Hardware and/or provided incorrect delivery details, making delivery impossible, UK Online might store the hardware and charge the consumer for the cost of the storage as well as eventual delivery. Ofcom regarded this term as potentially unfair under paragraph 1(i) of Schedule 2 of the Regulations, because there was no indication of what any such charges were likely to be, thereby binding consumers to agree to a term with which they had no opportunity to become acquainted before the conclusion of the contract.

UK Online has agreed to amend the term to:

“Where you have ordered the Broadband Services Hardware, if you fail to take delivery of any Broadband Services Hardware and/or provide incorrect delivery details such that we are unable to deliver it, we may store the Broadband Service Hardware”

v. Clause 2.8 (Clause 2.10 of the Contract as amended) stated that, although Broadband Service Hardware provided by UK Online would have been tested, if the equipment delivered to the consumer had or developed a fault the consumer would be required to notify UK Online. If the fault was covered by the manufacturer's warranty, UK Online would provide a replacement. The clause further required consumers to acknowledge that they might be charged for fixing any fault. Ofcom regarded this term as potentially unfair under paragraph 1(i) of Schedule 2 of the Regulations, because the term failed to clarify what the manufacturer's warranty covered and what charges would be levied for repair. The term therefore had the effect of binding consumers to a term with which they had no opportunity to become acquainted before the conclusion of the contract.

UK Online has agreed to amend the term to:

“Where you have ordered the Broadband Services Hardware, if the Broadband Services Hardware or other equipment which we deliver to you has or develops a defect or fault, you should notify us by contacting our Technical Support Team. If our Technical Support Team confirm that the Broadband Services Hardware is faulty and if the fault is covered by the warranty (which generally will cover defects and manufacturing faults only), we will provide you with replacement Broadband Services Hardware or other replacement equipment. You should return the faulty Broadband Services Hardware or other equipment to us as directed by our Technical Support Team. You acknowledge that where the warranty doesn't apply the fixing of a fault may incur extra charges (subject to such sums being fair and reasonable).”

vi. Clause 2.13 (Clause 2.13 of the Contract as amended) stated that UK Online would liaise with the consumer in relation to conditions of service provision set out earlier in the contract, but that if the service conditions could not be met, UK Online would notify the consumer as soon as possible, and refund any payment made. However, UK Online would not refund the payment for the Broadband Service Hardware, because they would allow the consumer to keep it. Ofcom regarded this term as potentially unfair under Regulation 7, because it did not make it clear whether consumers were entitled to return the Broadband Service Hardware and receive a refund for it if they so chose.

UK Online has agreed to amend the term to:

“…If this Agreement is terminated by you in accordance with the provisions of this clause you will be entitled to either keep the Broadband Service Hardware you have paid for or return it to us. We will only refund any payment you have previously made in respect of the Broadband Service Hardware where you return it to us (complete with all parts and in working order) within 30 days of termination of this Agreement.”

vii. Clause 3.5 stated that consumers agreed to comply with an Acceptable Use Policy.

Ofcom regarded this term as potentially unfair under paragraph 1(i) of Schedule 2 to the Regulations, because the Acceptable Use Policy was not readily accessible to the consumer reading the contract. The term had the effect of binding consumers to agree to a term with which they had no opportunity to become acquainted before the conclusion of the contract.

UK Online has agreed to add the URL for the Acceptable Use Policy to the top of the Contract.

viii. Clause 4.5 stated that if the consumer cancelled their account, UK Online would delete all messages contained in the mailbox. Ofcom regarded this term as potentially unfair under Regulation 5, because the destruction of data without notice potentially caused a significant imbalance between the rights of consumers and UK Online, to the detriment of the consumer.

UK Online has agreed to amend the term to:

“If you are using the Dial Service and your mailbox has not been accessed for sixty (60) calendar days, we will take this to be a cancelled account and all mail will be deleted upon notice by us to you and no further incoming mail will be received.”

ix. Clause 5.1 stated that consumers would:

“agree to comply with the terms of any end user license agreement and any other agreements reasonably required by the owners of any intellectual property rights in any software provided to you by us. You shall indemnify us against all claims, liability, damages, costs and expenses, including legal fees, incurred or suffered by us arising out of any non-compliance with the terms of such end user license or other similar agreements.”

Ofcom regarded this term as potentially unfair under Regulation 5, Regulation 7 and paragraph 1(e) of Schedule 2 of the Regulations as it created an imbalance between the rights and obligations of consumers and UK Online, to the detriment of the consumer. In addition, it contained legal jargon and could also have been considered a form of excessive penalty, as it could have required consumers to pay a disproportionately high sum in compensation (UK Online's costs, expenses and legal fees).

UK Online has agreed to amend the term to:

“You agree to comply with the terms of any end user license agreement and any other agreements reasonably required by the owners of any intellectual property rights in any software provided to you by us.”

x. Clause 5.2 stated:

“To the extent permitted by law, and save in respect of implied statutory warranties no warranties are provided by us in respect of the software. You acknowledge that your sole warranties in respect of the software are those contained in any end user license agreement (if any).”

Ofcom regarded this term as potentially unfair under Regulation 7, because the term was expressed in language which was neither plain nor intelligible.

UK Online has agreed to amend the term to:

“No warranties are provided by us in respect of the software. You acknowledge that your sole warranties in respect of the software are those contained in any end user license agreement (if any).”

xi. Clause 6.1 explained the consumer's obligations for using the service, including the stipulation that consumers comply with the Acceptable Use Policy. Ofcom regarded this term as potentially unfair under paragraph 1(i) of Schedule 2 of the Regulations, because the Acceptable Use Policy was not readily available for the consumer to become familiar with and understand, before agreeing to comply with the Policy.

UK Online has agreed to add the URL for the Acceptable Use Policy to the top of the Contract.

xii. Clause 6.2 stated that UK Online might update or change the Acceptable Use Policy without notice, and that a consumer's continued use of the service would be considered to constitute acceptance of the changes. The term went on to state that consumers agreed to observe the Acceptable Use Policy, and that failure to do this might result in suspension of the consumer's service without notice by UK Online. Ofcom regarded this term to be potentially unfair under paragraph 1(i) of Schedule 2 of the Regulations, because the Acceptable Use Policy was not readily accessible to the consumer reading the Contract. This clause could therefore have bound consumers to terms with which they had no opportunity to become acquainted before the conclusion of the contract.

UK Online has agreed to add the URL for the Acceptable Use Policy to the top of the Contract, as noted above in respect of clause 6.1.

xiii. Clause 6.4 (Clause 6.5 of the Contract as amended) stated that consumers agreed to pay for the services they had signed up for, and that UK Online might charge daily interest on late payments of 4% per annum above the base lending rate of Barclays Bank PLC . Ofcom regarded this term as potentially unfair under paragraph 1(e) of Schedule 2 of the Regulations, as it requires consumers to pay a disproportionately high sum in compensation.

UK Online has agreed to amend this term to:

“…We may charge daily interest on late payments at a rate equal to 1% per annum above the base-lending rate of Barclays Bank Plc. You agree that we may vary the charges only where the Service is upgraded at your request as set out on the Website and you will pay the charges as varied upon any upgrade for the remainder of the term of your Agreement with us.”

xiv. Clause 7.3 stated that if UK Online applied a temporary suspension of the service for maintenance or technical repair purposes, they could do so without giving notice, and would not be liable to pay compensation to the consumer for this loss of service.

Ofcom regarded this term to be potentially unfair under paragraph 1(b) of Schedule 2 of the Regulations and Regulation 5, because the term allowed UK Online to inappropriately limit the consumer's legal rights against UK Online for non-performance, thereby creating an imbalance between the rights of the consumer and UK Online to the detriment of the consumer.

UK Online has agreed to amend the term to:

“We reserve the right to modify or temporarily suspend the Service or any part of it upon notice to you for the maintenance or technical repair or enhancement of the Service. We will use our reasonable endeavours to maintain an uninterrupted service.”

xv. Clause 8.1 stated that in the event of reasonably foreseeable loss UK Online would not be liable for any indirect, special or consequential losses consumers might suffer in any way connected with the service or UK Online. Further, UK Online would not, in any circumstances, be liable for any loss of business, profits, business interruption or loss of data, or any other pecuniary loss (even where they had been advised of the possibility of such loss or damage). UK Online also stated that they would not be liable for any loss or damage caused by any virus or other hostile computer programme, denial of service, spamming or hacking (except where it was caused as a matter of UK Online's default). Ofcom regarded this clause as potentially unfair under paragraph 1(b) of Schedule 2 of the Regulations, as it inappropriately excluded the legal rights of the consumer against UK Online.

UK Online has agreed to amend the term to:

“We shall exercise reasonable skill and care in providing the Service to you in accordance with these Terms and Conditions and our Code of Practice. www.ukonline.net/cop

xvi. Clause 8.4 (Clause 8.3 of the Contract as amended) stated that consumers agreed to indemnify UK Online against all claims, liability, damages, costs and expenses, including legal fees, incurred or suffered by UK Online caused by any breach of the Contract. Ofcom regarded this term as potentially unfair under Regulation 5, Regulation 7 and paragraph 1(e) of Schedule 2 of the Regulations. This term created an imbalance between the rights and obligations of consumers and UK Online to the detriment of the consumer, contained legal jargon, and might also have been considered a form of excessive penalty, by requiring consumers to pay a disproportionately high sum in compensation (UK Online's costs, expenses and legal fees).

UK Online has agreed to amend the term to:

“Other than as set out in paragraph 8.2 above, any liability we have to you of any kind is limited to £350 in any twelve-month period.”

xvii. Clause 9.1 stated the circumstances in which consumers could terminate their contract. The term explained that the agreement would be terminated on the next payment date for the service, and that any money already paid by the consumer would not be refunded. Ofcom regarded this as a potential breach of paragraph 1(d) of Schedule 2 of the Regulations, because the term did not make it clear whether consumers who had already paid for, but not received, the service would be refunded for that service which they had yet to receive.

UK Online has agreed to amend the term to:

“If you wish to terminate your Agreement with us, or in accordance with paragraph 10.2 below, you must notify us by writing to Customer Services www.ukonline.net/contact . Subject to paragraph 9.5 below, termination of your Agreement will occur on the next payment date for the Service. To ensure that no further amounts are deducted from your credit or debit card or from your bank account via direct debit, you will also need to cancel the arrangements made with WorldPay and/or your Bank. You will find instructions telling you how to do this with WorldPay on the Website.”

xviii. Clause 9.2 (Clause 9.3 of the Contract as amended) stated that the minimum term for the agreement for broadband services is 12 months, and that if a consumer moved house during this period they would be required to pay a standard charge (stated on UK Online's website) to cover the costs of terminating the contract and re-providing the service at the new location, at which point the 12-month minimum term would recommence. Ofcom regarded this term as potentially unfair under paragraphs 1 (e); 1 (i) and 1(h) of Schedule 2 of the Regulations, because it might have required the consumer to pay a disproportionately high sum in compensation. Further, the Contract did not state what charge would apply, thereby potentially binding consumers to terms they had not become acquainted with before the conclusion of the contract. In addition, the automatic extension of the fixed term contract did not give the consumer the opportunity to give consent to a contract extension.

UK Online has agreed to amend the term to:

“If you move home at any time you will need to pay us a standard charge to cover the costs of our terminating your existing Service and re-providing the Service to your new location. Currently the standard charge is £75.00 (including VAT), and where your minimum term has not passed the remainder of the 12-month minimum term will then recommence from the date we start providing Service to that new location (so that the re-location of the Service shall not extend the minimum term (where still applicable) beyond the initial 12 months).”

UK Online also provided Ofcom with clarification of the basis of the standard charge. The charge appeared to be proportionate to the costs incurred by UK Online in relocating internet services.

xix. Clause 9.4 (Clause 9.6 of the Contract as amended) stated the circumstances in which UK Online might terminate the agreement. This included immediate termination, without notice, if either party breached the agreement. Ofcom regarded this term as potentially unfair under paragraph 1(g) of Schedule 2 of the Regulations, as it allowed UK Online to terminate the contract without reasonable notice and without serious grounds for doing so.

UK Online has agreed to amend the term to:

“We may terminate your Agreement with us immediately without prior notice to you where:

you commit any serious or persistent breach of these terms and conditions; or

you breach the AUP; or

you breach the FUP and such breach of the FUP has or we reasonably consider is likely to have a detrimental effect on (i) our network or (ii) our ability to provide services to our other customers or (iii) our other customers quality of service; or

you become bankrupt or enter into any arrangement with our or your creditors as applicable.”

xx. Clause 9.5 (Clause 9.8 of the Contract as amended) stated that once an agreement has been terminated consumers would no longer have access to the service, and that UK Online would remove or delete any data, rendering the data irretrievable, without notice to the consumer. Ofcom regarded this term as potentially unfair under paragraph 1(e) of Schedule 2 of the Regulations, as losing access to data without prior notice might constitute a disproportionate penalty.

UK Online has agreed to amend the term to:

“If our Agreement with you is terminated, you will no longer have access to the Services. We will also disable any webspace provided to you and any data held on it will be removed and deleted. Any data deleted will not be recoverable”

xxi. Clause 9.6 stated that if UK Online notified consumers of a materially detrimental change to the service or Terms and Conditions, consumers would be eligible to terminate their agreement within a month of that notification. Ofcom regarded this term as potentially unfair under paragraph 1(i) of Schedule 2 of the Regulations, as it did not define the meaning of the phrase “materially detrimental change” and therefore the consumer was bound to a term with which they had no opportunity to become acquainted before the conclusion of the contract.

UK Online has removed this term.

xxii. Clause 10.1 stated that while UK Online reserved the right to assign or sub-contract the agreement and performance of their obligations to other parties, consumers had no rights to assign or otherwise deal with the agreement. Ofcom regarded this term potentially unfair under Regulation 5, as it created an imbalance between the rights of UK Online and the consumer, to the consumer's detriment.

UK Online has agreed to amend the term to:

“Unless we agree otherwise you may not assign or otherwise deal with this Agreement. We reserve the right to assign this Agreement and/or to sub-contract performance of our obligations hereunder to the extent necessary for us to provide the Services. Your consent shall be required where any such assignment may adversely affect the Service provided to you.”

xxiii. Clause 10.2 stated that UK Online might modify the Contract at any time, by e-mailing any changes to consumers. Ofcom regarded this term as potentially unfair under paragraph 1(j) of Schedule 2 of the Regulations as it allowed UK Online to unilaterally alter the terms of the Contract without allowing consumers to terminate if the changes were to their disadvantage.

UK Online has agreed to amend the term to:

“We may modify these Terms and Conditions at any time or update or make changes to the AUP and/or FUP, by notifying you by email of the changes at either the email address you provide to us upon registration (or as you may update by notifying us in writing from time to time) or your UK Online email address relating to the Service. You may terminate your Agreement with us if you reasonably consider that you have been disadvantaged by any change we may make to these Terms and Conditions and/or the AUP and/or FUP. You may only terminate your Agreement for this reason during the first month following such notification.”

xxiv. Clause 10.4 stated that any decision made by UK Online in relation to the Contract, including the Acceptable Use Policy, would be final. Ofcom regarded this term as potentially unfair under paragraph 1(m) of Schedule 2 of the Regulations, because the term allowed UK Online the exclusive right to interpret any term of the Contract.

UK Online has removed this term.

xxv. Clause 10.5 (Clause 10.4 of Contract as amended) refers to the Contracts (Rights of Third Parties) Act 1999. Ofcom regarded this term as potentially unfair under Regulation 7 because it was not expressed in plain and intelligible language.

UK Online has agreed to amend the term to:

“If any part of these Terms and Conditions or the AUP or the FUP shall be held to be invalid or unenforceable, this shall not affect the enforceability of any other provision of these Terms and Conditions or the AUP or the FUP.”

xxvi. Clause 10.6 stated that English law governed the Terms and Conditions and all other legal relationships between UK Online and the consumer, and that English courts had exclusive jurisdiction. Ofcom considered this term as potentially unfair under paragraph 1(q) of Schedule 2 of the Regulations, because the term might restrict consumers from seeking legal remedy or redress wherever they might live in the United Kingdom of Great Britain and Northern Ireland.

UK Online has agreed to amend the term to:

“These Terms and Conditions, the AUP, the FUP and all other legal relationships between us shall be governed by English Law, unless you live in Scotland in which case Scottish Law will govern, and are subject to the exclusive courts of England and Wales, Scotland or Northern Ireland.”

Case Leader: Beverley Kotey (email: beverley.kotey@ofcom.org.uk )
Case Reference: CW/00887/01/06

Text published when the case was opened

Consumer complaint against UK Online about unfair contract terms

Complainant: A member of the public
Complaint against: UK Online Limited (“ UK Online”)
Case opened: 9 January 2006
Issue: Alleged unfair contract terms
Relevant instrument: Unfair Terms in Consumer Contracts Regulations 1999

Ofcom has received a complaint about contract terms in UK Online's Product Terms and Conditions, and is investigating whether any terms may be potentially unfair.

Case Leader: Beverley Kotey (e-mail: beverley.kotey@ofcom.org.uk ).
Case Reference: CW/00887/01/06