Effective incorporation of terms in consumer contracts – sufficiently signposting online terms using click wrap processes

Parker-Grennan v Camelot UK Lotteries Limited [2024] EWCA Civ 185

The question

What steps should companies take to ensure that online terms between them and the consumer are effectively incorporated?

The key takeaways

Where terms are not unduly onerous and reasonable steps are taken to bring the terms to the consumer’s attention, a court is more likely to decide that the terms have been properly incorporated. In this case, the “click-wrap” processes used were sufficient. However, onerous terms would be likely to require additional steps and signposting.

The background

Ms Parker-Grennan was an online player of the National Lottery Instant Win Game (IWG), operated under licence by Camelot UK Lotteries (Camelot). In 2009, in order to open her National Lottery account, Ms Parker-Grennan had been required to tick a box to confirm that she had read and accepted Camelot’s applicable terms. These account terms, rules and game procedures were accessible via a series of hyperlinks or drop-down menus. Camelot’s terms were updated from time to time and the updates were notified to players via a notification page. Significant updates had to be accepted by the player clicking a button marked “Accept”.

Ms Parker-Grennan could win between £5 to £1m in the IWG if her numbers matched with one of the winning numbers on the game screen. During a play, Ms Parker-Grennan matched the number “15”, which on the game screen was highlighted by a green circle and flashing white – this attracted a £10 prize. However, before Ms Parker-Grennan pressed “Finish” on the game screen, she noticed the game screen also showed that the number “1” was matching but this time, with no green circle or flashing. This was significant as matching the number 1 attracted a £1m million prize. However, after Ms Parker-Grennan had clicked “Finish”, she was informed that she had won £10 only.

She issued proceedings against Camelot claiming she was entitled to the £1m prize in addition to the £10 prize which the screen display had told her she had won. Camelot refused to pay out, saying that she did not win the £1m and that a coding issue had generated an error in the software responsible. The £10 prize was the one the computer had “predetermined” would be won in conjunction with the ticket she had purchased. Further, it was the £10 prize only that was automatically recorded on Camelot’s official list of winning plays.

The High Court decision

The High Court considered three key issues: what were the applicable terms (incorporation); were any of these terms unenforceable under Unfair Terms in Consumer Contracts Regulations 1999 (UTCCR) (enforceability) and, following on from this, did Ms Parker-Grennan win £1m (construction)?

The High Court held that Camelot’s use of drop-down menus and hyperlinks to display the relevant terms was sufficient to incorporate them. While the court considered there was some imbalance in the relationship between Ms Parker-Grennan and Camelot, it was not significant so as to render the terms relied on by Camelot to be unfair and unenforceable or contrary to the requirement of good faith.

Ms Parker-Grennan was found not to have won £1m and her application for summary judgment on her claim was refused. She appealed the decision.

The decision

The Court of Appeal (CA) considered the High Court’s decision to be “careful” and “closely reasoned.” The appeal, which was dismissed in its entirety, considered the same elements as the High Court: incorporation, enforceability, and construction.

Incorporation

The legal test applied was whether Camelot did what was “reasonably sufficient” to bring the various terms and conditions to the notice of a player of the IWG, with a trader generally required to signpost “onerous or unusual” terms if they wish to incorporate them.

In this case there were three sets of terms, and each set made it clear which rules would apply in case of conflict. The CA found that there was nothing onerous or unusual about the various contractual provisions on which Camelot sought to rely. There was therefore no requirement for Camelot to specifically signpost any of the relevant terms.

It was Ms Parker-Grennan’s position that Camelot’s terms were not incorporated as there was nothing on CL’s website that forced her to read Camelot’s terms before clicking the “Accept” button. However, the CA reasoned that forcing a consumer to go through that exercise would not make it any more likely that they would read the terms but would make it more likely that they would become fed up and quit the website.

The CA decided that by providing the terms via a drop-down menu and hyperlinks, Ms Parker-Grennan had a sufficient opportunity to consider them with no time pressure. Ms Parker-Grennan also had an option to contact Camelot and have the terms delivered to her in hardcopy if she so desired.

Enforceability

The issue for the CA was whether, contrary to the requirement of good faith, any particular term caused “a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the consumer”. If so, that term would be regarded as unfair, and unenforceable against the consumer.

While there were different sets of applicable rules, the terms did set out a hierarchy for the rules and provided the order in which they would apply in case of conflict between them. If one set of rules was silent about what should happen in the event of a software error, that was not an inconsistency with another rule, it is simply an omission, with the answer available elsewhere. Having a clause that set out which rule would take precedence over more general rules and high-level explanations did not create a significant imbalance in the contracting parties’ rights, let alone be contrary to the requirement of good faith.

A separate clause allowing Camelot to determine (reasonably) a dispute arising between itself and the other contracting party in a final and binding way did create a significant imbalance between the parties and was potentially unfair, but it was not “contrary to the requirement of good faith.” Camelot was entitled to have a validation process which it could control. In the circumstances, the question whether a player had won or lost was straightforward and binary, because what was crucial was what appeared on Camelot’s official list as per the terms.

Construction

Ms Parker-Grennan submitted that the only relevant contractual term was the “matching numbers” text on top of the game screen. The CA stated this was simply wrong and if Ms Parker-Grennan was playing an IWG, it would be expected that governing game rules would exist, even if she did not read them.

The CA concluded that if Ms Parker-Grennan had read the game procedures, she would have known that there was a requirement to press “Finish” to end the game. When she did this only one prize was won: £10. Further, under the IWG rules, Ms Parker-Grennan had agreed to be bound by Camelot’s predetermined prize.

Why is this important?

The CA has confirmed that online traders do not need to do “everything” in their power to bring terms to the attention of the consumer but rather, take reasonably sufficient steps to make sure they are known to the consumer.

In instances where the terms are unusually onerous, a higher standard would apply, and the court would be less likely to find the terms to be enforceable if the company did not go beyond reasonable steps.

The CA noted that the case highlighted the complexity of balancing the needs of traders to publicise their terms and conditions with the needs of consumers to access and understand those terms. Given that a decade has passed since the last report of the Law Commission, the time might be ripe for another, evidence based, review of this area of law. So, this may not be the last word on incorporation of terms.

Any practical tips?

When using “click-wrap” processes to incorporate standard terms and conditions in an online contract for goods or services ensure:

• it is obvious to the consumer that there are terms and conditions that apply
• the website remains open for the transaction for a period of time that enables the consumer to have sufficient opportunity to read and digest all the standard terms and conditions as well as to conduct the transaction
• the consumer is not required to click through so many different hyperlinks to find the relevant terms that it cannot be said that they are readily or easily accessible
• unexpected or onerous terms are specifically flagged
• the general rules of good drafting are adopted: keep terms short, write in clear English, use clear headers, and allow easy navigation for users. This might mean that, in certain circumstances, having more than one set of rules to apply in different scenarios, rather than one set of terms that applies to everything, helps to satisfy the test for incorporation.

Summer 2024