The Enforceability of Terms and Conditions

By LBV

06 Dec 2010

Some people do business without even using formal terms and conditions in the hope that problems never arise.

Others (often after a experiencing the difficulties and expense that a contractual dispute can present) once went to the effort of preparing terms and conditions, only to have developed their business without updating their terms.

In the recent case of Kingsway Hall Hotel Ltd v Red Sky IT (Hounslow) Limited a supplier faced unlimited liability and a pay out in excess of £100,000 after unsuccessfully trying to rely on inadequate and outdated terms and conditions.

In this case, software supplier, Red Sky provided a software package to Kingsway on its standard terms and conditions and sought to rely on exclusion and limitation of liability clauses to protect itself from proceedings brought by Kingsway for losses suffered by the hotel as a consequence of missed bookings caused by problems in the software.

The court ruled that even though the two parties were dealing with each other as businesses, there was a significant inequality of bargaining power.

The court took this view because the parties had bargained only on price, not over the standard terms and conditions of Red Sky. There had not been a long course of dealings between the parties and the claimant had relied on the advice of the defendant that the system was suitable for its needs.

Further, the standard terms and conditions of the defendant were drafted on the assumption that the customer would receive the operating manual and have the benefit of a demonstration before deciding whether to accept the product.

The Unfair Contract Terms Act 1977 (UCTA) requires that exclusion or limitation of liability clauses must be reasonable but the courts have traditionally been reluctant to apply UCTA to intervene in commercial bargains.

In the circumstances, however, the court held that the claimant had been entitled to reject the software, as it was not of satisfactory quality or fit for purpose. The limitations and exclusions of liability in the defendant's standard terms and conditions were not reasonable so were unenforceable.

The case is an important reminder that standard terms and conditions must be carefully drafted and regularly reviewed to ensure that they do not contain any irrelevant or inappropriate terms.

The contra proferentum rule provides that any ambiguity in a contract must be construed against the party seeking the benefit of the clause in question.

Further, if limitations and exclusions of liability are unreasonable then they will not be enforceable, even in commercial agreements.

Stephen Greenwood
Farleys Solicitors LLP
 

Enjoyed this? Read more from LBV

Latest news

1

Debenhams Group in Burnley return - bringing 1,200 jobs Boohoocom Ph3 Burnley 3 1

Debenhams Group in Burnley return - bringing 1,200 jobs

23 Oct 2026

2

Business invited to take part in LCC budget consultation Budget Facebook V20263

Business invited to take part in LCC budget consultation

23 Oct 2026

3

Wastewater instruments manufacturer in Swedish buyout Pi Wtr Photo

Wastewater instruments manufacturer in Swedish buyout

23 Oct 2026

4

HMRC compliance is a business priority Mandylockett

HMRC compliance is a business priority

22 Oct 2026

5

Blackpool shortlisted for UK City of Culture 2029 A Collection Of The People Involved In Blackpools City Of Culture Bid Celebrate Shortlisting

Blackpool shortlisted for UK City of Culture 2029

22 Oct 2026

Background image for hub sign up block

LBV Hub

Leverage Lancashire Business View platforms

Post your news
Post your events
Post your offers
Build your network
Improve your SEO
Gain coverage in the magazine
Sign-up
Events
LBV131 November/December Magazine Networking Event
LBV131 Magazine Launch Social720No Text 19 Nov 2026

LBV131 November/December Magazine Networking Event

The Landmark, School Lane, Burnley, BB11 1UF

08:30 - 10:30

Lancashire Business Day 2026
LBD26 WW Logo720 27 Nov 2026

Lancashire Business Day 2026

Burnley Football Club, BB10 4BX

12:00 - 17:00

Sub36 Reunion & Networking
03 Dec 2026

Sub36 Reunion & Networking

Burnley Football Club, BB10 4BX

15:00 - 17:00

Help to Grow: Management Course
Help To Grow 25 Sep 2026 - 15 Dec 2026

Help to Grow: Management Course

University of Lancashire, Preston, PR1 2HE

09:30 - 12:00

Lancashire Finance Leaders Forum: The Autumn Budget in Focus
ian-UmTFcwHLPC0-unsplash.jpg.jpg 29 Oct 2026

Lancashire Finance Leaders Forum: The Autumn Budget in Focus

Farington Lodge Hotel, Stanifield Lane, PR25 4QR

08:00 - 10:00

The PM+M Autumn Budget seminar - East Lancashire
Autumn Budget 2026 LBV 29 Oct 2026

The PM+M Autumn Budget seminar - East Lancashire

Blackburn Rovers Football Club (Premier Suite), Blackburn, BB2 4JF

08:00 - 10:30

Autumn Budget 2026
Lancaster And Morecambe Logo 1 30 Oct 2026

Autumn Budget 2026

Lancaster & Morecambe College, Lancaster, LA1 2TZ

08:00 - 10:00

Blackburn Budget Breakfast 2026
LBV Website Events GraphicBudget Breakfast 30 Oct 2026

Blackburn Budget Breakfast 2026

Premier Suite, Blackburn Rovers FC, Blackburn, BB2 4JF

07:30 - 10:30

Chamber Breakfast Networking – November
Lancaster And Morecambe Logo 1 03 Nov 2026

Chamber Breakfast Networking – November

Porsche Centre South Lakes, Carnforth, LA6 1FW

08:30 - 10:30

Funding Unlocked
IMG_3058.jpeg.jpg 04 Nov 2026

Funding Unlocked

Accrington Stanley FC, Accrington , BB5 5BX

10:00 - 12:30

Clubhouse Business Network sponsored by Orca Finance - November 2026
Club House Padel 05 Nov 2026

Clubhouse Business Network sponsored by Orca Finance - November 2026

Clubhouse, Blackburn, BB1 3NT

14:00 - 16:00

The Business Network Central and East Lancashire
12 Nov 2026

The Business Network Central and East Lancashire

Longridge House, Preston, PR3 2TB

11:30 - 14:15

Advertise with us

Reaching 50,000 members, our print, digital and event platforms offer a fantastic way to raise your business profile and help you grow.

Find out more LBV130 Online GraphicWebsite
Subscribe now

Weekly news bulletin