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faced unlimited liability and a pay out in excess of £100,000 after unsuccessfully trying to rely on inadequate and outdated terms and conditions.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

Gym Gear acquired by Findel Established Gym Gear Has Earned An Excellent Reputation Over Its Past 21 Years Of Trading

Gym Gear acquired by Findel

03 Nov 2026

2

Firms show support for Lancashire Business Day 2026 Clp5793

Firms show support for Lancashire Business Day 2026

03 Nov 2026

3

First phase of £6m community facility work completed Whittingham Club 020

First phase of £6m community facility work completed

03 Nov 2026

4

Accountants relocates to Chorley Img0024

Accountants relocates to Chorley

03 Nov 2026

5

Jewellers scoops top national award Ainsworth Jewellers Win At Naj Awards

Jewellers scoops top national award

03 Nov 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

Lancashire Net Zero Conference 2027
NZC27 Social 1200x800Generic 1 11 Feb 2027

Lancashire Net Zero Conference 2027

The Wellbeing Farm, Edgworth, Wheatsheaf Hill Farm, Plantation Road, BL7 0BY

09:30 - 02:00

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

Action Members November Event
Action Members 03 Nov 2026

Action Members November Event

The Wellsprings, Howell Croft South, Bolton BL1 1SB, Bolton, BL1 1SB

09:15 - 11:45

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

Lancashire Construction Connections
1790691579952.jfif.jpg 05 Nov 2026 - 05 Nov 2026

Lancashire Construction Connections

Holmes Mill, Clitheroe, BB7 1EB

14:00 - 17:00

Breakfast Social and Coworking Day: November
Brekfast social Nov Creative lancs small.png.png 05 Nov 2026

Breakfast Social and Coworking Day: November

Society1, Coworking Space, Preston, PR1 3LT

10:00 - 12:00

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

Immigration changes on the horizon - what HR teams need to know
Immigration webinar.png.png 10 Nov 2026

Immigration changes on the horizon - what HR teams need to know

Online, via Microsoft Teams

12:00 - 12:45

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