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faced unlimited liability and a pay out in excess of £100,000 after unsuccessfully trying to rely on inadequate and outdated terms and conditions.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

Major milestones reached in build of Pleasure Beach Resort’s new ride Aviktas ride taking shape

Major milestones reached in build of Pleasure Beach Resort’s new ride

28 Nov 2025

2

Airframe Designs to play key role in world water speed record attempt ames Hodgkiss Jerrod Hartley And Chris Fleet Of Airframe Designs In The Longbow Workshop

Airframe Designs to play key role in world water speed record attempt

27 Nov 2025

3

Lancashire businesses react to Autumn Budget announcement Roger Philips

Lancashire businesses react to Autumn Budget announcement

26 Nov 2025

4

Reeves delivers £26bn tax rise Budget UK Parliament Budget photo

Reeves delivers £26bn tax rise Budget

26 Nov 2025

5

Seven Lancashire towns on list of target locations for new M&S Food stores M&S Food Stores

Seven Lancashire towns on list of target locations for new M&S Food stores

26 Nov 2025

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
CMI Level 5 Project Management Course
UCLanAerialCampus.jpg.jpg
LBV Hub Seminars
21 Feb 2025 - 21 Feb 2026

CMI Level 5 Project Management Course

Preston Campus, Preston, PR1 2HE

08:00 - 17:00

CMI Level 5 Management and Leadership Course
UCLanAerialCampus.jpg.jpg
LBV Hub Seminars
21 Feb 2025 - 21 Feb 2026

CMI Level 5 Management and Leadership Course

Preston Campus, Preston , PR1 2HE

09:00 - 17:00

Help to grow management course
Help to grow - barriers to growth.png.png
LBV Hub Seminars
26 Sep 2025 - 16 Dec 2025

Help to grow management course

Preston Campus , Preston , PR1 2HE

09:00 - 15:00

RISE - Lancashire's unique leadership programme for women
thumbnail_Emma Weston Illustration WENDY BOWERS RISE Illustrstion.jpg.jpg
LBV Hub Seminars
22 Oct 2025 - 18 Mar 2026

RISE - Lancashire's unique leadership programme for women

East Lancashire Chamber of Commerce, Clayton le Moors, BB5 5JR

09:30 - 15:30

Women scaling up Blackpool Fylde and Wyre
LBV Hub Seminars
22 Oct 2025 - 09 Jan 2026

Women scaling up Blackpool Fylde and Wyre

The Small Business Academy, Blackpool, FY4 5JX

09:30 - 15:30

Lancashire post Budget analysis finance leaders events
MHA-BTI Logo_black (002).jpg.jpg
LBV Hub Networking
27 Nov 2025 - 27 Dec 2025

Lancashire post Budget analysis finance leaders events

Farington Lodge Hotel, Stanifield Lane, Farington, Preston, PR25 4QR

08:00 - 10:00

Navigating making tax digital for Income Tax
mtd event LinkedIn.jpg.jpg
LBV Hub Seminars
03 Dec 2025 - 03 Dec 2025

Navigating making tax digital for Income Tax

Junction 4 Skatepark , Darwen, BB3 0AJ

08:00 - 10:30

The Business Network Central & East Lancashire
LBV Header (27).png.png
LBV Hub Networking
04 Dec 2025 - 04 Dec 2025

The Business Network Central & East Lancashire

Mytton Fold, Langho, BB6 8AB

11:15 - 14:30

Chamber Breakfast Networking – December
Logo.jpg.jpg
LBV Hub Networking
04 Dec 2025 - 04 Dec 2025

Chamber Breakfast Networking – December

The Longlands Hotel, Carnforth, LA6 1JH

08:00 - 10:00

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 LBV124 Online Graphic
Subscribe now

Weekly news bulletin