A recent US court ruling is a harsh reminder that unless customers are given sufficient notice of changes to online contracts (eg, subscriptions, website terms of use, conditions of sale) the changes will not be binding. The courts in many other countries, including the UK, apply the same notice rule.

Although websites frequently attempt to satisfy the notice rule by including the following terms in their online contracts this will not always be sufficient:

  • changes can be made at any time without notice; and
  • customers must regularly check the website for any changes to the contract terms.

The US Decision

In the US, the Court of Appeal for the Ninth Circuit recently invalidated changes to an online contract for the provision of long distance telephone calls even though the changes had been made four years previously. When the customer had entered into the original contract he had also authorised regular automatic payment from his credit card. Subsequently changes were made to the online contract by the telco provider without notifying the customer. The court concluded that as the customer had no compelling reason to re-visit the website it could not be assumed that he was aware of the changes. The customer was therefore only bound by the unamended original contract terms. (It is likely that UK courts would have reached a similar conclusion).

The UK position

In the UK, if the customer is a consumer (ie, using the website for non-business purposes) the Unfair Terms in Consumer Contracts Regulations 1999 will apply. There have been a number of recent rulings which have considered contract terms which gave the seller the right to make changes without notice (eg, the OFCOM ruling against 3). They have in general declared such clauses "unfair" and therefore unenforceable on two grounds:

  • they require the consumer to be bound by terms which they have had no real opportunity to read; and
  • it binds the consumer to any changes the seller chooses to make without there being any limitations in the contract on the seller's exercise of that power.

As the UK unfair terms legislation has its origins at EU level there are also similar decisions in other European jurisdictions (eg, the 2004 French decision in UFC v AOL Bertelsmann Online France).

Current UK reviews of consumer protection

In mid-April 2007 the UK's Office of Fair Trading (OFT) issued draft revised Guidance on its interpretation of the Unfair Terms in Consumer Contracts Regulations 1999 (UTCCR). The examples of unfair terms included in the draft Guidance (see Group 9) make it clear that it will continue to be unlikely that terms which permit unilateral changes to the contract without actual notice will be enforceable.

There are also moves in place to merge the Regulations with the Unfair Contract Terms Act 1977 (see the separate 2005 Law Commission Report which included a Contract Terms Bill). Again however this is not likely to lead to any relaxation of the current strict requirements in relation to notifying consumers of changes to contract terms.

Action required

These recent US and UK decisions confirm that if any of the following factors apply:

  • some customers are consumers;
  • some customers will only be visiting the website infrequently; or
  • the changes are to key terms or place additional obligations on customers,

website owners should not rely solely on terms such as i) and ii) above. Instead they should err on the side of caution and take positive steps to alert customers of the changes eg, via prominent alerts on the website and via individual emails/letters to customers.