In the case of Overy v Paypal (Europe) Ltd [2012] EWHC 2659 (QB), the High Court has considered the extent to which the definition of consumer under the Unfair Terms in Consumer Contracts Regulations 1999 (UTCCRs) extends to situations where a person acts partly for business purposes.

The facts

Mr Overy decided to set up a competition for which his house was offered as the prize, and wanted to use Paypal’s electronic payment services as a means of collecting competition entry fees. On applying on Paypal’s standard contract terms, Mr Overy indicated that the service was required for business purposes, as this allowed payments to be made directly to Mr Overy via his own website. In support of his application, Mr Overy used a mixture of his own personal details and the details of a photography business which he owned.

Paypal subsequently suspended Mr Overy’s account on the ground that Mr Overy had breached the terms of the contract by providing untrue or misleading information and failing to obtain the necessary approval from Paypal in relation to competitions. Paypal also relied on the ground that they had reason to believe Mr Overy might have been engaged in fraudulent, unlawful or improper activity.

Mr Overy issued proceedings against Paypal for breach of contract and sought to recover over £1m for losses incurred as a result of Paypal’s actions.

The decision

The High Court held that Mr Overy could not be classed as a consumer for the purposes of the UCTCCs, as although the main purpose for entering into the contract was to use the services for his own private consumption, he also had a business purpose for their use which took him outside the definition. The court confirmed that consumers will only be afforded protection under the UCTCCRs where any business purposes are insignificant or negligible. As an obiter comment, the court also stated that an individual who would otherwise have been classified as a consumer, is nevertheless not entitled to protection under the UCTCCs where that individual gives the impression that they are acting for business purposes (as was clearly the case here).

The High Court also considered the increasingly common question of whether the standard contractual terms, in particular those relating to the right of a supplier to terminate or suspend a service and exclude or limit liability, are likely to be unfair under the UCTCCRs or unreasonable under the Unfair Contract Terms Act 1977 (UCTA).

In this particular case, the court held that Paypal’s standard terms were not unreasonable, and Mr Overy could therefore not rely on the protection under UCTA.

Comment

This decision clarifies the definition of consumer under UCTCCRs in cases where the consumer might have a mixture of business and personal objectives.

The correct decision appears to have been made in this case as plainly Mr Overy had, at least in part, entered into the contract with Paypal for business purposes. 

The decision also provides useful guidance on factors that will be considered by the court in relation to whether standard terms can be said to be unfair or unreasonable under consumer legislation, such as;

  • Whether the supplier in a position to anticipate or estimate the likelihood or scale of any loss, and consequently justify insurance cover in relation to such imperceptible losses; or
  • Alternatively, whether the exclusion or limitation is seemingly arbitrary and has been imposed without proper justification