Spreadex v Cochrane – are online terms and conditions child's play?
On 2 May 2012, Mr Cochrane used his online spreadbetting account with Spreadex. He left the house with a loss balance of £9,000. When he returned, he found he was £50,000 in the red; his girlfriend told him that her five year old son had been 'playing games' on the computer. He called Spreadex to explain, and they responded that he was liable for the trades. They relied on clause 10.3 of their terms, which said "Your password must be declared, together with your account number, when you wish to access your account. You will be deemed to have authorised all trading under your account number."
However, clear though this statement seems, the judge did not hold Mr Cochrane responsible. He said that first there was no contract in place, and secondly if there had been such a contract, this term was not a fair term.
He first made the rather obvious point that clause 10.3 would have to be in a contract in order for it to take effect. There were certainly contracts for the individual trades, but was there an overarching contract to cover all trades and the use of the online account, using Spreadex's terms and conditions?
Basic legal principles tell us that for there to be a contract, there must be a bargain for something of value – what lawyers call 'consideration'. One would think that this would not be a problem for Spreadex: it offered access to an online account in return for compliance with its terms and conditions. However the judge was not convinced. He pointed out that the Spreadex terms were more than a little favourable to Spreadex. They did not really commit Spreadex to anything: Spreadex could refuse to accept bets without giving reasons, and could withdraw access rights whenever it wanted.
The judge held that, because there was no commitment by Spreadex, the online account facility was no more than the parties putting themselves in a position to agree trades. It was not a contract.
The next criticism the judge made was under the Unfair Terms in Consumer Contracts Regulations. Mr Cochrane was a consumer, and so protected by these regulations. The judge felt that a clause which would have made Mr Cochrane liable if he had been negligent might possibly have passed the test, but that this clause, making him responsible for all unauthorised trades under his account, was not fair.
You didn't tell me…
The judge also pointed out the way that the online terms were brought to his attention. They were one of four documents, and the terms alone were 49 pages long. The judge said that:
"It would have come close to a miracle if he had read the second sentence of Clause 10(3), let alone appreciated its purport or implications, and it would have been quite irrational for [Spreadex] to assume that he had."
Online businesses dealing with consumers need to remember that:
- If you give yourself too much flexibility, you may not even have a contract
- If the terms are hard to understand, they may not protect you.
- 5 year olds are more dangerous than you thought they were.
Spreadex's online terms were too biased and too complicated and this meant it could not claim for its £50,000 loss.
Neil Wallis is a Partner in the Technology and Outsourcing Law Group at Fieldfisher. Please contact him on.