Recently, we've had quite a few enquires from small to medium sized business owners who have felt like they have been scammed.

Essentially they feel like they were tricked into agreeing contractual terms that are misrepresentative of the deal they believed to be entering into, and are now facing litigation for sums that could potentially bankrupt their business.

Generally speaking this has presented itself as service providers (e.g. of IT or telephony services) contacting SMEs offering to upgrade their systems at a cost of a few thousand GBP a month. The services are often only slightly more expensive than their current service providers, but promise to offer a lot more (which is often showed and discussed during a demonstration). On the quote / term sheet (that summaries the key commercial elements, such as price) it is also noted that the contract is for an initial term of (for example) five years with a sixty days' termination notice period.

However, the T&Cs that are incorporated (sometimes just by reference via a web link) explain that:

• if the agreement is not actively terminated then it auto-renews for the same period of time again;
• if terminated earlier then the customer has to pay the reminder of the fees due for the initial term (or the auto-renewed term);
• the contract alone forms the basis of the entire agreement, and does not rely on any previous discussions or representations (often called a ‘non-reliance’ or ‘entire agreement’ provision);
• contains explicit disclaimers / non-warranties about whether the services will work; and
• enables the service provider to increase the price on notice.

Accordingly, when the services are not as promised by the sales team, the customer looks to terminate for convenience and is then landed with an invoice to pay all fees due over the next several years (sometimes amounting to hundreds of thousands of GBP).

The majority of protections that individuals enjoy under the Unfair Contractual Terms Act do not apply because these are business-to-business relationships, and the agreement terms are binding on the parties. Nonetheless it seems unfair and unjust.

These risks are often not picked up, because the terms on the quote sheet make it seem that the commercial risks are relatively small (e.g. the ability to terminate to terminate on three months notice brings a presumption of three months of fees as the commercial risk, rather than the remaining Initial Term).

We’ve worked with clients to build a defence regarding the non-reliance clause being an unreasonable exclusion (sometimes together with a counterclaim regarding repudiatory breach). But this can be a difficult, uphill battle, which still includes all the expense and uncertainty of litigation.

Small print is viewed as boring, but it is essential reading to truly assess your risk (particularly when acting as a business without the protections offered to individual consumers). Do get in touch if you want someone to read it for you, or if you want to discuss this issue further.