Onerous terms in schools’ commercial contracts

Schools frequently enter into a number of commercial contracts, such as catering, cleaning and photocopier contracts. For contract terms to be enforceable, they must be properly incorporated into the contract. In circumstances where a term is deemed to be onerous, there are certain requirements which should be followed to ensure that the terms are successfully incorporated and can subsequently be relied upon.

What is an onerous term?

There is no exact science to determining how onerous a clause is. However, the courts have held the following provisions to be onerous:

• A clause requiring a customer to return defective goods at their own expense
• Excessive transfer and cancellation fees for customers seeking to switch contracts

How can onerous terms be incorporated?

When it comes to incorporating terms into a contract, any onerous or unusual terms must be fairly and reasonably brought to the other party’s attention for them to be properly incorporated. The more burdensome or unusual the terms, the more clearly they should be brought to the attention of the other party

Sometimes a provision is particularly unusual or onerous, but is not immediately visible to the other party. This may be because the terms are incorporated by reference – that is, they are referred to as part of another document. In these cases, a party will not be able to rely on the clause unless it has taken action to bring the clause to the attention of the other party.

What if onerous terms are hidden?

Hiding important and onerous terms in long, complex contracts, or in ‘small print’, may be deemed unfair and be open to challenge. The High Court decision in Blu-Sky Solutions Ltd v Be Caring Ltd last year considered whether a supplier’s standard terms and conditions were incorporated into a contract by reference and subsequently, whether an onerous clause relating to early cancellation fees was incorporated.

The court decided the supplier’s standard terms were incorporated when the customer signed an electronic purchase order that contained wording to the effect that the customer had read the terms on the supplier’s website. The standard terms contained a requirement for the customer to pay early termination charges.

As this clause was onerous, the court decided the supplier had not done enough to draw the customer’s attention to it. Therefore, whilst the supplier’s standard terms were incorporated, the onerous term within those had not been brought to the other party’s attention and so could not be relied upon by the supplier.

Whilst the facts of the case are specific, the decision of the court demonstrates the importance of bringing particularly onerous terms to the attention of the other party to ensure that they are properly incorporated into the contract. One way of ensuring that the customer’s attention is drawn to the onerous term is to use words in large bold font, such as “the customer’s attention is particularly drawn to clause x.”

Practical steps

In many cases, your school will be the customer when it enters into a contract with a supplier. We would encourage schools to have in place their own standard terms and conditions for the purchase of services and goods, rather than relying on those prepared by suppliers. You should also exercise caution and be wary of accepting standard terms which are incorporated by reference, and thoroughly review any standard terms presented by the other party.

If your school has a commercial contract which is not working as successfully as you might have hoped, containing potentially onerous terms, you should keep in mind the judgement in the above case. It may be the case that onerous terms have been hidden from view and are therefore unenforceable.