Unfair contract terms mean bookmaker cannot rely on online term for loss-making trades made by boy, High Court rules

Colin Cochrane claimed to have left his computer at his girlfriend's house and that her son had used his Spreadex account to make trades in oil, gold and silver without his permission. Spreadex argued that Cochrane should have to pay the £50,000 losses run up on his account, according to a report by the Metro newspaper.

Spreadex based its claim on a clause in its contract which meant Cochrane would be "deemed to have authorised all trading under your account number," a report by legal information service Lawtel said.

However, in rejecting Spreadex's bid for a summary judgment the High Court said that the clause was not legally binding because it didn't form part of a binding contract and  was unfair. Spreadex was not able to show that Cochrane entered into a separate contract for each trade made via his account and as such the company's general contract applied.

The High Court said the company's contract had not been drafted in accordance with the 'good faith' requirement and caused a significant imbalance that negatively impinged on Cochrane's rights. Because the contract had not been individually negotiated with Cochrane the terms were not legally binding, it said.

The Unfair Terms in Consumer Contracts Regulations (UTCCR) set out rules that businesses must comply with when drawing up contracts for customers. Under the Regulations "unfair" contract terms are prohibited and refer to terms in a contract which have not been "individually negotiated" that cause "a significant imbalance in the parties' rights and obligations arising under the contract, to the detriment of the consumer," contrary to the requirement that they be drafted in "good faith". Under the Regulations written contracts must also be drafted in "plain, intelligible language".

The Spreadex contract was unfair because the terms of the contract put no obligations on Spreadex but made Cochrane liable, without limitation, for unauthorised trade made via his account, the High Court ruled. The Court also said that Spreadex had not made sufficient effort to inform Cochrane about the clause.

Spreadex could only force Cochrane to pay for the losses if it could show Cochrane had been responsible for the individual trades or had authorised someone else to make them, the High Court said.

"This is an odd case," gambling law expert Susan Biddle of Pinsent Masons, the law firm behind Out-Law.com, said.

"It is hard to see how companies can incorporate general terms into future contracts with consumers – unless this case can be distinguished on the basis that the problem here arose because of the total exclusion of Spreadex’s liability in contrast to the consumer’s unlimited liability. If Spreadex had accepted some liability and/or capped the consumer’s liability the contract may have been deemed binding," she said.

"I would not advise businesses to purse summary judgment applications where contract terms are disputed as unfair and the reasonableness of them is at issue, especially when it involves a consumer," Biddle added.