Valid incorporation of terms dealing with software error in online contract using click-wrap acceptance

The question

When using the “click-wrap” method to accept terms in an online contract, what issues should be considered to ensure that the terms are properly brought to the consumer’s attention?

The key takeaway

Where standard terms and conditions in an online contract are clear, balanced and set out with some thought, the click wrap method will generally be effective to incorporate them.

Unusual or onerous terms may require additional signposting in order to be validly incorporated.

The case

Parker-Grennan v Camelot UK Lotteries Ltd [2023] EWHC 800 (KB)

The background

In 2015, Ms Parker-Grennan purchased a £5 ticket for an online National Lottery Instant Win Game (IWG) operated under licence by Camelot UK Lotteries (Camelot). To win the IWG, players had to match the numbers in the “Your Numbers” section of the screen to those in the ‘Winning Numbers’ section, where each of the ‘Winning Numbers’ corresponds to a monetary prize. Prizes ranged from £5 to £1m.

After Ms Parker-Grennan had pressed the “play” button on her screen and then clicked on all of the numbers as instructed, her screen changed, and she was told that she had won £10. This was because the number “15” was matched and it was flashing white, and the prize for that combination was £10. However, on closer scrutiny she could see that she had also matched the number “1”, the prize for which was £1m. There was no corresponding message to the effect that she had won that amount, and no flashing lights.

In 2009, in order to open her National Lottery account, Ms Parker-Grennan was required to tick a box to confirm that she had read and accepted Camelot’s applicable terms. These account terms, rules and game procedures were accessible via a series of hyperlinks or drop-down menus. Notable updates to these terms were alerted to Ms Parker-Grennan from time to time who was again required to indicate her acceptance through clicking an ‘accept’ button or ticking a box.

Under these terms, it was stated that the results of IWGs are pre-determined and that only one prize may be won per game. The terms also stated that Camelot had the right to validate each win before any prize was paid out and that its decision as to whether a play is a winning play is final. According to Camelot’s list of winning plays, Ms Parker-Grennan’s play had been assigned a prize value of £10.

Ms Parker-Grennan issued proceedings against Camelot claiming she was entitled to the £1m prize in addition to the £10 prize which the screen display had told her she had won. Camelot refused to pay out, saying that she did not win the £1m and that a coding issue had generated an error in the software responsible. The £10 prize was the one the computer had “predetermined” would be won in conjunction with the ticket she had purchased. Further, it was the £10 prize only that was automatically recorded on Camelot’s official list of winning plays.

Ms Parker-Grennan argued that either the above terms were not validly incorporated into the contract, or that they were unenforceable under the Unfair Terms in Consumer Contracts Regulations 1999 (UTCCR).

The decision

The High Court dismissed the application, finding that the applicable terms had been validly incorporated into the agreement with Ms Parker-Grennan and were enforceable.

The court considered three key issues: what were the applicable terms (incorporation); were any of these terms unenforceable under the UTCCR (enforceability) and, following on from this, did Ms Parker-Grennan win £1m (construction)?

The court acknowledged that it was not necessary for standard form conditions to be read by the receiving person and that the method of acceptance used by Camelot is common practice on the internet – consumers are familiar with the requirement to accept terms by ticking a box or clicking “accept”. Subject to the other issues on enforceability, Camelot’s use of drop down menus and hyperlinks to display the relevant terms was sufficient to incorporate them.

Reviewing the relevant terms against what would reasonably be expected in the given scenario, the court found that the rules were not particularly unusual or onerous so as to require additional signposting in order to be validly incorporated. In a more general comment, the court held that the rules were clearly drafted, set out in a logical order with reasonably prominent headings, obviously drafted by a lawyer and easy to follow.

On the enforceability of the relevant terms under UTCCR (which applied because the circumstances of the case arose before the Consumer Rights Act 2015 came into effect), the court found that while some of the relevant clauses contained terms that created an imbalance between the parties, it was not a significant imbalance so as to render the terms relied on by Camelot to be unfair and unenforceable or contrary to the requirement of good faith. In particular, Camelot’s requirement for it to validate a prize before paying out was not considered to be unusual for online games even though this gave more power to the supplier than the consumer.

Consequentially, Ms Parker-Grennan was found not to have won £1m.

Why is this important

This decision highlights that for clear and balanced online standard terms and conditions, the click wrap method will generally be effective but that reasonable steps must be taken to draw onerous and unusual terms to the notice of those who are to be bound by them to ensure that the terms and conditions are incorporated and do not fall foul of consumer rights legislation.

Any practical tips?

In online contracts, the click-wrap method of accepting terms is well established and will usually be sufficient to incorporate standard terms and conditions as long as the terms themselves are not unusual or onerous. Unusual or onerous clauses should be specifically signposted to consumers but clauses dealing with the supplier’s ability to step in to deal with issues such as the results of software errors will not necessarily be considered to be onerous or creating an unfair imbalance between the parties.

Terms must be accessible – in this case the court commented favourably on the use of hyperlinks, drop down menus and the use of three separate sets of terms (account terms and conditions, rules and game procedures) for the services offered.

The general rules of drafting also apply: keep key terms short and written in a way consumers can understand, use plain English and include short summaries of clauses, and use bullet points and headings to allow consumers to more easily navigate long form contracts.

Summer 2023