Companies who load the dice against the consumer stand to lose their shirt

So easy, a child could do it…. That was a nasty truth for one punter when he found himself £50,000 in the red after a five year old got into his online spread betting account.

But as well as striking fear into the hearts of parents everywhere, the resulting court case has delivered a wake-up call for companies who rely on contract terms that are buried in the small print. Now experts are warning all businesses, especially online traders, that the terms of consumer contracts must be fair and clearly presented.

The case focussed on punter Colin Cochrane who set up an account with Spreadex, an online spread betting bookmaker, which allows the public to bet on rises and falls in the price of stocks and shares. Soon after setting up his account, Mr Cochrane showed his girlfriend’s young son how it worked.

But the demonstration was something he lived to regret, as having left his computer switched on, he returned from a trip to find his account was ?50,000 in the red. It turned out that his girlfriend’s son had racked up the losses by trading in gold, oil and silver whilst he was away.

Although Mr Cochrane immediately rang Spreadex and explained what had happened, Spreadex were unsympathetic and issued proceedings to recover the £50,000. They argued that Mr Cochrane had no case to answer, because clause 10.3 of their consumer contract said ‘you will be deemed to have authorised all trading under your account.’But the judge in Spreadex Ltd v Cochrane ruled that the consumer contract was unfair and unenforceable under the Unfair Terms in Consumer Contracts Regulations 1999, saying that the 49 pages of T&Cs was an “unfair contract”.

Firstly, there was an imbalance between the parties’ rights and obligations, as Spreadex did not assume any obligations, but the consumer assumed considerable risks without gaining any rights. The judge accepted that Spreadex was entitled to protection against unauthorised use of the account but said that the clause 10.3 was too broad.

Secondly, the judge held that the way in which the clause was presented was unfair. A customer signing up to the site was invited to click to view the consumer contract and three other documents. The judge said that most customers would proceed without viewing the document and, even if they did look at the documents, they would be faced with lengthy and complex clauses. It would be a miracle, said the judge, if Mr Cochrane had read clause 10.3 let alone understood its implications.

A commercial law expert at Ashtons Legal, says : “Where consumer contracts are presented on a take it or leave it basis, as happens with online trading, there may be a temptation to load the dice against the consumer and think that covers it.”But that’s not the way to do it. All the terms must be fair and reasonable and must make allowances. And the terms must be clear – it’s particularly important for consumer contracts – and the harsher the provisions, the clearer they must be if companies want a chance of getting the courts on their side.”