Sharp practice in contracts for the supply of telephone services

Imagine the scene.  A retired lady of mature years (let us call her Mrs Smith) is cold-called by a sales representative from a phone company.  Mrs Smith is persuaded by the sales rep to switch her domestic telephone account from the market leader to the sales rep’s company (let us call it, neutrally, TryOnLine – not its real name).  The deal requires her to pay an upfront, annual line rental fee of £99 plus VAT and to set up a direct debit facility with the bank, that allows TryOnLine to deduct payments from her account without her prior approval.

Nearly a year goes by and the telephone line stops working.  Mrs Smith calls TryOnLine to ask them to fix it.  They sort-of fix it, but create new problems with an extension line.  This necessitates another telephone engineer coming to fix the created fault.  Mrs Smith is warned that she will probably be charged for fixing the (first) fault.  Unknown to her at this time, the engineer(s) have created another fault with the broadband service.

Mrs Smith is beginning to find the approach of TryOnLine unsatisfactory.  Later that month, her bank calls her to tell her that her account has gone into the red.  She is usually very careful about keeping it in credit.  Some days after this incident, she receives a letter from TryOnLine setting out their charges for the month, which include repair and call diversion charges, in addition to the normal usage charges.  If she had known how much these charges were before the payment was removed from her account, she would have made arrangements to put enough money in the account to cover the charges.

Mrs Smith decides to transfer her line back to the market leader.  She believes she can do this at the end of the first year.  It is easily done – the new supplier notifies the old supplier that they have been fired, and the new supplier takes care of all the details.  This is what happened when she moved to TryOnLine.  Some days later, she receives a letter from TryOnLine, which includes a statement that by transferring her account away from TryOnLine she is:

in breach of contract and will become liable to pay a termination fee in accordance with Section … of your contract, an approximation has been calculated and is listed below:

Approximately: £3623.92

The letter includes other statements that are clearly designed to persuade her to change her mind and go back to TryOnLine.

Before receiving this letter, Mrs Smith is called by a sales rep from TryOnLine who is not very pleasant and indicates that she is liable to pay TryOnLine’s charges for the “60-month” period of the contract.  This is the first Mrs Smith has heard of a 5-year term for the contract.

On the back of all TryOnLine’s stationery are terms and conditions in grey print in about 6-point type.  If IP Draughts puts his glasses on the end of his nose, he can just about read a clause that states the following:

This agreement will have the duration specified on the confirmation call, which was included with your confirmation letter and will be automatically renewed at the end of the period unless and until either of us gives the other written notice of termination at least 42 days before the relevant anniversary.  The minimum period is the first sixty months of the service after the ten day cooling off period from point of sale with [TryOnLine].  The contract will continue for the minimum period and shall automatically renew for periods of sixty months on the expiry of the minimum period…

A separate clause deals with the consequences of early termination and includes the following text:

If you wish to end your contract during the minimum period you will be charged your monthly line rental and average bill amount in advance up to the end of your contractual agreement date…

By the way, no written notice was given of any cooling off period, as required by EU consumer law.  No mention was made of a 5-year term when the contract was formed, and the terms and conditions (which Mrs Smith has never noticed, let alone read) were not referred to when the original order was placed by phone.  The only follow up communication that Mrs Smith received after the order was placed was an invoice for the first year’s line rental, as mentioned above, which in any case was paid by direct debit, so no action was required.  On the back of this invoice are the terms and conditions.

Undergraduate law question: is Mrs Smith bound to pay a cancellation fee of any kind?  And if not, how do we quickly get TryOnLine off her back?

IP Draughts has his own views on this question, but would invite readers to contribute their thoughts first.  My mother would really like to know the answer.


Filed under Commercial negotiation, Contract drafting

4 responses to “Sharp practice in contracts for the supply of telephone services

  1. And another one…

    The phone company has now sent Mrs Smith an invoice for £3, which is made up as follows:
    Call charges: £0
    Line rental: £0
    Provision of paper bill: £2.50 plus VAT

    When will this farce end?

  2. Quick update: Mrs Smith cancelled her direct debit and her solicitor wrote to the telephone company warning them that further communications with her could result in criminal or civil liability under the Protection from Harrassment Act. She has since had an invoice for the final call charge period (with a mysterious additional £20 charge which her solicitor suspects is a charge for reading his letter, but is too trivial to spend time on), but no further communication concerning the cancellation charge. However, yesterday she learnt that the direct debit had been reinstated by the company (or by an associated company with a different name, just to confuse matters). She complained to her bank by telephone, and learnt that the company had instituted or re-instituted direct debits with several of the bank’s customers that day. Her solicitor has advised her to confirm in writing her instructions to the bank to permanently cancel the direct debit.

    Watch this space!

  3. You might also want to check out General Condition 9.4:

    which limits the initial period of a contract to 24 months (at least as from 25 May 2011).


    The contract and the sales method almost certainly breach the Unfair Terms in Consumer Contracts Regulations 1999 and the Consumer Protection from Unfair Trading Regulations 2008. Take a look at the decision in Office of Fair Trading (OFT) v Ashbourne Management Services Limited [2011] EWHC 1237 on the question of unfairly long duration of consumer contracts and early termination provisions.

    I would refuse to pay and report the company to the OFT.

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