We've all been there – whether signing up for a gym membership or a software update – but agreeing to terms and conditions without reading the fine print has left well-known jeweller Michael Hill with a $2.26m damages bill. The New South Wales Supreme Court judgment, handed down on 31 January 2024, found the jeweller had breached three agreements with its packaging supplier, Gispac Pty Ltd.
What's interesting about this decision is that there was no direct evidence to establish that the terms in question, which were referenced via a hyperlink in the agreements, were actually accessible to Michael Hill. Nonetheless, the Court found Michael Hill's conduct manifested a clear intention to be bound by the relevant terms and was liable for breach of contract.
The decision serves as a salient reminder for organisations to conduct appropriate due diligence and carefully review the fine print before entering into new agreements.
Background to the breach
Gispac, which supplied carry bags to Michael Hill, alleged the jeweller breached three Sales Agreements between 2014 and 2018. Gispac claimed Michael Hill did not comply with its standard trading terms which, rather than being set out in full, were referenced via a URL in each agreement. The case centred on whether these trading terms were validly incorporated into the Sales Agreements.
The Sales Agreements – a detailed look
- The Agreements, signed either in 2014 or 2015, contained a section labelled 'Terms' detailing specifications related to the provision of carry bags, including payment terms, delivery charges, and minimum invoice values.
- Each Agreement also contained a prominent section entitled 'TERMS AND CONDITIONS OF TRADING' located directly above the customer signature panel.
- Customers were told in the Agreements: ''Please tick to confirm that you agree to terms and conditions that can be found at the following link [sic]". A (purported) URL to Gispac's trading terms with a checkbox alongside it was then included for the customer to (physically) tick.
The trading terms
Gispac's trading terms stipulated annual purchase quantities, maintenance of certain purchase volumes, exclusivity of supply, and a six month notice period for contract termination. The terms also provided the Sales Agreements had a duration of two years and automatically renewed.
Michael Hill raised a defence that at all times from when the agreements were entered into, the URL was either defective or non-existent. The jeweller did not provide evidence to prove this contention.
While Gispac did not agree with this claim, it admitted the URL was not functional in 2019 and linked to Gispac's internal server, rather than a publicly accessible website.
Michael Hill's conduct: tick of agreement
Michael Hill's representative ticked the box, agreeing to the trading terms in each agreement, and had done so on several prior occasions in other Gispac agreements.
Michael Hill's representative also acknowledged that:
- he was aware that ticking the box was in relation to the trading terms;
- he did not tick the boxes under duress, any misinformation, or due to deception on Gispac's part;
- he independently chose not the read the trading terms or seek advice on them; and
- he was aware that agreeing to the trading terms was a condition precedent to Gispac proceeding with the Sales Agreements.
The Judgment – a costly oversight
Despite the uncertainty as to the URL's operability, Justice Gleeson found that, in light of the jeweller's conduct, a reasonable person in Gispac's position would believe Michael Hill had exhibited a contractual intention to be bound, thus validating the incorporation of the trading terms into the Sales Agreements. As each Sales Agreement in itself was a signed contract, Justice Gleeson found that the Court was not required to conclusively decide on the URL's operability when the agreements were signed and performed. Nonetheless, Justice Gleeson commented he found no direct evidence establishing that the URL was, in fact, operational at the time.
Some lessons when contracting
As was the case here, suppliers often cross-refer to standard terms and other artefacts in order forms or other commercial documents, and it is not unusual for these to be referenced via URL.
Justice Gleeson's decision indicates that the failure of a customer to review such incorporated terms is unlikely to provide a defence to non-compliance with the contract.
Customers should also be aware that terms referenced via URL may be unilaterally changed by the supplier, often without notice. Putting aside whether the ability to effect unilateral changes constitutes an unfair contract term under the Australian Consumer Law, customers:
- should insist that a specifically identified version of the terms referenced via URL should apply to the contract (for example, 'Terms and Conditions v2.1'), or if the electronically stored terms are not version-controlled, should be attached in full to the contract; and
- to the extent that the incorporated contract artefact is 'dynamic' in nature (such as a product description for a software-as-a-service platform), should require that the terms provide that any changes made to that incorporated artefact must not materially adversely affect the functionality, performance or security of the relevant goods or services.
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