Does Your Contract Need Wriggle Room?

The 2018 TSB online banking saga has once again highlighted the issue of wriggle room in contracts.

Wriggling in court

Before specialising in advising on contract strategy and writing/negotiating contracts, I had the pleasure of winning a case in the Court of Appeal.  It involved what I call ‘advanced wriggling.’

My clients’ insurers were relying on wriggling out of their obligation to compensate my clients for their insured losses. The insurance company pointed to a term requiring its insured (my clients) to have a working burglar alarm at all times. Although the printing factory did have a burglar alarm, it had been disabled temporarily to allow renovation works to take place.

I vividly recall an Appeal Court judge asking the barrister (who was representing the insurance company) whether he was really suggesting that if the judge ‘popped out for a sandwich’ and failed to turn on his own burglar alarm, the insurance company would not compensate him for any insured risk that happened in the meantime?  The barrister ‘wriggled’, rather uncomfortably, when he confirmed that was precisely the insurer’s position. They were sticking to the terms of the insurance contract.

The Appeal Court judges showed their displeasure and their astonishment. They decided not to strictly enforce the terms of the small print in the insurance contract, and not to allow the insurance company to ‘wriggle’ out of its obligations.

Wriggling in public

In April 2016, when 123-reg (a website hosting company) ‘shut down the internet’, many disgruntled companies contemplated bringing court proceedings seeking compensation for breaching their website-hosting contract. 123-reg acted in a classically defensive and adversarial manner. Rather than:

  • creating trust with its clients (which it admits may have taken a knock)
  • being open about its failings from the start (it took several days to come clean)
  • being generous with its clients (six months free hosting anyone?)

It relied on (and hid behind) its terms and conditions. It wriggled like a worm on a hook! Even if legally correct, 123-reg’s response will irreversibly damage its reputation and its brand.

Two years later when TSB suffered a similar incident it apologised immediately, with its Chief Executive Paul Pester saying he was ‘deeply sorry’ for the chaos and that no-one would be left out of pocket.

Should should you do?

Clauses which allow one side to wriggle annoy the other side – either when they read them before the project starts or when trouble brews.

Make your choice: would you rather work with or be the sort of company who uses its contracts to wriggle out of its responsibilities, or who goes the extra mile?

My case: Printpak v AGF Insurance [1999] EWCA Civ 683

Like this article?

Share on facebook
Share on Facebook
Share on twitter
Share on Twitter
Share on linkedin
Share on LinkedIn
Share on pinterest
Share on Pinterest

Leave a comment