Unfair Contract Terms Act - do you think this qualifies?
Discussion
I'm doing some FD work for a charity who've found themselves overextended and losing money. One of the things I've uncovered is that they had been using a database software package to help them with one aspect of their 'business'. The software was not being used anywhere close to it's capacity and all the charity really need to achieve the same operational objective is a spreadsheet, so that's what we've created.
On attempting to cancel the database software, the supplying company have stipulated their notice period is 12 months!
I've searched though the files and found the original contract, which had a minimum term of 5 years (!) and states notice is 12m. Clearly the charity didn't think about it or take advice before signing, but sign it they did and I recognise they're on the hook. About the only positive is they're beyond the 5 year minimum term....
I'm doing my best to save this charity money and the monthly cost of the software package would be a palpable saving. I know contractually they don't really have a leg to stand on as the terms were clear and they agreed to it, but I'm wondering if there's an Unfair Contract Terms Act 1977 argument here that might hold water?
The software is generic and not bespoke to this charity's business. There's no way the software company can argue that this charity's cancellation leaves them with a liability extending anywhere near 12m - it's a two minute job to cancel the licence and stop the DD - so there's no real argument for their cancellation causing them cost that needs to be recovered.
What do those with more contract experience think? Is it worth pushing this and arguing unfair term? or am I ultimately just going to have to suck this up as that's what was signed?
The value of the contract over the notice period is such that it's worth throwing a couple of thousand at wriggling to save several £thousand if I can achieve early termination.
On attempting to cancel the database software, the supplying company have stipulated their notice period is 12 months!
I've searched though the files and found the original contract, which had a minimum term of 5 years (!) and states notice is 12m. Clearly the charity didn't think about it or take advice before signing, but sign it they did and I recognise they're on the hook. About the only positive is they're beyond the 5 year minimum term....
I'm doing my best to save this charity money and the monthly cost of the software package would be a palpable saving. I know contractually they don't really have a leg to stand on as the terms were clear and they agreed to it, but I'm wondering if there's an Unfair Contract Terms Act 1977 argument here that might hold water?
The software is generic and not bespoke to this charity's business. There's no way the software company can argue that this charity's cancellation leaves them with a liability extending anywhere near 12m - it's a two minute job to cancel the licence and stop the DD - so there's no real argument for their cancellation causing them cost that needs to be recovered.
What do those with more contract experience think? Is it worth pushing this and arguing unfair term? or am I ultimately just going to have to suck this up as that's what was signed?
The value of the contract over the notice period is such that it's worth throwing a couple of thousand at wriggling to save several £thousand if I can achieve early termination.
Peterpetrole said:
Being a charity might be worth appealing to the software companies better nature rather than assuming they are chiseling crooks?
Yeah, that was one of the principle angles I took early on.... the software company are keen to highlight that the terms were in the contract to which the charity agreed. No hint of better nature or suggestion of reduced termination fee! larrylamb11 said:
I've searched though the files and found the original contract, which had a minimum term of 5 years (!) and states notice is 12m. Clearly the charity didn't think about it or take advice before signing, but sign it they did and I recognise they're on the hook. About the only positive is they're beyond the 5 year minimum term....
I'm doing my best to save this charity money and the monthly cost of the software package would be a palpable saving. I know contractually they don't really have a leg to stand on as the terms were clear and they agreed to it, but I'm wondering if there's an Unfair Contract Terms Act 1977 argument here that might hold water?
It never ceases to amaze me how many people sign a binding contract without reading the T&Cs or, if they have, fail to understand what they are actually committing themselves to.I'm doing my best to save this charity money and the monthly cost of the software package would be a palpable saving. I know contractually they don't really have a leg to stand on as the terms were clear and they agreed to it, but I'm wondering if there's an Unfair Contract Terms Act 1977 argument here that might hold water?
Charities, particularly smaller ones, are often run by volunteers who can, unfortunately, be inexperienced in such matters.
If you have already tried asking at senior level ( rather than just an general enquiry ) then I think the charity aspect is of no interest to them.
To them you are just another customer and the nature of that contract whilst quite possibly shouldn’t have been agreed to at the time without adjustment , the fact remains it was signed and therefore not sure much mileage to be now gained by spending more money to try and exit quicker.
If you haven’t asked at senior level then perhaps worth an email trying but wouldn’t be holding my breath.
To them you are just another customer and the nature of that contract whilst quite possibly shouldn’t have been agreed to at the time without adjustment , the fact remains it was signed and therefore not sure much mileage to be now gained by spending more money to try and exit quicker.
If you haven’t asked at senior level then perhaps worth an email trying but wouldn’t be holding my breath.
As this is a B2B contract then the twelve month notice period would not be seen as unfair.
Strategically, you might have a couple of options;
1. If you simply said Adios to them - and stopped payment - how likely are they to litigate to achieve that payment? Would they go balls-out to recoup tens of thousands or are we talking a few hundred where they might shrug their shoulders and walk-away.
2. If you threatened / made noises around 1. would they negotiate an earlier exit to meet in the middle somewhere in return for a one-off Ex gratia payment. Dependent on affordability for the Charity of course.
Strategically, you might have a couple of options;
1. If you simply said Adios to them - and stopped payment - how likely are they to litigate to achieve that payment? Would they go balls-out to recoup tens of thousands or are we talking a few hundred where they might shrug their shoulders and walk-away.
2. If you threatened / made noises around 1. would they negotiate an earlier exit to meet in the middle somewhere in return for a one-off Ex gratia payment. Dependent on affordability for the Charity of course.
ADJimbo said:
1. If you simply said Adios to them - and stopped payment - how likely are they to litigate to achieve that payment? Would they go balls-out to recoup tens of thousands...
If they did, they wouldn't enjoy the subsequent publicity if it happened to reach the local press/TV news.Likewise, I'm amazed people sign up for things without really thinking through the consequences.... but they do! As you say, often a charity is a soft target as the people involved can be non-professionals with great intentions but insufficient experience.
Thanks for the comments - sounds like they'll just have to suck it up and swallow the cancellation cost. I did warn the charity the chances were slim that they'd get out of it early, but it was worth looking at every angle.
I'd hinted to the software co. the reputational harm associated with enforcing a punitive contract term on a charity in financial difficulty, but they didn't seem too bothered....
Thought about just cancelling the DD too, but I'm trying to make the situation better for the charity, not create situations where we breach a contract and potentially end up in litigation.
I'll keep pleading the case and see if I can climb the seniority tree, but I'm grateful for the steer ^ on unfair terms.
Thanks for the comments - sounds like they'll just have to suck it up and swallow the cancellation cost. I did warn the charity the chances were slim that they'd get out of it early, but it was worth looking at every angle.
I'd hinted to the software co. the reputational harm associated with enforcing a punitive contract term on a charity in financial difficulty, but they didn't seem too bothered....
Thought about just cancelling the DD too, but I'm trying to make the situation better for the charity, not create situations where we breach a contract and potentially end up in litigation.
I'll keep pleading the case and see if I can climb the seniority tree, but I'm grateful for the steer ^ on unfair terms.
Terminator X said:
I deal with contracts in construction. I always say to clients treat the contract as if every clause will be used to beat you at some point. The other side always say "oh don't worry about that clause we'll never use it". Why is it there then 
TX.
Absolutely.TX.
And treat any communications on contracts as if they might be read out in court.
Subject: Request for Early Termination of Licence Agreement
Dear [Supplier Contact],
I am writing on behalf of [Charity Name] in relation to our agreement for [Software Name]. As you know, the charity has honoured the initial minimum term of five years in full and has continued to pay for the service well beyond that period.
Due to financial pressures, we have undertaken a review of our costs. It has become clear that the software is no longer required for our operations, and we therefore need to bring the agreement to an end. We understand that the contract specifies a 12-month notice period, but we would ask you to reconsider this requirement in light of the following:
The minimum contractual term has already been fully satisfied.
The software licence is non-bespoke and can be reallocated to another customer without material loss to your business.
Strict enforcement of the full notice period would divert charitable funds away from frontline causes, which is not in line with the goodwill we believe your company would wish to foster in its relationship with the not-for-profit sector.
We therefore propose a fair and pragmatic resolution: either immediate termination with no further fees, or alternatively a reduced notice period (e.g. 3 months) / lump-sum settlement equivalent to [3 4 months fees].
We hope you will see this as a constructive and reasonable proposal that allows both sides to move forward without unnecessary dispute. We would be grateful if you could confirm whether you are willing to agree an early exit arrangement.
Yours sincerely,
[Name]
[Position, e.g. Finance Director]
[Charity Name]
Marking it without prejudice means it can t be used against you later if negotiations break down.
You re leaving them with options: walk away entirely, or take a smaller settlement.
You re flagging reputational risk without being confrontational.
Dear [Supplier Contact],
I am writing on behalf of [Charity Name] in relation to our agreement for [Software Name]. As you know, the charity has honoured the initial minimum term of five years in full and has continued to pay for the service well beyond that period.
Due to financial pressures, we have undertaken a review of our costs. It has become clear that the software is no longer required for our operations, and we therefore need to bring the agreement to an end. We understand that the contract specifies a 12-month notice period, but we would ask you to reconsider this requirement in light of the following:
The minimum contractual term has already been fully satisfied.
The software licence is non-bespoke and can be reallocated to another customer without material loss to your business.
Strict enforcement of the full notice period would divert charitable funds away from frontline causes, which is not in line with the goodwill we believe your company would wish to foster in its relationship with the not-for-profit sector.
We therefore propose a fair and pragmatic resolution: either immediate termination with no further fees, or alternatively a reduced notice period (e.g. 3 months) / lump-sum settlement equivalent to [3 4 months fees].
We hope you will see this as a constructive and reasonable proposal that allows both sides to move forward without unnecessary dispute. We would be grateful if you could confirm whether you are willing to agree an early exit arrangement.
Yours sincerely,
[Name]
[Position, e.g. Finance Director]
[Charity Name]
Marking it without prejudice means it can t be used against you later if negotiations break down.
You re leaving them with options: walk away entirely, or take a smaller settlement.
You re flagging reputational risk without being confrontational.
There are ‘charities’ and then there are ‘charities’. I’m sorry I don’t have much sympathy for people ‘doing good’ if they think that negates their need to act responsibly.
I’m aware 'OP' is trying to the right thing, because of someone’s cock up, but why should a company waive costs because it’s a charity, they should’ve asked for a waiver in the beginning.
I’m aware 'OP' is trying to the right thing, because of someone’s cock up, but why should a company waive costs because it’s a charity, they should’ve asked for a waiver in the beginning.
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