In an average year most businesses will sign tens if not hundreds or even thousands of contracts, whether it’s an office lease, an employment contract or a business-to-business goods or services contract. As a result most of us are loathe to spend the time required to thoroughly read the terms of the contract; the dreaded ‘small print’. However, in this blog we explore why it is important to go through the small print properly and the problems that can arise when you sign on the dotted line without properly reading what you’re agreeing to. We begin with one of the best examples of a business not properly reading the small print…
Blackpool Airport v. Jet2
For quite a few years now the budget airline, Jet2, has been flying to and from Blackpool Airport. In the original service contract Blackpool Airport agreed to a seemingly straight-forward clause stating
“Blackpool airport should use their best endeavours to promote Jet2’s low cost services from Blackpool airport”.
As a result, Blackpool Airport often stayed open past its usual operating hours to facilitate the Jet2 flight schedules which (to keep costs down) were often at unsociable hours. After four years Blackpool Airport reviewed the cost of the late opening hours and determined that it was effectively running at a loss. With this is mind, Blackpool Airport announced to Jet2 that they would have to reschedule their flight times as they were no longer prepared to stay open late. Unsurprisingly, Jet2 was unhappy about this and launched legal action to prevent the airport from forcing Jet2 to change their flight times.
The High Court found that the phrase ‘best endeavours’ did in fact require Blackpool Airport to stay open past their usual operating hours and therefore, to incur substantial losses. Unhappy with this ruling, Blackpool Airport appealed to the Court of Appeal and were further disappointed when the Court of Appeal upheld the previous judgement.
Why does this case matter?
You would be forgiven for thinking that multi-million pound aviation contracts have no relevance to ordinary consumer or small business contracts – but you’d be wrong! Whether it’s a contract for £5 or £50 million, the principles are the same. So, with that in mind, let’s take a look at the lessons to learn from the Jet2 case:
- Consider the practical ramifications of the clause
If you’re signing a contract in which you agree to use your ‘best endeavours’ – think carefully about what this might mean. Could your business afford to stay open past usual operating hours or incur other costs just to comply with the terms of one contract? Furthermore, even if you could afford to do so, would you really want to eat into your profit margins just to honour a contractual obligation which you could have avoided in the first instance?
Ensure that all important terms are expressly stated
It’s important to remember that the Jet2 case would probably not have arisen if Blackpool had simply specified its’ operating hours in the contract in the first place. However, as this was not stated, the Jet2 sought to rely on the ‘best endeavours’ clause. This highlights the importance of stating operating hours, costs and other important terms at the outset; even in situations where you might think it obvious and that it doesn’t need to be stated in the contract.
3. If in doubt, seek legal advice!
This really cannot be overstated. Of course, there will be some smaller contracts which are very straight forward (particularly between a business and a consumer) and therefore, there will be no need for legal advice. On the other hand, and particularly in relation to business-to-business contracts, it can be worth obtaining legal advice if you’re unsure about any of the terms or the potential obligations that may arise from the terms.
As with any business, we understand that you don’t want to spend your hard-earned profits on legal fees unless you really have to. Yet, as Blackpool Airport can no doubt attest to, the cost of a lawyer reviewing your contract will usually be far less than the cost of fulfilling your contractual obligations when a court has ruled against you.
At Hybrid Legal our team have a wealth of experience advising and drafting all manner of contracts. If you’re unsure about the terms of a prospective contract, need a new contract to be drawn up or have any queries in relation to an existing contract, we would be more than happy to assist you. If you’d like to get in touch, feel free to give us a ring on 0333 014 4568. We’ll be delighted to talk to you.