British Telecommunications Plc provided its own directory service. BT was licenced as a public telecommunications operator requiring it to provide telephone services on request to anyone who sought them without discrimination. The claimant wanted to operate its own free service, and contracted with BT to use a line, but BT then gave notice to end the contract. The claimant obtained an interlocutory injunction, arguing for an implied term that it could only be terminated if there were good cause.
Held: The court dismissed the appeal against the injunction. The defendant could not rely on a term of the contract which would allow it to render a contractual performance substantially different from that which was reasonably expected of it.
Sir Thomas Bingham MR spoke as to the submission that there was implied such a term: ‘On behalf of BT Mr. Hobbs submitted that the meaning of the contract, particularly the meaning of clause 18.1, was quite clear. BT could terminate on a month’s notice at any time with or without reason, and no matter how great the loss such termination might, to BT’s knowledge, cause the customer. There was, he said, no inconsistency, as the learned judge had thought, between the power to suspend for operational reasons under clause 6 and the power to terminate under clause 18. He argued that the factual matrix was irrelevant, since this was a standard form contract applicable to many millions of customers and the meaning of the contract did not vary depending upon the peculiar circumstances of those who happened to be parties to it. Furthermore, he said that there was no room for implication since terms were to be implied into the contract only if they were necessary and not because they were thought to be reasonable. In other words, Mr. Hobbs propounded with great skill what could fairly and not pejoratively be described as an old-fashioned classical argument based upon a literal approach to the text of the contract. That may prove to be a good argument. It is certainly a view of the matter which has been accepted by judges on other occasions albeit in the absence of full argument.
For my part, however, I share the judge’s reservations. It is relevant to bear in mind that BT is a public telecommunications operator licensed by the Secretary of State under Telecommunications Act 1984 to provide a public telecommunications service. It is subject to the oversight of the Director General of Telecommunications who has certain powers if BT should fail to comply with its licence. It is quite plain, as one would expect, that BT is indeed obliged to observe the terms of its licence. The terms of the licence are not, as I have pointed out, part of the contract with the consumer, but they are, nonetheless, as I consider, an inescapable part of the background which falls to be considered. . .
It is therefore correct, speaking very generally, to regard BT as a privatised company, no longer a monopoly, but still a very dominant supplier closely regulated to ensure that it operates in the interests of the public and not simply in the interests of its shareholders should those be in conflict. Against that background I am, for my part, by no means sure that the classical approach to the implication of terms is appropriate here. As Lord Cross pointed out in Liverpool City Council v. Irwin [1977] AC 239, 257, implied terms can find their way into contracts either because the law lays down a general rule that in contracts of a certain type a certain obligation should be implied, or on grounds of necessity for business efficacy. Thus, pure necessity is not the only ground on which a term can be implied and I can see strong grounds for the view that in the circumstances of this contract BT should not be permitted to exercise a potentially drastic power of termination without demonstrable reason or cause for doing so. ‘
Judges:
Sir Thomas Bingham MR
Citations:
[1995] EMLR 459
Statutes:
Unfair Contract Terms Act 1977
Jurisdiction:
England and Wales
Cited by:
Cited – Commerzbank Ag v Keen CA 17-Nov-2006
The bank had sought summary dismissal of a claim for non-payment of bonuses to the claimant a former employee, and now appealed refusal of its request for summary dismissal, saying that the claim had no prospect of success. The claimant said that . .
Lists of cited by and citing cases may be incomplete.
Contract
Updated: 12 December 2022; Ref: scu.246220