Other Author       Ellen Hepworth, Trainee Solicitor

On 7 April 2021, the UK High Court granted summary judgment to a claimant, Mr Green, who sought to recover his winnings of over £1.7m from Petfre (Gibraltar) Ltd (trading as "Betfred"), an online gambling company that had argued he won a game in error as a result of an in-game glitch. Betfred have said they will not appeal the decision (available here).

In an important ruling for the providers of online services, platforms and other solutions, the UK High Court ruled that:

  • The contract terms that apply to users online activities may be determined and formed at the point of the provision of the relevant service to the user, rather than at the point the user signs up and creates their account; and
  • Exclusion clauses typically found in standard form online service terms, end user licence or other "click wrap" agreements may not be enough to exclude a provider's liability for errors caused by malfunctions of the service.

In this ruling, the UK High Court examined some of the basic principles of contract law in the light of the provision of an online service, including the offer and acceptance of terms and conditions, interpretation of exclusion clauses, and the incorporation of standard terms into contracts. In particular, it serves as a reminder that  terms and conditions for online services must be accessible, with any onerous clauses highlighted to consumers in an obvious way.

Background

Mr Green had won 'chips' worth £1.7m in an online game called Magic 7 Blackjack, having won the jackpot for this game three times over a period of several hours. Upon winning, Mr Green had taken a screenshot showing the number of chips in his account but was not able to withdraw any money.

Betfred had stated that in usual gameplay the likelihood of winning the jackpot once was only 0.00018361% and that the level of success achieved by Mr Green occurred because of a 'glitch' in the game. Detailed technical evidence about the glitch was not heard as part of the application for summary judgement, but Betfred claimed that a third party provider of the game had advised Betfred that a glitch had occurred and that Betfred should not pay out.

Arguments

Mr Green's case was that the terms and conditions he accepted several years ago when creating his account say that '"Customers may withdraw funds from their account at any time providing all payments have been confirmed." The Gambling Act 2005 sets out that a contract if formed between the relevant parties where remote gambling takes place, and so it was possible for Mr Green to sue for breach of this contract. Mr Green also noted that there was no maximum pay out stated for the game in question.

Betfred put forward a number of arguments as to why the award should not be honoured.

Firstly, Betfred argued that various terms of the contracts between the parties excluded their liability for pay outs that had been triggered by a software malfunction or defect.

These were:

  1. A clause in the general Terms and Conditions which excluded liability for "costs, expenses, losses or claims" arising from systems errors. These broad Terms and Conditions were intended to cover use of the website and any services provided through it (i.e. the games);
  2. A similar exclusion clause in the End User Licence Agreement for the third party gaming software platform; and
  3. That the Individual Game Rules set out that a "malfunction" (which was not defined) "voids all pays and plays",

(together the "Exclusion Clauses").

Secondly, Betfred argued that the doctrine of mistake applied; i.e. that there had been shared but mistaken belief by both parties that the game was functioning properly according to its intended design and the rules.

Thirdly, Betfred suggested that a summary judgement would be inappropriate as it would not allow detailed technical evidence to be heard, and that such a ruling would have an extremely large impact on the industry as a whole.

1. Interpretation

The key issue for the High Court to decide was the correct interpretation of the Exclusion Clauses that Betfred had highlighted and to do so, the Court looked at indicators of Betfred's intentions when drafting of these clauses.

The High Court noted in particular that Betfred had used specific terms to exclude payment of winnings in specified cases elsewhere on the website compared to the three Exclusion Clauses cited above for the game in question.

Secondly, in the ordinary and natural meaning of the English language, the High Court found that the Exclusion Clauses would not exclude liability for winnings, given that the Exclusion Clauses did not refer to game winnings at all. The High Court noted that exclusions of liability for a "systems error" or "communications error" would also not typically be taken to include an undetected glitch like in this case, but were more focussed on excluding liability for the unavailability of the system.  In relation to the Individual Game Rules, the Court did not find that the definition of "malfunction" was intended to apply to an undetectable "glitch".

Notably, the High Court determined that the End User Licence Agreement was a standard form software agreement that was not appropriate for the circumstances in which it was being used. Again, the High Court found that the exclusion clauses in this End User Licence Agreement did not refer to or operate to exclude "winnings".  The High Court rejected Betfred's argument that references in the End User Licence Agreement to "payments made to you" should extend to winnings on the basis that this was an "obscure" reference.

2. Incorporation of the exclusion clauses

The High Court also found that the Exclusion Clauses were not adequately drawn to Mr Green's attention in order for them to be incorporated as terms of the contract between the two parties.

The High Court found that it was likely that there was a gambling contract made on each occasion that a player bet on a game. The High Court found that the point of acceptance of the contract was when a bet was placed and there was the continuing offer made by Betfred on the terms and conditions previously agreed by players (subject to any incorporation or enforceability concerns).

Notably, the High Court found it was possible to play the game without accepting the Individual Game Rules. Players did have to agree to the End User Licence Agreement and Terms and Conditions when making an account, but in Mr Green's case, this had occurred several years prior to his winnings, and was before the game in question was made available.

Betfred had included a mechanism for signing up to the Terms and Conditions and End User Licence Agreement where players had to scroll through the full text before clicking a button to indicate their agreement. The High Court described the use of this "click and scroll" mechanism as prudent.

However, the High Court determined that Exclusion Clauses that would be particularly onerous (if they were interpreted to include the non-payment of winnings) must be drawn to the consumers attention through clear signposting. Yet, in this particular case, a player would have to exit a game and go through multiple pages to view the relevant terms and conditions.

Furthermore, the High Court stated that the meaning and intended effect of such clauses should be highlighted to the consumer. In this case, the Exclusion Clauses were described as being "closely typed" and repetitive to read. Betfred argued that some parts of the Exclusion Clauses were written in capital letters to make them more visible, but the High Court did not consider this to be sufficient due to the large number of other clauses that were written in capital letters.

3. Consumer Rights Act 2015

The High Court also considered the effect of the Consumer Rights Act 2015 and found that the Exclusion Clauses were not transparent or fair, and so Betfred was not entitled to rely on them.

4. Secondary Arguments  

Finally, the High Court rejected Betfreds secondary arguments that the doctrine of mistake applied, finding that there had been no mistake because performance of the contract was not rendered impossible. The High Court also decided that no further evidence from experts was necessary as the High Court had sight of the terms and conditions, the issues were "short points of contractual construction" and that impact on the wider industry was not a relevant consideration.

Commentary

This is likely to be an important ruling for providers of online gaming, and the wider provision of online services where any repeat provision or receipt of services might mean that a contract is formed and the terms of that contract are determined each time a service is provided, rather than at the time that an account is created.

In relation to ensuring terms and conditions with a consumer are sufficiently incorporated, the High Court stated that it was not making a blanket ruling that incorporating exclusion clauses via 'click wrap' is inadequate to successfully exclude liability. However, the level of sophistication and visibility of the methods used to draw consumers' attention to the applicable terms and conditions should be proportionate to and calibrated in light of how onerous the terms would be if relied upon by the service provider to exclude liability. It appears that the Court viewed "click and scroll" mechanisms as being more effective in drawing exclusion clauses to the attention of consumers and incorporating them into the contract compared to other methods, but that this mechanism alone would not be enough for certain terms. Where there is a particularly onerous term to a user, such as a wide exclusion of liability, service providers may consider additional methods of drawing them to users’ attention including very selective highlighting. For more extreme cases, it may be appropriate to direct users to the relevant terms and conditions at every point a payment is made, or even require a positive indication of acceptance.

Additionally, as a result of this ruling, online service providers should ensure that their terms and conditions, particularly those which seek to exclude liability to consumers for certain events, are specific to the contemplated use cases and are clear about the events which are excluded, for example, by using plain language that the average consumer would understand. In particular, providers should be wary of relying on any 'off the shelf' licence terms or agreements for technology which is not tailored to the particular use case under consideration.