Consumer Protection in Mobile Communication Industry: The Role of Statutory Controls in Regulating Exclusion Clause

By Oyetola Muyiwa Atoyebi, SAN FCIArb. (U.K)

Introduction

The significance of exclusion clauses in mobile communications contracts has grown increasingly prominent in the industry. These clauses, usually found within the fine print of user agreements, limit the liability of service providers by restricting specific rights and obligations.[1] Despite this, concerns have been raised about consumer protection due to the inclusion and application of these clauses.[2] This article delves into the main issues surrounding the usage of exclusion clauses in mobile communications contracts, concentrating on exclusion clauses as contractual terms. The aim is to contribute to the ongoing debate on consumer protection in the mobile communications sector and offer valuable insights for industry stakeholders and consumers.

Understanding Exclusion Clauses in Contract Law

Exclusion clauses, otherwise known as exemptions, are an important aspect of contract law, as they limit or exclude a party’s liability for breach of contract.[3] These clauses allocate contractual obligations and risks, thereby promoting commercial efficacy in the sale of goods contracts.[4] To be enforceable, these clauses must be incorporated into the contract and correctly constructed.[5] Section 55 of the Sale of Goods Act 1893 states that rights, duties, or liabilities arising under a sales contract by implication of law may be negated or varied by express agreement, course of dealing, or usage binding both parties.

Exemption clauses are based on the principle of freedom of contract, which allows parties to allocate risks and facilitate mutually beneficial agreements. Although these clauses might initially seem counterintuitive, they serve as essential tools for contract negotiations.

In the case of Couchman v. Hill[6], the plaintiff purchased a heifer at auction that was described as “unserved.” The sale was subject to conditions stating that all lots were sold “with all faults.” Despite assurances from the defendant and auctioneer, the heifer was unserved and was found to be in the calf and died. Initially, the county court ruled for the defendant, holding the sale conditions over any verbal warranties. On appeal, it was determined that the defendant’s statements constituted an overriding warranty, yet the court upheld the exclusion clauses as conditions for the sale.

Application of Exclusion Clause in a Contractual Agreement

Exclusion clauses are only enforceable with mutual consent and incorporation into the contract according to the law.[7] The party relying on the clause must prove its inclusion in the contract through signature, notice, or previous dealings.[8] This is further explained below:

1. Application by Signature

An exclusion clause, once included in a signed document, becomes part of the contract and binds the signatory regardless of whether they have read or understood it.[9] In L’Estrange v. Graucob[10], the court ruled that a signed document binds the party in the absence of fraud or misrepresentation, even if the plaintiff hadn’t read the exclusion clause. Additionally, even unsigned documents referenced in a signed document can be binding, as demonstrated in Atu v. Face-to-Face Pools Ltd[11].

• Application by Notice

An exclusion clause can be incorporated through reasonable and sufficient notice, often provided via an unsigned document like a ticket or notice. This notice must be communicated before or at the time of contract formation. In Chapelton v. Barry UDC[12], a ticket with an exclusion clause was deemed insufficient notice as it was considered a mere receipt. Similarly, in Olley v. Marlborough[13], a hotel’s notice in a room was ineffective because the contract was concluded at reception. The notice must be reasonable, not necessarily actual, as demonstrated in Otegbeye v. Little[14], where illiterate parties did not understand a receipt containing an exclusion clause.

• Application through Prior Course of Dealings

A consistent pattern of past dealings can incorporate an exclusion clause even without proper notice. In McCutcheon v. MacBrayne[15], the court held that the occasional signing of documents with exclusion clauses did not bind the plaintiff as he had not read them. Conversely, in Spurling v. Bradshaw[16], the defendant was bound by an exclusion clause due to prior dealings where similar documents had been received, indicating knowledge of the clause. For private consumers, multiple past transactions may be necessary to establish this. Trade usage or custom can also incorporate clauses, as shown in British Crane Hire Corporation v. Ipswich Plant Hire Ltd.[17], where industry norms implied the clause. Nigerian law aligns with these principles, presuming facts based on natural events and business practices, consistent with Spurling v. Bradshaw.[18]

Statutory Control of Exclusion Clause as Unfair Terms in Mobile Communications Transactions.

In the mobile communications sector, the prevalence of unfair terms in contracts between the service providers and consumers has become a significant concern.[19] These terms often heavily favour the service providers, putting consumers at a substantial disadvantage. They do this by limiting the liability of the supplier and putting an unfair burden on the consumer through the use of an exclusion clause.[20] Despite being numerous and complex, these clauses must adhere to the principles of fairness and good faith, as protected by relevant legislation, e.g., the Sales of Goods Act, Federal Competition and Consumer Protection Act.

Consumers in Nigeria are now protected under the Federal Competition and Consumer Protection Act.[21] This law stipulates that any term found by a court to be unfair is ineffective, though the remainder of the contract remains binding.[22] This provision ensures that while a specific term may be void, the overall contract can still be enforced.

Furthermore, exclusion clauses in contracts within the communication industry are often described as one that creates a significant imbalance in the parties’ rights and obligations, is not necessary to protect the legitimate interests of the advantaged party, and causes detriment to the consumer if enforced. This means that heavily one-sided terms, which lack a satisfactory commercial reason, and cause financial loss or inconvenience to the consumer, are likely to be deemed unfair.[23]

Several examples from major network providers in Nigeria illustrate the prevalence of such clauses in contracts, they include:

1. MTN: Their terms and conditions state that “MTN reserves the right to make changes to the rates for the service from time to time” without any reference to network users. This allows MTN to alter rates unilaterally, leaving consumers with no recourse despite such actions favouring the service provider solely.[24]
2. Airtel: Similarly, Airtel’s terms and conditions indicate that “Airtel reserves the right to make changes to the data rates for the service rendered from time to time” without any reference to network users”. This implies that consumers are obligated to pay even if they are dissatisfied with the new rates, which can be considered inherently unfair to the consumer.[25]
3. Glo: Glo’s terms and conditions also state that “Glo reserves the right to make changes to their rates for the services rendered from time to time” without any reference to network users”. This provision, like those of MTN and Airtel, implies that consumers must pay regardless of their satisfaction with the new rates, posing a similar issue of fairness.[26]
4. 9mobile: Their terms allow them to suspend service or disconnect telephone numbers without compensation if the network requires maintenance, a third-party service fails, or if the subscriber breaches the agreement. Additionally, there is an indemnity clause where the subscriber must indemnify 9mobile against all liabilities arising from a breach of the agreement by the subscriber, even after termination of the contract. These terms significantly disadvantage the consumer and limit their ability to seek redress for service failures.[27]

Principles of Good Faith and Transparency

Unfair terms like exclusion clauses in contracts under the communication industry, putting more burden on the consumer and limiting the liability of the service provider, violate Section 127 of the Federal Competition and Consumer Protection Act and the principle of good faith, which requires that all contract terms be fair, transparent, and drafted in plain, understandable language.[28] From the provisions of Section 127, if a clause is ambiguous, the interpretation most favourable to the consumer will prevail.[29] Consumers have the right to challenge unfair exclusion clauses in court. If a clause is found to be unfair, it cannot be enforced, though the rest of the contract remains valid. This legal recourse ensures that consumers are not left at a disadvantage due to one-sided contract terms imposed by mobile communication providers.[30]

Conclusion

Unfair exclusion clauses in mobile communications contracts are prevalent and significantly impact consumers’ rights. By examining possible Legislative protections, which aim to ensure fairness and good faith in these contracts, and provide consumers with the means to challenge and invalidate unfair terms. Consumers can better navigate their contractual relationships with mobile service providers and seek redress when necessary.

Keywords: Communication, Consumer, Protection, Exclusion, Clause, Contract, Sales of Goods Act, Service Provider, Federal Competition and Consumer Act, Commercial.

Snippet: In the mobile communications sector, the prevalence of unfair terms in contracts between the service providers and the consumers, has become a significant concern.

AUTHOR: Oyetola Muyiwa Atoyebi, SAN FCIArb. (U.K)

Mr. Oyetola Muyiwa Atoyebi, SAN, is the Managing Partner of O. M. Atoyebi, S.A.N. & Partners (OMAPLEX Law Firm). Mr. Atoyebi has expertise in and vast knowledge of Commercial Law and Practice, and this has seen him advise and represent his vast clientele in a myriad of high-level transactions.  He holds the honour of being the youngest lawyer in Nigeria’s history to be conferred with the rank of Senior Advocate of Nigeria.

He can be reached at atoyebi@omaplex.com.ng  

CONTRIBUTOR: Cyril Samuel Dandison

Cyril is the Team Lead of the Corporate and Commercial Team at OMAPLEX Law Firm. He also holds commendable legal expertise in Commercial Law and Practice.

He can be reached at cyril.dandison@omaplex.com.ng

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[1] Richard Lawson Exclusion Clause and Unfair Contact Terms (10th Edition 2011 Sweet & Maxwell)1

[2] F. N. Monye, Commercial Law: Sale of Goods Lecture Guide, (Enugu: Faculty of Law UNEC, 2005), p. 37.

[3] Peter v. David (1995) NWLR (Pt. 603) 486 at 497 (CA)

[4] “Exclusion and Limiting Clauses”, Law Teachers: The Law Essay Professionals available at http://www.lawteacher.net/contract-law/lecture-notes/exclusion-clauses-lecture.php Accessed 20th June, 2024.

[5] Ibid

[6] [1947] 1 KB 508

[7] Ibid

[8] Ibid

[9] L’Estrange v. Graucob [1934] 2 KB 394.

[10] Ibid

[11] [1974] 4 UILR 131

[12] [1940] 1 KB 532

[13]  [1949] 1 KB 532

[14] [1907] 1 NLR 70

[15] [1964] 1 WLR 125

[16] [1956] 2 All ER 121

[17] [1975] QB 303

[18] [1956] 2 All ER 121

[19] “Unfair Terms in Consumer Contracts” available at http://www.citizensinformation.ie/en/consumer_affairs/consumer_protection/consumer rights/unfair_terms.html  Accessed 15^th  June 2024. 

[20] I. Amasiatu, “Issues in Exclusion Clauses in the Mobile Communications Industry: Statutory Control and Exclusion Clauses as Terms of Contract” 2023 Vol 9. No. 2 IIARD Journal of Business and African Economy E-ISSN 2545-5281.

[21] Federal Competition and Consumer Protection Act 2018.

[22] Section 127 Federal Competition and Consumer Protection Act 2018.

[23] I. Amasiatu, “Exclusion Clauses in Mobile Communication Industry” 2023 Vol 8 No. 1 Journal of Law and Global Policy (JLGP) E-ISSN 2579-051X

[24] Available @ Terms & conditions – MTN Nigeria accessed 22^nd June 2024

[25] Available @ airtel: Prepaid | Postpaid | 4G accessed 23^rd June, 2024.

[26] Available @ TERMS & CONDITIONS (gloworld.com) accessed 21^st June, 2024.

[27] Supra Amasiatu.

[28] “Assessing the Statutory Regulation of Unfair Contract Terms under the Nigerian Federal Competition and Consumer Protection Act” Available @ Assessing the Statutory Regulation of Unfair Contract Terms under the Nigerian Federal Competition and Consumer Protection Act. – CLRNN – Commercial Law Research Network Nigeria Accessed 20th June, 2024.

[29] Ibid

[30] Ibid