On 31 January 2024, the NSW Supreme Court (NSWSC) issued a judgment in the matter of Gispac Pty Ltd v Michael Hill Jeweller (Australia) Pty Ltd, awarding $2.2 million in damages against Michael Hill. 

The facts

The facts of the dispute, which generally pertained to issues of contract law in an online context, were as follows:

1. Michael Hill engaged Gispac in 2014 to provide product packaging on an as-needed basis under three related sales agreements.

2. As contemplated by the sale agreements, packaging orders were to be placed by Michael Hill for the quantities and types required through an online portal provided by Gispac.

3. Relevantly, the sales agreements contained a tick box, which was ticked, signed, and dated by a representative of Michael Hill, stating:

TERMS AND CONDITIONS OF TRADING

Please tick to confirm that you agree to the terms and conditions that can be found at the following link:

🗹 http://gispac.com/EquoteNew/docs/gispac_terms_and_conditions_Jan2012.pdf

4. There was no agreement between the parties as to whether, at the time sales agreements were executed, the hyperlink to Gispac’s further terms and conditions was operational.  When cross examined, the representative of Michael Hill who signed the sales agreements and ticked the relevant box (i.e. acknowledging the further terms and conditions) conceded that he had chosen not to read the further terms and conditions.

5. Gispac’s further terms and conditions relevantly:

  • required Michael Hill to purchase an “annual quantity” of packaging from Gispac, which was specified in the sales schedule.  Where Michael Hill failed to purchase an amount of goods equal to 25% of this annual quantity, Gispac was entitled to issue Michael Hill with an invoice for the difference between the amount purchased and 25% of the annual quantity; and
  • stated that the term of the agreement was 24 months and would automatically renew for a period of 24 months unless 6 months’ notice was provided by Michael Hill to Gispac.

The dispute between the parties arose in relation to the term of the sales agreements, and whether Michael Hill was liable under these agreements (and the related further terms and conditions) for failing to make purchases in the amount of 25% of the annual quantity required by Gispac.

The findings of the Court

The key findings of the NSWSC were that:

  • Gispac’s further terms and conditions were agreed to by Michael Hill and incorporated into the sales agreements through the ticking of the relevant box by Michael Hill’s representative;
  • the initial term of each relevant agreement was 24 months, and it extended for a further term of 24 months as no notice was provided by Michael Hill to Gispac; and
  • Michael Hill had failed in a number of instances to purchase an amount of goods equal to 25% of the specified annual quantity for each year in which the sales agreements applied, and was therefore liable to pay the invoices Gispac was entitled to issue.

In making these findings, the NSWSC dispensed with the counter arguments raised by Michael Hill that:

1. A penalty was being imposed in breach of the unfair contract terms (UCT) regime (i.e. through the clause providing Gispac could invoice Michael Hill for the shortfall where there was a failure by Michael Hill to purchase 25% of the specified annual quantity), on the basis that:

  • there was an agreement by Michael Hill to purchase the specified annual quantity;
  • this agreement to purchase the specified amount meant that the clause allowing Gispac to recoup the shortfall was commercially justifiable, as there was no secondary market for unpurchased bags held by Gispac;
  • the amount payable under this clause did not exceed the amount that would have been payable by Michael Hill if it had purchased the specified annual quantity; and
  • the clause did not have the predominant purpose of deterring a breach of contract; and

2. Gispac had engaged in misleading or deceptive conduct and unconscionable conduct under sections 18 and 21 the Australian Consumer Law, on the basis that:

  • in relation to the claim of misleading or deceptive conduct, Gispac had not deliberately concealed the further terms and conditions, which were expressly brought to the attention of the signatories by way of the tick box, and instead Michael Hill’s representative had failed to take steps to satisfy himself of the contents of these further terms and conditions; and
  • in relation to the claim of unconscionable conduct, Gispac did not unreasonably fail to disclose the further terms and conditions, nor did Gispac not act in good faith or in a manner that, in the context of a commercial negotiation at arm’s length for the supply of goods on standard terms, constitutes a substantial departure from generally acceptable commercial behaviour.

Implications

This decision provides clear guidance regarding the enforcement of ‘click wrap’ agreements commonly used in online dealings, and provides a timely reminder for businesses to review all contract material prior to execution.

While there may still be some instances where a click wrap agreement or its terms remain void or unenforceable (such as where a party has acted in bad faith, or the relevant clause is manifestly unreasonable or excessive such that it constitutes a penalty in breach of the UCT regime), in this matter the Court contemplated that a click wrap agreement will be binding and enforceable where:

  • a party is aware of the existence of the click wrap agreement, and the manner in which they are communicating their consent to be bound by it (e.g. tick, cross, initial, etc.);
  • a party had the opportunity to read the click wrap agreement (even if this opportunity was not utilised); and
  • there has been no undue pressure placed on the party to agree to the click wrap agreement without ample opportunity to review it.

To date, no announcement has been made in relation to any appeal of the decision.

If you have any queries or would like to discuss the terms and enforceability of click wrap style agreements, or require any assistance in terms of a UCT review of your agreements, please reach out to a member of our Digital & IP team.