Overy v Paypal (Europe) Ltd

A person may qualify as a consumer under the Unfair Terms in Consumer Contracts Regulations 1999 only where the contract’s business purpose is insignificant or negligible. The court determines the purpose or purposes objectively, by considering all relevant evidence. A person may nevertheless lose consumer protection where his words or conduct give the supplier the obvious impression that he is contracting for business purposes.

An unrestricted right to terminate a financial-services contract immediately and without cause is likely to create a significant imbalance against the customer. Rights to suspend or terminate for breach, inability to verify information, or reasonable suspicion of fraud or criminal activity may, however, be fair. Under the Unfair Contract Terms Act 1977, exclusion of business losses and indirect or consequential loss may be reasonable, but an arbitrary liability cap requires justification.

Mr Alfred Overy claimed damages exceeding £1 million from Paypal after Paypal suspended his account, which he had used to receive entry fees for a competition offering his home as a prize. Earlier summary judgment had established that the contractual terms were incorporated, that the competition fell within Paypal’s gambling-policy provisions, and that Paypal was entitled to suspend the service, subject to questions under the Unfair Terms in Consumer Contracts Regulations 1999 and the Unfair Contract Terms Act 1977.

The issues were whether Mr Overy contracted as a consumer, whether the challenged terms were unfair or unenforceable, and whether Paypal’s liability exclusions and limitations satisfied the statutory reasonableness requirement.

1. Consumer status. The Regulations required an autonomous, community-wide interpretation of “consumer”. The question was factual and depended on all objective evidence. A contract serving a business purpose to a non-negligible extent was outside the Regulations. A person also lost protection where his conduct gave the supplier the obvious impression that he was acting in a business capacity.
2. Mr Overy’s account was a Business Account. He supplied extensive business information and intended the account to support both his photography business and the competition. The photography-business purpose was not negligible. Alternatively, his application and the information supplied objectively represented that he was acting for business purposes. He therefore could not invoke the Regulations.
3. The judge nevertheless gave provisional views. A right to terminate immediately without cause was likely to create a significant imbalance, despite the customer’s reciprocal termination right. Rights to suspend or terminate for breach, failure to verify information, or reasonable suspicion of fraud or criminal activity were not inherently unfair. The gambling-policy requirement for prior approval was not unfair in principle.
4. Under the Unfair Contract Terms Act 1977, Paypal established that exclusions for loss of profits, goodwill, business, revenue, anticipated savings, and indirect or consequential loss were reasonable in the business context. It failed to establish the reasonableness of the cap based on fees paid or the value of the transaction. That limitation was unenforceable against Mr Overy.
5. The claim was not otherwise determined on the merits in this judgment. The court concluded that Mr Overy was not protected by the Regulations, but recorded its conclusions on the challenged terms and statutory limitations.

The judgment itself was a first-instance determination. It records earlier summary judgment orders in the same proceedings, including an order dated 15 May 2009, but no appeal from that order.