Can cold calls result in a breach of contract claim against your business?
It is becoming increasingly more common for businesses to receive cold calls, where agents encourage us to purchase products and/or services. This winter, it is imperative to ensure that the great deals being advertised by energy brokers through cold calls, do not leave your business in a situation where you have mistakenly entered into contract for the provision of energy.
Is a verbal agreement with an energy broker/cold caller a legally binding contract?
Energy brokers often operate by inviting you to give them authority to act, allowing them to act on your behalf, entering your business into contract with an energy supplier. The broker will then receive commission from the energy provider and/or the commission payment will be incorporated into the sums paid by your business for its energy supply.
There is no requirement for a contract to be in writing, meaning that an oral contract (such as through a telephone call) can be legally enforceable. If you have displayed a clear intention to create a contractual relationship and the terms have been set out clearly and are agreed, then it is likely that you will have entered into contract with a cold caller. The energy broker may subsequently provide you with written confirmation after the telephone call.
Many companies record their telephone conversations to avoid any accusation that a contract has or has not been formed. It may be advisable to request a copy of this recording, if there is any dispute as to what has been agreed.
What to do if a second energy broker telephones with a better deal on my energy supply?
By providing a second energy broker with authority to engage with energy suppliers, you are entering your business into a second contract. This could result in a situation where both brokers enter you into further contracts to pay for and receive energy from two different suppliers.
It is common for contracts of this nature to include restrictions that require the user to purchase the energy on an exclusive basis. This is largely due to the fact that two separate energy providers may be unable to supply the exact same location. Consequently, if you give authority to both energy providers and enter into two energy contracts, then your business will be in breach of contract of at least one contract.
Further, you will also be in breach of contract if you do not pay the sums owed under contract.
What are the consequences of being in breach of contract?
Most contracts include express provisions setting out the consequences of breaching the contract. This usually involves the payment of damages to reimburse the loss that the defaulting party has caused, such as the commission that the energy broker would have earned from the energy provider.
If the damages/default charges are not paid, the energy broker could have six years to bring a claim against your business for these sums.
What can you do if your business is in breach of contract?
If you do not intend to pay the default payment claimed by the energy broker, then you could attempt to dispute this fee.
You could also contact the Energy Ombudsman, which is a free and impartial service that aims to resolve disputes relating to the supply of energy.
There may be scope to defend such a claim by considering the way the call was conducted or if the terms agreed were unclear. Further, a court would not enforce a default payment if it is deemed to be a disproportionate penalty.
How can this be avoided?
If you are dealing with calls of this nature on behalf of a business, ensure that you communicate with any other individuals who may also arrange the property’s supply of energy. Perhaps allocate the role of managing the energy supply to one individual, to avoid a situation where multiple people arrange contracts for the same property, as this mistake will not necessarily mean that the contracts cannot be enforced.
Further, it is often that energy contracts are arranged long before the energy is due to be supplied, particularly if your existing contract does not come to an end for another year or so. As such, it is important to make clear records of the agreements that you have made, to prevent a situation where you may have forgotten about previous arrangements and subsequently enter into two contracts simultaneously. If you have any questions or have any concerns regarding breaches of contract more generally, please contact Lauren.Windsor@TaylorWalton.co.uk in the Commercial Litigation department at Taylor Walton, who will be happy to assist.
Disclaimer: General Information Provided Only
Please note that the contents of this article are intended solely for general information purposes and should not be considered as legal advice. We cannot be held responsible for any loss resulting from actions or inactions taken based on this article.
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