Can a company insist that contract terminations be done over the phone?

Question

This article in The Guardian says:

Virgin Media is one of those companies – Sky is another – that insist customers terminate their contracts verbally, rather than by email or letter. It is very frustrating for some customers, who have claimed it would be easier to leave the mafia than their phone/TV company. Virgin cites data protection reasons, but is likely making you call to cancel so it can try its hardest to keep you as a customer by offering a new deal.

Is this legal? Can a company ignore a contract termination letter or email on the grounds that they want to do it over the phone?

Answer 1

IANAL, but arguably it could fall under the following prohibition from Schedule 2 of the Consumer Rights Act 2015:

A term which has the object or effect of limiting the trader's obligation to respect commitments undertaken by the trader's agents or making the trader's commitments subject to compliance with a particular formality.

In practice, unless you can find case law that found such by-phone-only terms invalid under that "particular formality" provision (or some other)... it's probably going to be an uphill battle unless you're prepared to lawyer up and go to court.

There is however further Government (OFT) commentary (on the older law, but this provision is unchanged):

It is often administratively convenient if the consumer complies with formalities – for example, procedures involving paperwork – and may even be sensible from the consumer's own point of view. But that does not justify a business opting out of important obligations where the consumer fails to comply with a minor or procedural requirement and commits a trivial breach.

Unless the need to observe a formality is obvious and important, or is prominently drawn to the attention of consumers, they may overlook or forget it. That is particularly so if it has to be complied with some time in the future without any reminder. Terms imposing severe penalties for trivial breaches committed inadvertently are open to strong objection.

Obviously where compliance with a formality involves disproportionate costs or inconvenience, the potential for unfairness is even greater. An example would be a requirement to use registered post for written notification when notification by ordinary post would be perfectly adequate.

So that seems to clearly apply if the phone line (to cancel) is not toll-free for instance, and they put you on hold. It's less clear if courts would read that as prohibiting the mere specification of a (non-costly) method of communication, like a toll-free line. I suppose the inconvenience factor can be raised, if there is substantial wait time.

Otherwise it's less clear if neither cost nor inconvenience applies if the customer can easily reject the trader's choice of communication venue. I suppose the fact that snail mail is generally acceptable for contractual matters can be invoked since given that cancellation (restriction) "has to be complied with some time in the future without any reminder", i.e. you can pretend you forgot that weird clause and used regular correspondence.

Finally, since this is pre-drafted contract by a big business, you can complain to the CMA, formerly OFT. If the law hasn't changed in this regard (since OFT's time), if the complaint (of unfair terms) is judged valid by the government agency, they will sue the company typically obtaining an injunction that explicitly prohibits that clause/practice for all consumers.

Answer 2

I had this exact same problem with trying to cancel my phone contract.

Unfortunately if you check your service contract with virgin, it is likely that the contract has a section stating that you may only terminate through a phone call, and that other methods of termination shall not count as termination for the purposes of the contract.

As the law currently stands, that clause is not an "unfair clause" and is enforceable in court.

This is indeed very annoying. If you are for whatever reason absolutely unable to conform to this method of termination, then most people take steps such as cancelling their direct debits, and stop making payments, ignoring subsequent letters asking for payment.

Of course, technically speaking doing so is a breach of your contract. They may take you to court over this, though the likelihood of them doing so depends on the amounts owed, and whether you had any outstanding payments due at the time of your "termination"

Now on the chance that your contract does not include such a clause, then hey any form of unequivocal communication can amount to your termination of the contract, such as a text message, written letter, even a cow with text tattooed on it!

Answer 3

You'll have a hard time finding an authority which says that a mandatory & specified method of notice does not need to be complied with, especially where the other party is not in breach of contract. That's because of the operation of the principle of freedom of contract.

It sounds like the contract provided for termination by telephone call, so I suppose that if that method of termination was not available, the clause wouldn't be enforceable. Virgin might be in repudiatory breach in those circumstances. And then you wouldn't have to phone them. You could write to them.

Anyway, to you provide a sense of this fundamental principle of law (freedom of contract) in the context of notice, check out Mannai Investment Co Ltd v. Eagle Star Assurance [1997] UKHL 19, where it says: "It is, in my opinion, correct in principle that a notice under such a clause will only be effective if it conforms to the specification in the clause. The specification in the clause is contained in a document which has been agreed between the parties, and so prescribes the requirements with which the notice must comply if it is to achieve the desired effect."