Legality of charging customer service for one’s time spent dealing with them

Question

An acquaintance has a practice of charging companies’ customer service departments £50 per 30 minute increments of his time spent addressing issues with them on the phone. I don’t think he’s ever followed through on collecting on this, but when I asked him about the legality he says that it can’t be charged for within the scope of what a court once called “reasonable time and effort” for resolving the business beyond which one can set their own contractual rate. As he tells it he lets them know at an early point in the call that he charges £50 per half hour of his time and they usually dismiss it with an acquiescent comment like “that’s fine sir, but…” before changing the topic back to something different. He said he responds by saying “thank you for agreeing to my contract.”

Apparently this cited court had made its remarks in a case involving an Irishman (supposedly in the UK but perhaps in Ireland).

Apart from this I have had experience with online entrepreneur type “coaches” who have lured me into “exploration calls” with interesting content and then try to retrospectively charge for every minute of their time spent trying to sell me with a sales pitch on paying for more of their time, essentially just to negotiate and talk business. This seems to be a similar principle but where a trader is doing it to the consumer in case it is helpful to have an example more aligned to one’s common sense and perhaps one’s sympathies.

What is the legal position here?

Answer 1

I think the courts might be loath to accept the logic here.

The starting point is that courts expect each side to allow a reasonable amount of time and effort for communicating about a dispute or performing other administration in connection with a contract.

After a certain level of hassle, and taking into account any explanation for it, the court may accept that the price is diminished, and may start to consider damages.

I've certainly had a dispute myself in the past for a monthly contract, where I warned that I would diminish the price for the service if the farcical maladministration continued, and it did continue and I eventually diminished the monthly price on two separate occasions as a result.

But I don't think the courts would accept - without unambiguous verbal discussion or without confirmation in writing - that a vendor had entered into a meta-contract under which certain administration time would be paid for at a particular hourly rate.

Where such a "contract" is introduced without warning into a discussion about an existing contract, there may be a question about whether there is valuable consideration on both sides, or whether there is an objective intention (on the vendor's part) to enter into legal relations.

Instead, the usual rules on contractual non-performance and damages would be applied.

Answer 2

He already has a contract with the company

It’s unlikely that will require the company to pay him for time spent dealing with them but, if it does, then it would set a rate for this. All the contracts I’ve seen that do this, allow the company to charge the customer for service, not the other way around.

Implying such a term

Courts will only imply terms into a contract if the contract is unworkable without it. That is clearly not the case here.

Varying the contract to include such a term

Parties can always agree to vary a contract, however, such a variation is itself a contract and must meet all the requirements of one. See What is a contract and what is required for them to be valid?

In addition, the contract may contain terms allowing for variation. If you’re relying on this you must follow those terms to the letter. Typically, they will only allow the company to vary the terms a usually require changes to be in writing - saying it in a phone call doesn’t count, even if both parties agree.

As a form of damages

It appears that the protagonist is taking the position that the company breached the contract and that reimbursement for his time is a form of damages for that breach.

Even if we take it as given that the company has breached the contract, reimbursement for managing/rectifying that breach is not a form of damages the court will normally recognize. Both parties have a duty to cooperate to ensure fulfillment of the contract and this time would be considered normal administrative overhead of having the contract.

Damages only cover your losses. Just because your friend has a given “charge out” rate, he would need to demonstrate that dealing with the company caused him to lose income from other sources. You don’t get compensated for losing what would otherwise be free time - you get compensated for losing an actual paying client.

Answer 3

You ask whether an agent of a corporation (e.g. a customer service representative) can accept on behalf of the corporation a contract offered to them that would have the corporation pay the offeror a fee for time spent on the phone call.

Summary

For the contract to be binding:

• the agent must have actual authority to enter into it on the corporation's behalf; or
• the agent must have apparent authority to enter into it on the corporation's behalf (the point made in Freeman and Lockyer, below), without this apparent authority being negated by the counterparty's knowledge or constructive knowledge that the agent lacked actual authority (the point made in Criterion Properties, below).

Details

Unless they have actual authority, the person purportedly accepting the contract on behalf of the corporation would have to have the "apparent authority" (also called "ostensible authority") to bind the corporation.

For a contractor to be able to enforce a contract against a company, entered into by a customer-service representative (agent) with no actual authority to do,¹ four conditions must be satisfied (Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480):

1. that a representation that the agent had authority to enter on behalf of the company into a contract of the kind sought to be enforced was made to the contractor;
2. that such representation was made by a person or persons who had "actual" authority to manage the business of the company either generally or in respect of those matters to which the contract relates;
3. that he (the contractor) was induced by such representation to enter into the contract, that is, that he in fact relied upon it; and
4. that under its memorandum or articles of association the company was not deprived of the capacity either to enter into a contract of the kind sought to be enforced or to delegate authority to enter into a contract of that kind to the agent.²

See also Criterion Properties Plc v. Stratford UK Properties LLC & Ors [2004] UKHL 28, para. 31:

If a person dealing with an agent knows that the agent does not have actual authority to conclude the contract or transaction in question, the person cannot rely on apparent authority. Apparent authority can only be relied on by someone who does not know that the agent has no actual authority. And if a person dealing with an agent knows or has reason to believe that the contract or transaction is contrary to the commercial interests of the agent's principal, it is likely to be very difficult for the person to assert with any credibility that he believed the agent did have actual authority. Lack of such a belief would be fatal to a claim that the agent had apparent authority.

The criteria from Freeman and Lockyer continue to be relied upon in recent judgments: Trafalgar Multi Asset Trading Company Ltd v Hadley & Ors [2023] EWHC 1184 (Ch); Carlton Vale Ltd v Gapper [2023] UKUT 141 (LC).

This answer takes no position on whether the customer service representative in the question's scenario would be found to have actual or apparent authority — that analysis depends on facts that are not presented in the question.

---

^{1. For many tasks (adjusting a cell-phone contract, providing a refund, agreeing to provide store credit, etc.), the corporation would have given the customer service representative actual authority to bind the corporation, which totally side-steps the apparent-authority analysis. Just because the agent has actual authority to agree to some things does not imply that they have actual or apparent authority to agree to other things.}

^{2. When dealing with a director, or where a director is the one who has represented that an agent has authority to bind the company, this fourth criteria is rendered irrelevant by s. 40 of the Companies Act 2006.}