Contracts

Staff looking at stock in a warehouseIf you're thinking of signing up to a new contract, there are a few things you might want to consider first.

For instance:

  • Will the amount you pay each month stay the same over the course of the contract? 
  • Have you checked what the minimum contract period you have been offered is, and what notice period you are required to give to your provider?
  • If the terms you agreed to at the outset of the contract change or increase unexpectedly, what are your rights?

This page helps answer these questions.

Core subscription price and types of contract

The core subscription price - usually the price that you have to pay each month - is likely to be one of the most important factors in your choice of contract. It may be:

  • Fixed - where you agree to a single price which is fixed for the entire term of the contract e.g. £20/month for 24 months.
  • Tiered - where you agree to pay different prices at different times, e.g. £x/month for the first 12 months and £y/month for the second 12 months.
  • Variable - where you agree to pay a core subscription price for the fixed term of the contract, but the provider reserves the right to increase the price at its discretion.

No matter what type of contract, the core subscription price or prices you agree to pay should be provided clearly and transparently to you at the point of sale.

Mid-contract price rises

Under Ofcom rules (known as 'General Conditions'), communication providers must give all businesses at least one month notice of any changes in their contract that are likely to be of material detriment to them, including increases in the price you agreed. 

If the agreed price increases to your 'material detriment', you are, therefore, allowed to cancel that contract without penalty. Remember, this applies even if you are still within your 'minimum contract period'.

If your provider does not automatically give you the right to exit your contract without penalty following a price increase, but you consider the increase to be of 'material detriment', you could raise the matter with your provider. 

Whether or not a price rise is materially detrimental to your business will be determined by your particular circumstances and the nature of your contract and your usage. You should be prepared to provide evidence of these to your provider.

Additional guidance to protect small businesses (with 10 employees or fewer)

Ofcom has issued additional guidance on how providers should apply these rules to protect consumers and small businesses from unexpected price rises.

It sets out that if a provider wishes to introduce any increase to the monthly subscription price (or prices) agreed by the customer at the point of sale, customers should be given one month's notice of the increase and be allowed to exit the contract without penalty.

You can find out more about price increases and things to consider when taking out a new phone or broadband contract in our checklist.

Requesting contract terms

Florist on phoneAll businesses are entitled to ask for certain information to be included in their contract in a clear comprehensible and easily accessible form. This can include:

  • Information on whether any services might be limited or restricted in any way;
  • Details of the minimum service quality levels offered, e.g. the ongoing service quality and initial connection time;
  • The customer service and maintenance service that comes with the contract;
  • Details on the contract duration and conditions on renewal and usage requirements; and
  • Details of any charges due on termination of a contract (including early termination charges)

For greater detail on the information you can ask for, please see General Condition 9.2(a)-(m).

Clear information

If you are a small business consumer (with 10 employees or fewer) and considering whether to enter into a new contract for your landline or a mobile service, the provider must give you key information about the contract before you sign up.

For mobile contracts, this must be in a written format (e.g. by letter or email). For landline services, this must be provided either in written format or by telephone. As of June 2015 this has also applied to broadband contracts.

This information must include when the contract will start, the main charges and its cancellation procedures.  A mobile provider must also explain how any deals and incentives (e.g. cashback) work.

If you're unclear about what you are being asked to agree to, we recommend that you don't sign up until you fully understand the terms of the contract. 

Don't forget to consider whether any additional charges apply within the contract you are planning to enter into. These could include costs for additional parts of the service, costs to leave the service early, costs for paper billing, and costs for not providing sufficient notice if you cancel your service or switch provider. 

Automatically renewable contracts

Automatically renewable contracts (ARCs) are contracts that automatically roll forward to a new minimum contract period - with penalties for leaving - unless the customer actively opts out of the renewal.

If you are a small business (with 10 employees or fewer) with landline and/or broadband services, your provider is not entitled to renew your contract term automatically - it must obtain your consent for every new minimum contract period. Ofcom banned automatically renewable contracts for residential and small business consumers from 31 December 2011.

Businesses with more than 10 employees should check their terms carefully to see if they are automatically renewable before signing up.  Where existing contracts contain automatic renewal terms these businesses may want to contact their provider and discuss the renewing of any minimum contract period.

Minimum contract periods and early termination charges

You should pay particular attention to the length of the contract, or 'minimum contract period' when choosing a service and provider. This is the minimum length of time you must take the services you sign up for.

If you cancel your services before this minimum date has elapsed, you may have to pay early termination charges. These charges could be substantial, and you should check your contract terms and conditions when signing up.

Architects looking at plansYou should also be aware of the notice period you need to give if cancelling or switching your services.

Your provider should make sure that conditions or procedures for contract termination do not disincentivise you from changing provider.  This could include, for instance, excessive early termination charges or excessively long notice periods.

Service level agreements

Your business contract may come with a Service Level Agreement ('SLA'). Only half of SMEs are aware of SLAs so make sure you check with your provider when signing up. 

An SLA will define the terms of the service you are being provided, and outline information about support and resolution of problems. Providers offer packages with improved care levels at a premium price, and different packages may come with different products purchased.

Make sure to ask your provider about SLAs and the level of ongoing service you can expect, as it can be extremely important to your business. SLAs may include such issues as:

  • fault repair and installation times;
  • the speed of taking action over queries or complaints;
  • coverage levels;
  • speed of connection; and
  • the minimum number of days without service

SLAs can be accompanied by service level guarantees ('SLGs'), and usually have compensation arrangements in place if the SLA is not met. 

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Last updated: September 2015