Review – an insufficient term to enable suppliers to increase fees

22 March 2012

The Court of Appeal have recently held in Amberley (UK) Limited v West Sussex County Council1 that a contract term stating that fees payable were “subject to review as costs increase” was insufficiently clear to allow a care home to increase the fees unilaterally. Amberley ran a care home for people with mental illnesses, and appealed to the Court of Appeal against a decision that he was not allowed to increase unilaterally the fees it charged to the local authority for the care of residents. The contract that was in place between the residents and Amberley stated in relation to fees that: “The level of fees is subject to review as costs increase. No fee is stated here as a standard, due to the reviews”. The local authority had become responsible for paying the fees of some of the residents after the Health and Social Care Act 2001 came into force; the contract between the residents and Amberley constituted an “existing arrangement” within s.50(6) so their obligation to pay and their liabilities under that agreement became that of the local authority. The Court of Appeal dismissed the appeal; the issue was one of construction of the contract term, whether objectively the parties had intended that Amberley should have the right to unilaterally increase the fees. Although parties to a contract can agree that one party could unilaterally vary the terms to the detriment of the other, it would be an unusual provision and clear words would be required to achieve that result. In this case the fee review term made no reference as to who would perform the review, or how often and on what basis. There was also nothing in the term that gave Amberley an express right to unilaterally increase the fee and then enforce the increase on the residents. It was therefore the view of the Court that the parties intended that Amberley would carry out the review, but if he wished to increase the fees then he required the agreement of the residents so as to vary the contract. It is therefore evident that a provision of this sort is clearly insufficient to enable any supplier to increase their fees unilaterally. If a party wises to be able to change a fee unilaterally then it must be made clear in the contract itself. Further, to avoid a scenario like Amberley where the agreement of the other party was required it would be advantageous to include a term in the contract stating that the client agrees to any increased fees. – For additional information or comment please contact: Justin Emerson of Gepp & Sons. The above is not legal advice; it is intended to provide information of general interest about current legal issues.