I believe what they mean is no _recurring_ contract. Money changes hands, and services are received, so in my mind there is certainly a contract in place and they are able to apply T&Cs of service.To confuse matters, sometimes the money changes hands on a regular, recurring basis, at which point it may as well be a "contract" as most people understand the term, as opposed to "PAYG".
The default for such an arrangement is indeed to form legal relations and enter in to a contract, but that does not have to be so. If it is stated that there is no contract, then it would be bound by honour only.
I guess this is an Advertising Standards issue - i.e. their advertising is misleading because it falsely claims that there is no contract, when in fact there is. It's no different in that sense from claiming that something is fibre-based broadband when it's delivered over coax :-)Saying "this is not a contract" doesn't of itself stop something from being a contract, just like writing "this is not a tree" on a tree doesn't change whether or not it's a tree.Of course this case is not quite so clear cut, since one of the requirements in the UK for a contract is that there be "intent to create legal relations" so you could perhaps argument that the frequent assertion of no contract meant that you did not intend to create legal relations.
Indeed, and unlike the "tis is not a tree", I think that asserting "this is not a contract" on an agreement does in fact make it not a contract. First chapter in any contract law book explains the difference between an agreement bound only by honour, and one intended to create legal relations and as such enforceable - i.e. a contract. So I would certainly assert that there was clearly no intent to create legal relations. Also, imagine this in court - it would be a case of "breach of contract" and one would produce copies of web site / TV advert / etc stating "no contract". It would make it a tad hard to assert breach of contract in such cases I feel.