Earlier this year, six students at Rycotewood college in Thame, Oxfordshire, were awarded damages after suing for breach of contract. They claimed their HND course in historic vehicle restoration, which they enrolled on in 1996, had been a waste of time and not lived up to the prospectus.
For the first time in such a case, damages were awarded for distress and disappointment.
Jaswinder Gill, who acted for the six after their case was taken up by the National Union of Students, said: "There is a clear precedent in which courts will award damages akin to those for ruined holidays or weddings."
The judge awarded an average of pound;10,000 each, principally for "loss of value of the course" but, significantly, pound;2,500 for mental distress.
Mr Gill, however, believes that pound;2,500 was too little. "Going to university or college is meant to be a pleasurable experience," he said.
"These were mature students who had sacrificed a lot. It was two years of wasted life. If they had had the money to carry on fighting the case, we would have appealed against the low level of damages."
In his judgment, Judge Charles Harris QC said: "They satisfied me that the practical content, which they legitimately expected to be substantial and good, was often low and poorly taught. An extreme example was the lecturer in woodwork who knew nothing whatever about the methods of constructing frames and admitted as much."
The college sought leave to appeal on the question of damages for disappointment and anxiety. But this was refused, although Judge Harris said it could be granted if a higher court could be "persuaded it was a significant case".
Judith McIntyre, Rycotewood's principal, declined to comment except to say:
"We decided there was no point in appealing."
Meanwhile, Rycotewood - founded in 1935 to nurture traditional handicrafts - is involved in a three-way reorganisation alongside Oxford City college and North Oxford college, Banbury.
Around the time of the complaints, Rycotewood's vintage vehicle restoration course was inspected by the Quality Assurance Agency, which graded all six elements as making either a substantial or acceptable contribution to the stated objective.
The outcome has, say education lawyers Martineau Johnson, who represent more than 40 FE colleges and some 30 universities, set alarm bells ringing.
Their recent communique The Distressing Case of Rycotewood warns of a fundamental change in the legal landscape.
The damages decision was described by Martineau Johnson's Smita Jamdar as "a shocker". "We have had two seminars about this recently and feel there is a lot of concern," she said. "What's new is that students can claim damages for disappointment. In my view, it's likely we'll see another case where this is relied on as persuasive."
She said colleges could view as unacceptable the risk of being found against in court, or else dissatisfied students going to appeal. "Colleges may give in on claims for a relatively small amount," she said. "The difficulty for them would be having members of staff implicated. But if that happens, other students might think the college a soft touch."
It had been a basic rule that damages for distress, disappointment or anxiety cannot be recovered for breach of a commercial contract. Martineau Johnson says the judgment could trigger class actions by all students on a particular course.
Colleges are being warned to monitor carefully what is promised in prospectuses; check quality of delivery; ensure staff understand areas of legal risk and how to avoid them; and to deal with complaints properly and promptly.
NUS vice-president for FE, Katt Martin, said: "We're very concerned, with the continued expansion of HE and its impact on FE colleges, that prospectuses should be honest and accurate."
A spokesman for the Association of Colleges said: "This issue is a matter of concern and something colleges have to think about very carefully. We've been looking at the judgment and are considering seeking further legal opinion."