CONTRACT - WEEK 5 Flashcards
memorisation
L’Estrange v F. Graucob Ltd [INCOPERATION]
signature
FACTS: C bought an automatic cigarette vending machine from D which stopped working after a few days. C signed an “elaborate” order form which excluded liability for all express and implied conditions, statutory or otherwise, even though she knew nothing about the contents of the form. The exemption clause was in “regrettably small print” and in an unexpected place, but was “quite legible”. C sued for breach of an implied warranty that the machine was fit for the purpose for which it was sold, but D tried to rely on the exclusion clause.
RATIO: C could not sue as she was bound by her signature. D could rely on the exclusion clause.
The rule in L’Estrange v Graucob: Where a document containing a contractual term is signed, in the absence of fraud and other misrepresentation, the party signing it is bound, and it is “wholly immaterial whether he has read the document or not”.
- Where the rule does not apply: Where the contract is contained in a railway ticket or other unsigned document, D must prove C was aware or ought to have been aware of its terms and conditions.
If the case arose today: s6(1A) UCTA would apply, where a seller can only exclude liability for implied undertakings as to the goods’ fitness if the clause satisfies the test of reasonableness. Here, D would not have been able to satisfy that test.
Curtis v chemical cleaning and dyeing co [INCOPERATION]
signature - exceptions
FACTS: C took her dress to be cleaned by D. D asked C to sign a form. C asked D what the consequences of signing would be, to which D said there was an exclusion of liability for any damage caused to sequins, whereas it was actually an exclusion of liability for all damage. D damaged C’s dress. C sued D, but D tried to rely on the exclusion clause.
RATIO: As C was induced to sign the form through (innocent) misrepresentation, the exclusion clause was not incorporated and did not become part of the contract.
- Incorporating exclusion clauses: D must exempt himself through an “express stipulation brought home to the party affected, and assented to him as part of the contract”.
- Misrepresentation and signatures: D can fail to draw attention to the existence or extent of the exclusion clause.
Parker v South East Railway Co [INCOPERATION]
by notice
FACTS: C deposited a bag in D’s cloakroom. C received a ticket which said “see back” on its face; on the back was a limitation clause limiting liability to £10. C claimed for £24 damages against D after his bag was misplaced. D sought to rely on the exclusion clause but C said, although they knew there was writing on the back of the ticket, they did not believe it contained conditions. The judge directed the jury to consider whether C was actually or ought to have been aware of the condition on the back
The case was remitted to trial as the judge had directed the jury wrongly. The question was whether D did what was reasonably sufficient to give C notice, which they did not.
Where the ticket contains terms of the contract:
- 1) Where C knows there is writing on the back which contains conditions: By receiving and keeping the ticket, C assents to the conditions, even if he does not read them or know what they are.
- 2) Where C knows there is writing on the back but does not know it contains conditions: Did D do what was
“reasonably sufficient to give the plaintiff notice of the condition”? If D did so, the fact that C remains ignorant “on account of his exceptional ignorance or stupidity or carelessness” is on C.
o Where C who ships goods receives a bill of lading from D, he would be bound by it even if he claimed he did not know it contained the terms of the contract of carriage. Business transactions would not occur otherwise, so D is entitled to assume that persons shipping goods know the bill of lading contains the terms of the contract.
o Applied: This is a situation where there is not a general practice of putting conditions on the back of cloakroom tickets, so it is reasonable to assume that C might not read the writing on the back. D did not give reasonable notice.
- 3) Where C does not know there is any writing on the back of the ticket (Henderson v Stevenson): C is not bound by a condition on the back.
Chapelton v Barry [INCOPERATION]
by notice
FACTS: C hired a deckchair from D by paying the attendant. C received a ticket containing a clause excluding liability for personal injury. The deck chair gave way and C was injured. C sued D for negligence but D sought to rely on the exclusion clause.
RATIO: D could not rely on the exclusion clause. The display of the pile of chairs with a noticeboard stating they cost £2 for three hours was the entire offer - the offer did not contain any information about the exclusion clause. The noticeboard contained a “respectful request” that customers then get a ticket from the attendant, but these are only “mere vouchers or receipts showing how long a person hiring the chair is entitled to use that chair”.
- The case would have been different if the exclusion of liability was put up on the notice near the chairs.
Distinguished from Parker v South East Railway Co: The trial judge was wrong to apply the reasonable notice test - the ticket given here was “no more than a receipt”, as opposed to a railway ticket with terms imposed on.
Olley v Marlborough courts [INCOPERATION]
by notice
FACTS: C paid for a room at D’s hotel in advance. C saw a notice exempting D from liability for lost or stolen articles (unless they were handed to reception for safekeeping) only when she went into her room. C’s property was stolen due to D’s negligence, so C sued D, but D sought to rely on the exclusion clause.
RATIO: D could not rely on the exclusion clause because the notice did not form part of the contract - she only saw it after the contract was concluded. D was therefore liable.
- Requirements for a valid exclusion clause: D must prove i) that the words form part of the contract between the parties (incorporation) and ii) that the words were so clear that they must be understood by both parties as absolving D from negligence (interpretation).
- Ways to incorporate an exclusion clause: 1) Signature. 2) Handing before or at the time of the contract a written notice specifying its terms and making clear to C the contract is on those terms. 3) A “prominent public notice” which is plain for C to see when he makes the contract.
Applied: 3) is not made out because the notice was in the bedroom, which a customer does not see until after the contract has been formed
Thornton v Shoe Lane Parking [INCOPERATION]
by notice
FACTS: C drove into D’s car park - outside was a sign saying “customers park at their own risk”. C inserted money into D’s ticket machine and was issued with a ticket stated to be “subject to the conditions of issue as displayed on the premises”. Notices in the car park excluded liability for damage and for personal injury. C was injured and sued D, who sought to rely on the exclusion clause.
RATIO: D could not rely on the exclusion clause because the contract was already formed before notice was given to C, so the exclusion clause was not incorporated into the contract. The terms of the contract were what was on the ticket machine and the “customers park at their own risk” sign outside (which is not to be taken to exclude liability for personal injury).
- Ticket given by machine - Lord Denning: The customer cannot refuse the ticket. The offer is made when the proprietor holds the machine out as being ready to receive the money, with the terms of the offer being contained in the notice placed on or near the machine. The acceptance is made when the customer puts his money into the slot.
o The customer is not bound by the terms of the ticket if they differ from the notice as the ticket is “no more than a voucher or receipt”. - Ticket given by attendant: The issue of the ticket is an offer. If the customer took the ticket and retained it, this was an acceptance. The customer could have refused the ticket.
o Onerous clauses: If the reasonable notice test was applied to this case (even though this is not necessary as it is a machine case), as the clause is “so wide and destructive of rights”, C would not be bound unless “it is drawn to his attention in the most explicit way”, such as being “printed in red ink with a red hand pointing to it”.
It is hardly a matter of “general knowledge, custom” that liability for personal injury is excluded in a car park and the clause was contained in a long list of conditions of entry.
D could not have intended that customers leave their cars outside and go inside to view the conditions to see if they accept the offer or not
Interfoto Picture Library Ltd v Stiletto Visual Programmes [INCOPERATION]
by notice
FACTS: , an advertising firm, ordered photographic transparencies from C. C sent 47 transparencies with a delivery note stipulating a “holding fee of £5 per day per transparency retained past the stipulated period”. D was invoiced for £3,783 when it returned the transparencies two weeks late. D refused to pay so C sued for the amount, arguing the term in the delivery note was incorporated into the parties’ contract.
RATIO: The clause was not incorporated into the contract because reasonable notice was not drawn to it
However, C was entitled to £3.50 per transparency per week late on quantum meruit.
- Incorporating “very onerous” terms: D could not have conceivably known such a “high and exorbitant” fee would be charged for being slightly late. C did not do enough to draw D’s attention to the clause, as it was buried in other conditions.
o The rule in Thornton that onerous exclusion clauses need more to draw attention to them applies generally to all contractual terms, not just exclusion clauses.
- Bingham LJ’s (good faith) analysis: D is not relieved of liability because they did not read the condition (although they probably did not read the condition), but because C did not fairly and reasonably bring the condition to D’s notice.
–> “The more outlandish the clause the greater notice which the other party, if he is to be bound, must in all fairness be given”.
Goodlife Foods Ltd v Hall Fire Protection Ltd [INCOPERATION]
by notice
FACTS: D said they excluded all liability for damage caused to C’s “property, goods, persons” due to negligence. D offered to provide insurance to cover those risks for which liability would otherwise be excluded (this would involve a higher contract price; this was not implemented). A defect in D’s fire detection and suppression system caused C extensive losses.
RATIO: Even though the clause was a “stringent limitation of liability provision”, it was not onerous or unusual merely because it was a limitation clause. It was also properly incorporated. The clause was also not unreasonable, so D could rely on the clause
- Was the clause onerous or unusual?: The mere fact that the clause is an exclusion or limitation clause does not of itself mean it is onerous or unusual
–> Applied: The exclusion clause limited D’s liability to the “(often modest) amount of the contract price” to “protect themselves against the possibility of unlimited liability”.
McCutcheon v David MacBrayne Ltd [INCOPERATION]
by custom/course of dealings
FACTS: C regularly transported his car using D’s ferry. C’s car was lost when D’s negligence sank the ferry. D sought to exclude liability by reference to a risk note that C had signed four times previously, but did not sign on this occasion, so the contract was only oral. C admitted that he knew the risk note contained conditions but did not know of their specific content. C claimed in negligence against D, who sought to rely on the exclusion clause in the risk note.
RATIO: The exclusion clause had not been incorporated into the contract through a course of dealing.
–> Incorporation by course of dealing: “If two parties have made a series of similar contracts each containing certain conditions, and then they make another without expressly referring to those conditions it may be that those conditions ought to be implied”. If an officious bystander asked the parties if they meant to leave them out, they would say no.
o “Previous dealings are relevant only if they prove knowledge of the terms, actual and not constructive, and assent” to them.
o Applied: There was no constant course of dealing, as only sometimes C was asked to sign the risk note. C also did not know what the conditions were, but merely of the practice to impose them (which cannot be taken as accepting them).
Hollier v Rambler Motors [INCOPERATION]
course of dealings/custom
FACTS: C took his car to D’s repair shop, as he had done a few times before. Usually, he signed an invoice which said D was not responsible for damage caused by fire to C’s car. C did not sign the form on this occasion. D’s negligence meant a fire burnt the car. C sued D
RATIO: The clause was not able to be enforced because it was not incorporated into the contract: the parties had only made three or four transactions over five years (this was not a regular or consistent course of dealing).
British Crane Hire Corporation v Ipswich Plant Hire [INCOPERATION]
by custom/course of dealings
FACTS: C and D had dealt before on two occasions, using printed forms. C then leased a crane to D, where C sent a printed form (that required D to indemnify C) to D but D did not sign it. The crane sank, so C sought to claim the cost of recovery from D by arguing the terms in the printed form were incorporated into the oral contract, so D had to indemnify C.
RATIO: The term was not incorporated by a course of dealing (as twice is not enough), but because of trade practice.
Incorporation via trade practice: The “common understanding which is to be derived from the conduct of the parties” meant that the hiring was on the terms of C’s usual conditions. Both parties knew quite well C would impose an indemnity clause.
–> Hollier distinguished: That case involved a private individual vs. a garage, where the individual was not of equal bargaining power. Here, both parties were equal.
Investors compensation scheme Ltd v West Bromwich Building Society [INTERPRETATION]
FACTS: Investors were given negligent advice and assigned their rights through a contract to the ICS, which was created by the government to sue on their behalf. s3(b) said “any claim (whether sounding in rescission for undue influence or otherwise)” could not be assigned. ICS said it should be read as “any claim sounding in rescission (whether for undue influence or otherwise)”
RATIO: In allowing the appeal and restoring the opinion of the trial judge, was held that the right to claim rescission had been retained but that the right to claim damages had been validly assigned.
Summary of (previous?) principles as follows
1) Definition of Interpretation: “Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would have reasonably been available to the parties”
2) The definition of the factual matrix [“background’]: background was famously referred to as the matrix of fact. But this is an understated depiction … it includes absolutely anything which would have affected the way the language of the document would have been understood by a reasonable man
3) What is inadmissible: The law excludes from the admissible background of he previous negotiations of the parties and their declarations of subjective intent, they are admissible only in an action for rectification
4) The role of the reasonable man: The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of document is what the parties using those words against the relevant background would have been understood to mean.
5) Natural and ordinary meaning rule: The “rule” that words should be given their natural and ordinary meaning reflects the common sense proposition in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had.
In essence this modern approach herald that one should always construe a contract in its context, moving from a literary to a contextual approach
Chartbook Ltd v Persimmon [INTERPRETATION]
FACTS: D and C agreed that D was to develop C’s land. Under their contract D would receive profits from selling leases on the developed property and C would receive an agreed price for each unit sold in return. The agreed price consisted of a fixed component for every unit that was sold and an ‘additional residential price”
–> there were conflicting interpretations of the contractual prices. D argued that in support of their construct of the APR, precontractual negotiations should be included as evidence
* D counter claimed that the contracts should be rectified
RATIO: Held in favour of D based on the construction of contract: precontractual negotiations were not admissible as evidence for the purposes of contractual interpretation. D had lost on construction they would have been entitled to rectification.
- Shows the radical effect of ICS v W Bromwich as the courts determined to be business common sense served as an alternative
- The correct of linguistic mistakes is the task of interpretation although the courts will not readily accept that linguistic mistakes are made in formal documents, it will do so when the context and background indicate so where there is a clear mistake ‘there is no limit the amount of red ink or verbal rearrangement or correction which the court is allowed’, the process of interpretation does not require one to formulate some alternative forms of words which approximates as closely as possible to that of the parties
Rainy Sky SA v Koomin [INTERPRETATION]
Clarified ICS that in the modern contextual approach it is not necessary, before looking at the commercial purpose, to show that a particular construction would product an absurd or irrational result. One should go straight to construction most likely to give effect to the commercial purpose of the contract
Arnold v Britton [INTERPRETATION]
FACTS: The dispute in this case was over the correct interpretation of a clause, dealing with the service charge payable, in some 25 year leases of chalets on a leisure park. The clause in question provided that, in addition to the rent, the lessee (tenant) was to pay the lessor (landlord)
“as a propionate part of the expenses and outgoings incurred by the lessor in the … provision of services hereinafter set out the yearly sum of $90 and VAT (if any) for the 1st year of the term hereby granted increasing thereafter by 10% for every subsequent year or part thereof”
The landlords argued that their meant the service charge increased every year after the 1st on a 10% compound basis. The tenants argued that this could not be the correct interpretation because it would produce an increasingly absurdly high annual service charge in the later years of the lease. In dismissing the tenants appeal (4-1), the supreme court took the opportunity to make some general comments about contractual interpretations.
RATIO: C had to pay the charge. The reasonable reader would read the proportionate reference as “descriptive of the purpose” of the clause. To read this as implying a cap (the “commercially-based argument” that the parties cannot have intended the natural meaning), the courts would be departing from the natural meaning of the clause and “inserting words which are not there”.
Lord Neuberger:
What the court should have regard to
o i) The conventional meaning of the disputed words.
o ii) The consistency of rival meanings with other parts of the contract.
o iii) The purpose of the disputed clause and the wider contract.
o iv) The context in which the contract was concluded
o v) Common sense.
