Incorporation of Contract Terms

Question 1

Four ways of objectively determining consent

Answer 1

signature, notice, reference, course of dealing

Question 2

General rule for signature

Answer 2

a party is bound by their signature regardless of whether he has read or understood contract terms

Question 3

L’estrange v Graucob Ltd (1934)

Answer 3

• P was owner of cafè who purchased automated slot machine from D
• Signed a sales agreement
• contract included exclusion clause that excluded D’s liability from any issues with the machine
• Machine had issues
• P did not read the contract and wasn’t aware of the clause
• court held that was immaterial as the term was binding and incorporated

Question 4

Tilden Rent a car Co v Clendenning (1996) (canadian case)

Answer 4

• D purchased a car and was given form to sign
• he signed but didn’t read it
• contract contained exemption clause
• imposed liability on D for damage done to the car under certain circumstances
• damage occurred and company sued to recover loss
• it was an informal transaction carried out in a hurried manner and parties did not have ample time to read through all the terms
• clerk of C was aware D had not read terms before he signed it
• court held that in informal transactions it is not safe to assume signature means consent
• C needed to take reasonable measures to draw attention to the clause
• they did not
• clause wasn’t incorporated despite signature

Question 5

Clendenning rule

Answer 5

if the contract terms are ‘stringent’ or ‘onerous’ the party that made the contract must draw attention to the terms and if they do not it’s not incorporated

Question 6

General rule for notice

Answer 6

notice of the terms must be given before or at the time of concluding the contract to be incorporated

Question 7

Duty of the party who proposes the terms for notice

Answer 7

-must give reasonable or sufficient notice for the term to be incorporated

Question 8

Olley v Malborough Court Ltd (1949)

Answer 8

• man and wife went to a hotel and paid for a week in advance
• notice displayed in room that said hotel would not be liable for articles lost/stolen
• this was an exemption clause
• CA held the contract was made when the couple checked in at reception
• it was too late for the hotel to try and incorporate the clause
• notice only came after the contract was concluded
• must be given before or at the time contract is being concluded to have legal effect

Question 9

General requirement for nature of document (notice)

Answer 9

-terms must appear in document that is intended to have contractual effect

Question 10

Chapelton v Barry Urban District Council (1940)

Answer 10

• P hired deck chairs on beach
• near the chairs there was a notice that stated members of the public had to get tickets from chair attendants
• P paid and got tickets
• did not read them
• on the back it stated an exemption clause for liabilty for damage from the chair
• chair broke and injured P
• CA held the ticket was nothing more than a reciept
• terms of the hire were set out in the notice which was displayed above the chairs and didnt contain an exemption clause
• no reasonable person would have considered the receipt to be a contractual document
• term on the back of receipt wasn’t incorporated

Question 11

Parker v South Eastern Riailway Co (1877)

Answer 11

• P put his luggage in cloakroom at station and was given a ticket
• the front of ticket stated ‘see back’
• limitation clause at the back which stated D would not be liable for an item stolen worth more than 10 pounds
• P’s luggage was stolen
• court held if P KNEW the ticket/receipt contained contractual terms he would be bound by them regardless of if he read them
• see back was reasonable notice so the clause was incorporated

Question 12

LJ Denning’s obiter in Spurling

Answer 12

“the more unreasonable the clause is, the greater the notice which must be given of it”

Question 13

Thornton v Shoe Lane Parking (1971)

Answer 13

• P parked car in montessori car park and was issued a ticket
• ticket stated it was issued subject to conditions displayed on the premises
• terms included exemption clause from liability for personal injury ‘howsoever caused’
• P injured himself while trying to leave car park
• D acknowledged their negligence but tried to lean on clause
• clause was broad and unreasonable and required greater threshold of notice to the terms
• held that D’s notice wasn’t sufficient

Question 14

Lord denning’s comment in Thornton

Answer 14

‘(this clause) is so wide and destructive of rights that the court should not hold any man bound unless it is drawn to his attention in the most explicit way”

Question 15

Interfoto Picture library Ltd v Stiletto Visual programmes (1989)

(new higher threshold of fair notice)

Answer 15

• P had an enquiry from D to deliver 47 photos
• was delivered with note that contained terms at the bottom
• condition 2 had a holding fee clause
• if the photos were not retuned within 14 days D would have to pay 5 pounds a day per photo
• D didn’t read this
• D returned photos 4 weeks late
• P brought action to recover 3,783 pounds owed based on condition 2
• CA held the clause was very onerous because the fee was very high and so it required fair/reasonable notice (not just reasonable)
• court held nothing was done by P to draw D to condition 2
• fair/reasonable notice was not satisfied
• courts reduced compensation to P to 3.50 per week per photo as it was more fair

Question 16

O’Brien v MGN (2001)

Answer 16

• P bought paper which included scratch card game
• under game instructions were the words ‘normal mirror group rules apply’
• the rules were not published on the issue but were availble in other issues
• P called hotline and was told he won 50,000
• newspaper published too many winning cards by mistake and over 1,000 claimed the prize
• normal mirror group rule 5 stated if there were more winners than prizes for any reason D would hold draw for winner
• if it was under high interfoto threshold of reasonable and fair notice- yes
• held it was not onerous because it does not impose a burden on the claimant (don’t have to pay) unlike interfoto holding fee
• lower threshold of reasonable notice is enough
• D did ‘just enough’ to bring rules to C’s attention through the reference on the face of the card

Question 17

What if the party who whom the standard of terms are presented has a disability or is illiterate?

Answer 17

• if the party is disabled/illiterate it is usually irrelevant
• if the other party is aware of it then they may be required to take extra steps to satisfy reasonable notice

Question 18

Can terms be incorporated by reference to the standard terms?

Answer 18

yes, if the reference is to another source where the terms can be found and if reasonable notice of the terms which were referenced has been given

Question 19

Impala Warehousing v Wanxiang Resources (2015)

Answer 19

• reference to terms and terms were available on a website
• warehouse certificate which stated on its face that its ‘subject to terms and conditions of Impala’
• at the bottom the reader was invited to look at the back of the page for additonal conditions but it only referenced you to Impala’s website
• court held the steps were reasonably suffcicient to give the holder of the certificate notice of the terms and conditions

Question 20

Circle Freight v Medeast Gulf (1988)

Answer 20

• it is sufficient to state that the standard terms are available upon request
• not necessary for terms to be specifically set out if they are common/usual terms in the relevant business

Question 21

General rule for course of dealing

Answer 21

• if the parties have had previous transactions and agreed expressly to a term in their regular dealings with each other
• if they fail to mention it in their most recent transaction the law will regard their previous dealings as objective evidence that the parties wish to contract on the same terms as before
• courts believe the parties wished the term to be incorporated into their current transaction

Question 22

What if the parties want to depart from their previous practices?

Answer 22

-they should expressly say so in their most recent transaction

Question 23

Definition of ‘course of dealing’ in McCutcheon v David MacBrayne (1964)

Answer 23

HoL held that course of dealings between both parties must be ‘regular’ and ‘consistent’ to form a basis for incorporation of terms from previous transactions

Question 24

Henry Kendall v William Lillico (1969)

Answer 24

• HoL held that sales contracts that took place between parties 3-4 times a month for 3 years was a course of dealing
• there was incorporation of terms from previous sals transactions

Question 25

Hollier v Rambler Motors (1972)

Answer 25

• course of dealing not established
• three of four contracts between parties over period of 5 yrs
• courts held that this was not a course of dealing that would give rise to incorporation of term

Question 26

If course of dealing is not satisfied are there any other similar remedies?

Answer 26

-court can incorporate term if it is a common trading practice of the business that the parties operate in

Question 27

British crane hire corporation ltd v Ipswich Plant hire Ltd

Answer 27

• is an industry-wide indemnity clause incorporated?
• D urgently needed crane and agreed the hire on the phone with P and they orally agreed on price
• later B sent their standard terms to D
• including clause which stated it was D’s obligation to recover crane if it sank and to pay for expenses for the use of the crane
• before D signed it the crane sank
• parties had 2 previous trnasactions concluded on the same terms with these same standard terms
• on the facts this was not sufficient for CoD
• but the parties were operating in the same trade and had equal bargaining power
• they both were aware of these standard conditions that were regularly imposed in these types of transactions
• both knew it would be the hirer’s job to recover the crane if it sank
• clause was incorporated based on common understanding