Incorporation of Terms Flashcards
Incorporation of terms generally pertains to contentious terms (arising usually for exclusion clauses). What are the ways to ensure that terms are incorporated into the contract?
- Signature - best way
- Take reasonable steps to bring the terms to the NOTICE of other party
- Incorporation by past dealings or by custom
Incorporation by Signature - classic case?
L’Estrange v F. Graucob (1934)
P bought a cigarette machine from D, signed a sales agreement containing small print (faint exclusion clauses printed on brown paper). Machine failed within a short time.
Court held that a person is bound by his signature. 3 exceptions:
(1) Did not have a real understanding of a document, and not his fault (non est factum)
(2) Misrepresentation or Fraud
(3) If it isn’t a contractual document, but is an administrative document
Problems with signature rule? Hint: Canadian case
Has been subject to a lot of criticism, that the courts revere the signature too highly.
The Court of Appeal of Ontario in Tilden Rent-A-Car Co v Clendinning (1978) accepted the position that “if the party seeking to enforce the document knew or had reasons to know of the other’s mistake the document should not be enforced”, therefore providing a very broad exception to the signature rule where onerous provisions ignorantly signed by a party may not be enforced by a party who knowingly allows it.
UCTA will also probably not allow such an unfairly placed exclusionary clause in today’s context
What is Singapore’s position on signature rule?
Press Automation Technology Pte Ltd v. Trans-Link Exhibition Forwarding Pte Ltd, [2003]
Judith Prakash J held that L’Estrange’s position is adopted, and rejected Tilden Rent-A-Car. Places responsibility on contracting parties to care for their legal position before signing anything, and will be bound by the terms, unless provided for by the UCTA.
In Consmat Singapore (Pte) Ltd v Bank of America National Trust, Court held that P was bound to the agreement, inter alia, because they signed the agreement and failed in their claim that the exclusion clause was unreasonable (they tried to use Interfoto) - signing is taken by the Court as an express indication that you have read, understood and agreed to the terms
Incorporation by Notice - what are the three requirements
(1) Notice given at or before time of contracting
(2) Terms must have been contained or referred to in a document intended to have contractual effect (i.e. cannot be a receipt)
(3) Reasonable steps must be taken to bring the terms to the attention of the other party
Notice must be given at or before time of contracting - what is the rule proof?
Thornton v Shoe Lane Parking
Contract was concluded at the moment of entry, and the notice of the exclusion term was contained inside the car park, and terms on the ticket were given too late to be included - it cannot be refused. (anyway, the ticket is also not a document with contractual effect)
Terms must have been contained or referred to in a document intended to have contractual effect - rule proof?
Chapelton v Barry UDC. The receipt given is not a contractual document, and cannot incorporate terms of contract.
Reasonable steps must be taken to bring the terms to attention of the other party - rule proof?
Parker v South Eastern Railway (1877)
Train company lost the bag of P. When P deposited his bag, he received a ticket with “see back” stating the terms of the exclusionary clause for items about £10. He admitted he knew of writing, but claimed he thought it was just a receipt.
Court said that if the other party knows or believes that there is conditions in the writing, he is bound. If he knows or believes that there is writing, but did not know that it contained conditions, he would be bound IF THERE WAS REASONABLE NOTICE GIVEN THAT WRITING CONTAINED CONDITIONS
The case that wraps up Incorporation by Reasonable Notice
Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd (1989)
Court of Appeal held that if a term is particularly onerous or unusual, the greater the steps that must be taken to draw reasonable notice to the existence of the term. In this case, P had an onerous clause that imposed heavy and unreasonable fines for late returns of transparencies that D borrowed. Court found that while D is bound by the terms even if they did not read them, there is the assumption of trust that the terms are reasonable (standard practice), but P ought to have brought the clause to reasonable notice of D. Denning “put a red hand” pointing to the clause.
Ties in with Parker v South Eastern Railway - that D is bound by the terms, since he can be reasonably be said to have knowledge of existence of the terms - but the factual matrix of this case places greater emphasis on whether P brought reasonable notice since their term is particularly onerous.
What is onerous or unusual? Terms deviating away from standard practice, that may place the other party in a disadvantageous position (impose a burden, or exclude liability) from which he may reasonably assume otherwise.
Incorporation by Course of Dealings and Custom
Generally, to establish a course of dealing there must be regularity and consistency of dealing between parties.
Difficult to prove sufficient regularity of dealing, especially between a business and consumer.
Hollier v Rambler Motors (AMC) Ltd (1972): Court rejected that an exclusion clause had been incorporated on the basis of course of dealing - P’s car had been damaged badly while undergoing repairs at D’s garage. D had signed an invoice with an exclusion clause on previous occasions, but not this time. P had previously repaired D’s car 3-4 times over 5 years - the court did not consider that sufficient regularity to constitute a course of dealing MEANING A GREATER DEGREE OF REGULARITY IS REQUIRED.
Generally, easier to establish the requirements for course of dealing/custom - consistency and regularity for parties in the same trade or industry
Rule proof for incorporation by course of dealing?
British Crane Hire Corporation v Ipswich Plant Hire (1975)
D hired a crane from P. Both were in the same business/trade. The crane was damaged while D was using it (not their fault), P sought to recover the costs, even though their agreement this time was by telephone, and they had not signed anything.
Court held that P’s terms with the indemnification clause was incorporated - D was liable for costs - D would’ve known that this term was standard use in the business.
