Terms Flashcards
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Printing and Numerical Registering Co v Sampson (1875) 19 Eq 462
terms - freedom of contract
Sir George Jessel MR, 465, ‘… men of full age and competent understanding shall have the utmost liberty of contracting… their contracts when entered into freely and voluntarily shall be held sacred and shall be enforced by Courts of justice. Therefore, you have this paramount public policy to consider—that you are not lightly to interfere with this freedom of contract.’
= The CA decided that the contract should be upheld.
The company sued Sampson (one of its shareholders) for breaking a patent contract, where Sampson had given ‘all future patent rights’ for a printing machine, to the company. Sampson argued it should be void as it lasted too long. The company won in the Court of Appeal.
Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd [1965] 1 WLR 623
terms in oral / unsigned agreements
Denning LJ, because Harold Smith Motors Ltd was a professional seller the statement of the mileage became a term. (The reverse of Oscar.)
‘Here we have a dealer, Mr. Smith, who was in a position to know, or at least to find out, the history of the car.’
= Again, the rules are applied against the party with more power – with expert knowledge.
DBP Ltd bought a Bentley from HSM which was thought to have done 20,000 miles, but in fact had done 100,000 miles.
L’Estrange v F Graucob Ltd [1934] 2 KB 394
terms (signed agreement) - GR
Maugham LJ held that she was bound. Two ways to escape would be (1) m/r or (2)a plea of non est factum (not my deed)
= Now the decision would differ: UCTA 1977 s 6(2)(a)
Two of the defendants’ representatives visited the plaintiff and asked her to buy an automatic slot machine for cigarettes. The plaintiff was the owner of a café in Llandudno. She agreed to buy the machine and signed a ‘Sales Agreement’ produced by one of the defendants’ representatives with an exclusion of liability clause. However, the machine was defective.
Bassano v Toft [2014] EWHC 377 QB, [45].
terms (signed agreement) - electronic signature
see also Law Comm, Electronic Commerce (2001) para. 3.37
Electronic, online forms, where clicking or tapping ‘X’ or ‘I accept’ in a box is said to count as signing
Curtis v Chemical Cleaning [1951] 1 KB 805.
terms (signed agreement) - exceptions (m/r)
Misrep. ( overrinding oral assurance) made exclusion inoperative.
misrepresentation that a document excluded liability for damage to a satin dress’ sequins: but it excluded all liab. Dress stained
Grogan v Robin Meredith Plant Hire [1996] CLC 1127
terms (signed agreement) - exception ( not a contractual document)
Exclusion ineffective: only an ‘administrative’ document.
= Terms in a signed document are not contractually binding unless the signatory knew the document contains contract terms, or a reasonable person would expect it to contain contract terms.
The defendant was a plant hire company. They approached a civil engineering company called Triact for work. The parties agreed orally that Triact would hire some of the defendant’s employees for a fee.
After those employees had worked for two weeks, Triact’s site manager signed a time sheet which the defendant drew up. At the bottom of the sheet was a set of contract terms. This included a term requiring Triact to indemnify the defendant against any liability incurred in the course of the hire (the indemnity clause). The site manager did not read the terms.
The claimant was injured by one of Triact’s machines. They sued both Triact and the defendant for damages. The defendant was judged liable for 2/3rds of the compensation, while Triact was liable for the remaining 1/3rd. The defendant sought to enforce the clause requiring Triact to indemnify them for their 2/3rds liability. They argued that the clause had been incorporated into the contract when Triact’s site manager signed the time sheet.
Autoclenz Ltd v Belcher [2011] UKSC 41
terms (signed agreements) - exception (employment contracts)
see also Uber Technologies Inc v Heller, 2020 SCC 16, [65]-[72] and [149] (canadian case)
Lord Clarke [35] held, to interpret whether what people have signed is the ‘true agreement’, the parties’ ‘relative bargaining power must be taken into account’, a ‘purposive approach’. This does not affect ‘commercial contracts’, [21]
⇒ Employers and their advisers cannot draft their way out of employment status if that does not accord with the reality of the relationship:
B, a car cleaner signed he ‘hereby confirms that he is a self-employed independent contractor’. To get the minimum wage and paid holidays, the Working Time Regulations 1998 and National Minimum Wage Act 1998 required he is a ‘worker’ or an ‘employee’. B claimed he was in fact an employee, despite the signed ‘contract’.
City and Westminster Properties (1934) Ltd v Mudd [1959] Ch 129
signed agreements - entire agreement clauses - collateral contracts
= Harman J held this ‘collateral’ contract overrode the written lease
a court can say there’s a ‘collateral’ contract, imposing obligations alongside a main written contract
despite the GR (‘the parole evidence’ rule = a written contract is presumed this is the whole deal unless the parties intended to be bound by oral terms)
written lease said M could only use property for business, but he was orally assured he could live there. He did.
Parker v South Eastern Railway (1877) 2 CPD 416
terms - incorporation by notice
see also Richardson, Spence and Co Ltd v Rowntree [1894] AC 217: R falls of the ship and the ticket fell off ship. Ticken given to her had an exclusion sclause but was folded and smudged. Not Incorporated
The jury was directed to consider whether P had read or was aware of the special condition upon which the bag was deposited. It answered this question in the negative and accordingly judgment was entered for P. On appeal by the defendant, the Court of Appeal held that the jury had been misdirected. The real question was whether thedefendant had done what was reasonably sufficient to give P notice of the condition. A new trial was ordered.
=> Mellish LJ, ‘The railway company must, however, take mankind as they find them, and if what they do is sufficient to inform people in general that the ticket contains conditions, I think that a particular plaintiff ought not to be in a better position than other persons on account of his exceptional ignorance or stupidity or carelessness.’
P deposited a bag in the defendant’s station cloakroom. He received a paper ticket which said on its face ‘See back’ and on the back were a number of printed conditions, including a condition excluding liability for any bag with a higher value than £10. P admitted that he knew there was writing on the ticket but stated that he had not read it and did not know or believe that the writing contained conditions. The bag was lost and P claimed £24 10sfor its value.
Thompson v London, Midland and Scottish Railway [1930] 1 KB 41
terms - incorportion by notice (by reference)
the terms were incorporated
T fell off the train when it stopped in dark past the platform. Ticket said conditions were found in the timetable, which could be bought at the station.
Chapleton v Barry UDC [1940] 1 KB 532
incorporation by notice
Slesser LJ : the ticket was not a contractual document => NoT INCORPORATED
C got a deckchair at a (pebble) beach, South Wales. He paid for the chair and got a ticket which said that the ‘council will not be liable for any accident’. The chair collapsed.
Olley v Malborough Court:
incorporation by notice - timing of the notice
Not incorporated - brought to the attention after the agreement was made
O left her fur coat in her room at the hotel and her room key at the reception. A tied stole the coat. A notice behind the bedroom door excluded liability.
Thornton v Shoe Lane Parking Ltd [1970] EWCA Civ 2
incorporation by notice - timing of the notice - red hand rule
but see ( decided before + between businesses)Spurling v Bradshaw [1956] 1 WLR 461
The defendant used the services of a warehouse to store goods on a regular basis. Each time he delivered goods to the warehouse he was asked to sign an invoice which contained an exclusion clause. This invoice came after the contract had been agreed. On one occasion he stored some barrels of orange juice and again signed the invoice. When he went to pick them up, however, some of the barrels were empty and one contained dirty water. Consequently he refused to pay for the storage. The claimant warehouse owners brought an action for the agreed price of storage relying on the exclusion clause to demonstrate that they were not liable for the damage to the goods. The defendant argued the clause had not been incorporated into the contract as he signed the document after the contract was made.
Held: The clause was incorporated through previous dealings. The defendant would have been aware of the term from the previous contracts and therefore it did form part of the contract. The claimant was entitled to payment and the defendant had no right to claim compensation for the damage to the orange juice.
The machine itself constituted the offer. The acceptance was by putting the money into the machine. The ticket was dispensed after the acceptance took place and therefore the clause was not incorporated into the contract.
The claimant was injured in a car park partly due to the defendant’s negligence. The claimant was given a ticket on entering the car park after putting money into a machine. The ticket stated the contract of parking was subject to terms and conditions which were displayed on the inside of the car park. One of the terms excluded liability for personal injuries arising through negligence. The question for the court was whether the term was incorporated into the contract ie had the defendant brought it to the attention of the claimant before or at the time the contract was made. This question depended upon where the offer and acceptance took place in relation to the machine.
Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd [1987] EWCA Civ 6
see also O’Brien v MGN Ltd [2001] EWCA Civ 1279
OB and were told that they had won 50,000. This was all a mistake. This was all a mistake. Rule 5, printed in papers on some days, not others, said that if too many prizes given, there would be a prize draw. Readers’ complained when their claims for £50k were refused.
Hale LJ : the notice in incorporated in the contract. Notice was not really adequate but the term was not onerous.
condition had not been so incorporated
Dillon LJ
> [I]f one condition in a set of printed conditions is particularly onerous or unusual, the party seeking to enforce it must show that that particular condition was fairly brought to the attention of the other party.
=> the more onerous the terms, the more notice is needed
I delivers 47 photo transparencies contained in a bag, not opened, condition 2 siad 5£ per day was charged for each. S did not return them for a month. Not an exclusion clause so no help from the UCTA 1977.
Mc Cutcheon v David MacBrayne Ltd [1964] UKHL 4
incorporated through trade - course of dealings ( consistent)
The terms weren’t incorporated because The claimant had used the car ferry on a few occasions previously. Sometimes he had been asked to sign a document containing an exclusion clause sometimes he had not been asked to sign a form ⇒ Lack of consistency (Lord Reid)
Mr McCutcheon, the appellant, asked his brother-in-law, Mr McSporran, to arrange for his car to be shipped from Islay to the mainland. Mr McSporran took the car to the respondents’ office in Port Askaig where he was quoted a price for a return journey for the car. He paid the fare and was given a receipt. He delivered the car into the possession of the respondents. The vessel sank on the journey as a result of the negligence of the respondents’ employees and the car was a total loss. The appellant brought an action in negligence against the respondents, who sought to rely on the terms of an exclusion clause contained in their conditions of carriage.
Hollier v Rambler Motors (AMC) Ltd [1971] EWCA Civ 12 (regular)
incorportaed through trade - course of dealings (regular)
that the term was not incorporated. Salmon LJ held that the course of dealing was not regular and consistent enough. (⇒ contrast with Henry Kendall v William Lillico where chicken feed defects excluded in nite. Buyers had bought 3 or 4 times a year for 3 years. Term incorporated: dealing was regular and consistent enough - also note that they were professionals )
Mr Walter Hollier had his car repaired at RM’s garage 3 or 4 times in last 5 years. Each time, he signed a note saying the ‘company is not responsible for damage caused by fire to customers’ cars on the premises.’
*British Crane Hire Corporation Ltd v Ipswich Plant Hire Ltd [1973] EWCA Civ 6
incorporated through trade - general trade practice
The Court of Appeal held that the defendants were liable to meet this cost on the basis that the plaintiffs’ terms contained a clause which required the defendants to indemnify them against such losses and such a term was, as the defendants knew, in standard use in the trade (a course of dealing cannot be established here) ⇒ therefore bound by them
The defendants hired a crane from the plaintiffs. Both parties were in the business of hiring out heavy earth-moving equipment. Given the urgency of the situation, the agreement was reached over the telephone. Agreement was reached on the price but nothing was said about the general conditions of hire. The plaintiffs did send their conditions of hire to the defendants but before the defendants signed it the crane sank into the marshy ground on which the defendants were working (although the accident occurred without negligence on the part of the defendants). The plaintiffs sought to recover from the defendants the cost of recovering the crane from the marshy ground. The defendants denied that they were liable to meet this cost.
Investors Comp Scheme Ltd v West Bromwich Building Society [1997] UKHL 28
construction
Therefore, the House of Lords held, what they really meant was to assign all claims except for: ‘Any claim sounding in rescission (whether for undue influence or otherwise)’ (i.e. move the ‘whether’ and the bracket). => they wanted to assign the claims for damages
Lord Hoffmann listed five principles:
(1) what the reasonable person with all background knowledge would think is the meaning
(2) the relevant ‘matrix of fact’ is anything that could affect the language’s meaning
(3) but exclude prior negotiations (to avoid cost unless to ascertain the knowledge of the parties Ocean bulk or rectification)
(4) it is not the literal meaning of a sentence, but the contextual meaning that is preferred
(5) there is a presumption that people do not make linguistic mistakes
= in short, construe words according to what a reasonable person would understand in the context at hand, but exclude evidence of prior negotiation.
lICS Ltd was set up by the Securities and Investment Board (now the FCA) to compensate people who had been sold dodgy investments (‘Home Income Plans’) by banks and building societies (like West Bromwich BS).
lCustomers got compensation and assigned their legal claims to ICS. ICS sued WB for them. But the assignment contract said …
s 3(b) ‘Any claim (whether sounding in rescission for undue influence or otherwise) that you have or may have against the West Bromwich Building Society…’ was excluded from the assignment (i.e. not transferred by investors to ICS).
=> you are not assigning anything AT ALL, mistake in drafting.
Wood v Capita Insurance Services Ltd [2017] UKSC 24
construction - interpretation (purpose)
see also Rainy Sky SA v Kookmin Bank [2011] UKSC 50, where there are two or more possible interpretations, choose the one that promotes the ‘commercial purpose’.
Supreme Court held no: this was not covered by an interpretation that was ‘consistent with business common sense’ = the term of the contract as construed from a business standpoint would not contemplate that indemnity
Capita (buyer) entered into an agreement with Wood (seller) to purchase an insurance company
The agreement contained an indemnity clause under which the seller promised to pay to the buyer an amount equal to any compensation resulting from claims from customers or complaints by customers to the Financial Conduct Authority (FCA)
Shortly after the sale, the buyer discovered that the company misled customers, informed the FCA and agreed to a compensation scheme with the FCA, unprompted by any customer complaint
The Court of Appeal held in favour of the seller on the ground that the indemnity excluded compensation not paid pursuant to claims or complaints
Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38
construction - interpretation- contractual context
=> Lord Hoffmann holds ‘no’. The meaning could be established by asking whether it made commercial sense. In fact, common sense suggested that P’s contention for £897k was correct, because otherwise the deal could not have been profitable. There was no amount of ‘red ink’ that could not be used to correct verbiage to match the contract’s (commercial) purpose.
=If the context and background of a contract indicate that something has gone wrong with the language of a contract, the courts are not obliged to attribute to the parties a meaning they plainly did not have. If both the mistake and the true intended meaning would be apparent to a reasonable person aware of all admissible background knowledge, the court may correct the mistake in the process of interpretation. This being the case, there is no need to rectify the contract.
P, a developer, would build on C’s land and sell properties, giving C: ‘23.4% of the price achieved for each Residential Unit in excess of the Minimum Guaranteed Residential Unit Value less the Costs and Incentives.’ C argued it was £4.4m owing and P said it was only £897k owing. Pre-contractual negotiations suggested it was indeed £897k. Were they to be admissible?
Canada Steamship Lines Ltd v R [1952] UKPC 1
construction - interpretation - contra proferentem (exemption clauses)
=> Lord Morton, held no. It was to be interpreted to not cover negligence, and exclude only liability under strict duties. (Despite the wide words.) If there’s no express exclusion of negligence, and there’s some other alternative, the exclusion applies to that.
= only covers the strict duty, not beyond
CSL stored goods in the Crown’s shed on the wharf of Montreal harbour. An employee, while repairing with an oxy-acetylene torch, accidentally started a fire and burnt down the shed. The Crown had a strict duty to keep the shed in repair (Civil Code art 1614). Also, clause 7 said ‘the lessee shall not have any claim… for… damage… to… goods… being… in the said shed.’ Did this clause cover negligence?
Ailsa Craig Fishing Ltd v Malvern Fishing Co Ltd [1981] UKHL 12
construction - interpretation - contra proferentem - limitation clauses
contra proferendum doesn’t apply in ‘full rigour’ to limitation clauses.
= the limitation clause did apply
A security company (D) had contracted to provide security and supervision in Ailsa Craig (C)’s fishing boats
A limitation clause in the contract limited D’s negligence liability to £1000
A boat belonging to C was sunk when it crashed while anchored against another boat belonging to Malvern
C sued D for negligence
HIH Casualty and General Insurance Ltd v Chase Manhattan Bank [2003] UKHL 6
construction - interpretation - exemption clause
there can never be an exclusion of liability for fraud (public policy ground)
Photo Productions Ltd v Securicor Transport Ltd [1980] AC 827
construction - interpretation - fundamental breach- exemption clauses
HL held that, even though the breach was ‘fundamental’ (ie S was meant to guard building, but instead burnt it down), the exclusion clause covered the breach.
Lord Denning’s fundamental breach doctrine (= contract was breached and terminated for a reason that was ‘fundamental’ then no exclusion clause was effective. ) was rejected
Photo Productions (C) engaged Securicor (D) to provide security in its factory
D’s employee started a fire to keep warm and burnt D’s factory down
C sued D in negligence for the damage
D sought to rely on an exemption clause in their contract: ‘under no circumstances shall the company be responsible for any injurious act or default of any employee of the company unless such act or default could have been and avoided by exercise of due diligence’
Liverpool City Council v Irwin [1976] QB 319
standard implied terms - terms implied in law
Lord Denning MR, in CA, held there was a duty to on landlords to do reasonable repairs. A term could be implied whenever it was reasonable, based on ‘stacks of’ cases. But the duty was not breached on the facts: tenants should’ve done more to keep the common parts clean themselves.=> pointing towards more judicial intervention
Lord Wilberforce held terms could only be implied when it was ‘necessary’ (but did not say necessary for what purpose). Here such a term was necessary, but it was not breached. On the facts, the tenants should have cared more for maintenance themselves.
The ‘Piggeries’, a set of old Liverpool council flats, were vandalised and dirty. Tenants refused to pay rent in protest. The council tried to evict the tenants. The tenants counter-claimed breach of an implied term to keep block in repair.
Shell UK Ltd v Lostock Garage Ltd [1976] WLR 1187
implied terms - terms implied by law
Lord Denning MR => non-discrimination term was not common enough to be a term implied in law; there was also no implied term in fact on the (old) intent test.
Lostock claimed Shell breached an implied duty to it, as a franchisee, to not discriminate against Lostock when selling petrol under an exclusive supply agreement. Lostock was losing money because the price from Shell was too high. It switched supplier. Shell sued.
