Law of Contract Terms of Contract 2 Incorporation of Terms

Incorporation of Written terms Contracting parties may agree to incorporate a set of written terms into their contract. Three hurdles must be overcome before such terms can be incorporated : 1) Notice of the terms must be given at or before the time of concluding the contract 2) The terms must be contained or referred to in a document, which was intended to have contractual effect. 3) Reasonable steps must be taken to bring the terms to the attention of the parties.

Incorporation of Written terms 1) Notice of the terms must be given at or before the time of concluding the contract Olley v Marlborough Court Ltd (1949) Held : a notice in the bedroom of a hotel, which purported to exempt the hotel proprietors from any liability for articles, lost or stolen from the hotel, was held not to be incorporated into a contract with a guest. Reason : The notice was not seen by the guest until after the contract had been concluded at the hotel reception.

Incorporation of Written terms Notice before at or time of contract Thornton v Shoe Lane Parking (1971) Facts : The plaintiff made his contract with the car park company, when he inserted a coin in the ticket machine. The ticket was issued afterwards, and in any case referred to conditions displayed inside the car park which he could see only after entry. Held : Notice therefore came too late, and thus cannot be incorporated into contract.

Incorporation of Written terms 2) The terms must be contained or referred to in a document which was intended to have contractual effect. Chapleton v Barry UDC (1940) The claimant hired a deck chair from the defendants. On paying his money he was given a ticket, which, unknown to him, contained a number of conditions, including an exclusion clause. The claimant was injured when he sat in the deck chair and it gave way beneath him. The defendants sought to rely on the exclusion clause. Held : exclusion clause not incorporated because it was contained in a mere receipt which was not intended to have contractual effect.

Incorporation of Written terms 3) Reasonable steps must be taken to bring the terms to the attention of the party. Parker v South Eastern Railway (1877) Facts : The plaintiff deposited a bag in the railway cloak room. He paid 2 pence and was given a ticket, which stated on the face “see back”, and the exclusion clause was contained on the back ; that the co. would not be liable for any item was value was more then £10. Held : it was established that the test is whether the defendant took reasonable steps to bring the notice to the attention of the claimant, not whether the claimant actually read the notice. ( He in fact did not read the ticket)

Reasonable notice Thomson v London, Midland & Scottish Railway(1930) Facts : the train ticket indicated that the conditions of the contract could be seen at the station master’s office or on the timetable. Held : an exclusion clause contained in a railway time table was held to be validly incorporated despite the fact that the claimant was illiterate. But see Geir v Kujawa (1970)

Reasonable notice Geir v Kujawa (1970) Facts : a notice in English was stuck on the wind screen of a car stating that passengers travelled at their own risk. A German passenger who was known to speak no English, was held not to be bound by the clause, as reasonable care had not been taken to bring it to his attention.

Reasonable notice Richardson, Spence and Co v Rowntree (1894) If the party seeks to rely on an exclusion clause that he notifies to the other party, and knows of a disability of the party, he should take additional reasonable steps to bring terms to the attention of the party.

Reasonable notice What amounts to reasonable notice, depends on the facts and circumstances of the individual case. Thompson v London, Midland & Scottish Railway (1930) Held : The defendants were held to have taken reasonable steps to bring the exclusion clause to the attention of the claimant, even though it was contained on page 552, of the time table and the timetable cost 1/5 of the price of the railway ticket. (The case has been criticized for its liberal view)

Reasonable notice If the clause/ term is not referred to on the front of the ticket or if the reference to the clause is obliterated or not clear, the clause is less likely to be incorporated. Henderson v Stevenson(1875) Sugar v London, Midland Scottish Railway(1941)

Reasonable notice The more unusual or unreasonable the clause, the greater degree of notice is required by the courts. Spurling Ltd v Bradshaw (1956) as per LJ Denning, “some clauses would need to be printed in red ink on the face of the document with a red hand pointing to it before a notice could be held to be sufficient”

Reasonable notice Although the courts “red hand” restrictive approach towards incorporation, applies generally to exclusion clauses, courts do apply this restrict approach to other clauses. Intefoto Picture Library v Stiletto Visual Programmes (1989) CA Facts : The clause in the case imposed charges 10 times higher then normal, for holding onto to transparencies, charging £5 per day for holding on. Held : that a party who seeks to incorporate into a contract a term which is particularly onerous or unusual must prove that the term has been fairly and reasonably brought to notice of the defendant.

Incorporation by a course of dealing Terms may also be incorporated into a contract by a course of dealing If there has been a course of dealing between parties the usual terms may be incorporated into the contract, although not specifically drawn to the attention of the parties each time a contract is made. Spurling v Bradshaw (1956) Bradshaw deposited some orange juice in Spurling’s warehouse. The contractual document excluding liability for loss or damage was not sent to spurling until several days after contract. Held : The exclusion clauses were valid as the parties had always done business on this basis

Incorporation by a course of dealing (previous dealings) Three or four contracts over a period of five years were held not to be a course of dealing between a consumer and a motor garage. Hollier v Rambler Motors (1972) CA Held : bringing a car to be serviced or repaired at a garage on three or four occasions over a period of five years did not establish a course of dealings.

Incorpn by a course of dealing The course of dealings must be “regular” and “consistent” enough for the terms to be incorporated Henry Kendall v William Lillico (1969) HL Held : The HL held that 100 similar contracts over a period of three years, constituted a course of dealing, that allowed, an incorporation of terms

Incorpn by a course of dealing But if contracting parties are commercial parties of equal bargaining power, then : British Crane Hire Corporations Ltd v Ipswich Plant Hire (1975) Facts : a clause was incorporated into the contract on the basis of two previous transactions and the custom of the trade. The court placed emphasis on the fact that the parties were of equal bargaining power, they were both in the trade and such conditions were habitually incorporated into these contracts.

Incorpn by a course of dealing The course of dealing must not only be regular it must be consistent. McCutcheon v David MacBrayne(1964) Facts : A ferry belonging to the defendants sank and the claimants car was lost. In the resulting action by the claimant, the defendant’s sought to rely on an exclusion clause contained in a risk note which contrary to their usual practice had not asked the claimant’s brother in law (who made the arrangement for the shipping of the car) to sign. The defendant’s argument failed as there was no consistent course of dealing, as there was always a signing of a “risk note” before.