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.