Estudio 2

It would obviously be unfair if one party to a contract was allowed to claim that he had contracted on certain terms unknown to the other party – the essence of a contract is agreement. The terms of an oral contract must therefore be apparent to both parties before any contract is actually made.

A term will usually be considered to be incorporated into a contract if:

• the affected party knew of the clause, or

• reasonable steps have been taken to bring the term to his notice.

In deciding whether a party has had reasonable notice of a term, the courts look at the extent, or degree, of the notice, and at the point in time at which the notice was given.

The degree of notice Ecay v Godfrey (1947)

The defendant described the boat he was selling as ‘sound’, but suggested that the buyer obtain a private survey. Because of this, the statement was held not to be a term of the contract of sale.

Schawel v Reade (1913)

The seller of a horse claimed that it was sound and that the buyer need not look for anything. He said, ‘If there was anything the matter with the horse I would tell you.’ The claim was held to be a term of the contract of sale.

50p

paid for hire of one deck chair see back for conditions

Receipt for left luggage Payment received for deposit

of luggage for one day.

Liability limited to an agreed sum – see reverse for terms

and conditions Important – please retain

this receipt for return of your luggage

or

Figure 6.1

The court looks to see if it was obvious to the parties that a term was intended to form part of a contract. If something clearly looks like a contractual document, it can be assumed that the party understands that it is to be included and binding, even if the terms have not actually been read.

On the other hand, if it is not obvious that a statement is part of a contract, then nothing will be assumed.

This arose in the following case regarding a ticket.

A lot of problems regarding notice have arisen out of ‘ticket’ cases. These are really decisions based on the contractual effect of tickets, often for public transport, but they help to form a general picture of what is need for a term to be incorporated. The Court of Appeal have formulated two questions that need to be considered in considering liability.

• Did the plaintiff read, or was he aware of, the term?

• If not, did the defendant do what was reasonably sufficient to give the plaintiff notice of the term?

The following case shows that if the ticket contains writing which is not legible then the writing will not form part of the contract.

Try to find some example of documents or tickets with on them. Are they the kind of documents that you would normally keep? Would you expect to read them before forming a contract?

Chapelton v Barry UDC (1940)

A receipt for the hire of a deckchair on Barry beach had printing on the back. It was held not to be the type of document that would be regarded as of contractual importance, and the words on it were therefore not incorporated as terms.

Parker v South Eastern Railway (1877)

In this case the plaintiff left a bag at the left-luggage counter and was given a receipt containing a limitation clause. It was held that as this was the kind of receipt which had to be kept and was likely to be read, since it was needed to retrieve the bag. The plaintiff therefore had notice of the term, even though it was on a ticket which she had not read.

Sugar v LMS Railway (1941)

A passenger was given a ticket which had an instruction on the front to

‘see back’ for conditions. The words on the back were covered by the

Previous dealings

It can be seen from the above cases that the courts really do try to take a reasonable point of view, and do their utmost to protect the consumer. This does not mean, however, that they will not take an objective stance, and they may consider that sufficient notice has been given if it can be shown that there was a ‘course of dealing’ between the parties.

However, if a term is to be incorporated into a contract through a course of dealing, there must be a consistent pattern of behaviour, as the following case shows.

If the parties are both involved in the same trade, they may therefore be assumed to have knowledge of the normal trade terms.

date stamp which the booking-clerk had put there to validate the ticket.

It was held that as these words could not be read they could not form part of the contract.

Hollier v Rambler Motors (AMC) Ltd (1972)

The plaintiff left his car at the defendant’s garage for service, but there was a fire at the garage and the car was destroyed. The defendant claimed exemption from paying damages, relying on a notice inside the garage. However, it was established that the plaintiff only went to the garage infrequently so he had not been regular enough to be deemed to have read the terms.

McCutcheon v David MacBrayne Ltd (1964)

The plaintiff often used the defendant’s ferry service, sometimes going into an office for a ticket, sometimes paying outside or on the ferry. On this occasion the ferry sank, and the defendant claimed exemption from liability because of a term in his notice of terms in the office. It was held that the pattern of behaviour was too inconsistent to form a course of dealing, and the defendant was liable for the cost of replacing the car.

How might a ferry operator, or any other person in business, make provision for this kind of event?

This seems a reasonable stance to take, since both parties were in the same trade and it was established that both were aware of the normal procedure.

It could be argued that if they had been prudent, they would, like anyone else in business, be insured to cover the cost of such events.

The time at which notice of a term is given

It is fairly obvious that a statement can only become a term of a contract if it is given either at the time of making the contract, or before it is made.

Afterwards is too late as it would be unfair to impose terms, without any negotiation, on a person who has already made a contract.

In O’Brien v Mirror Group (2001) the claimant believed that he had won a leading prize in a lottery claim, but through a misprint there was an unusually large number of other winners. The rules which provided for sharing the prize were held to have been properly brought to the attention of the contestants by being printed in the newspaper the previous day. This contrasts with the following case over the issue of sufficient notice.

British Crane Hire Corporation Ltd v Ipswich Plant Hire Ltd (1975) It was common practice in this particular trade that the hirer of equipment should assume responsibility for returning it to the place of hire. This was so even if a crane was stuck in mud since both parties were aware of these terms from the outset.

Olley v Marlborough Court Ltd (1949)

Mrs Olley stayed at the defendant’s hotel, booking in at reception and paying for the room there. Belongings were later stolen from the room, and Mrs Olley sued the hotel, who tried to rely on an exemption clause on the back of the hotel door. It was held that as the contract had been made when booking in at reception, the terms on the back of the door came too late, and were not part of the agreement.

Thornton v Shoe Lane Parking Ltd (1971)

Mr Thornton drove into the defendants’ car park, paying money into a machine and taking a ticket which activated a barrier to let him in.

When Mr Thornton returned for his car there was an accident in which he was injured, partly because of the negligence of the defendants, and Mr Thornton sued for compensation. The defendants tried to rely on a notice which contained a term exempting the defendants from liability for any damage or injury caused. It was held that the term was not part of the contract for two main reasons:

The term had not in this case been specifically pointed out, and Mr Thornton was therefore successful in his claim.

Lord Denning pointed out in Thornton that the offending clause was in

‘regrettably small print’, and referred to a statement from Spurling v Bradshaw (1956), where he said that a particularly wide or unusual clause may need bringing to someone’s notice more explicitly, e.g. by being printed in red ink and with a red hand pointing to it.