Exemption clauses - incorporation

Parker v South Eastern Railway Co (1877)

The prima facie rule is that should one sign a document containing contractual terms then one is bound by them regardless of whether or not one has read them or fully understands their legal effect -The prima facie rule is that should one sign a document containing contractual terms then one is bound by them regardless of whether or not one has read them or fully understands their legal effect

Olley v Marlborough Court Ltd [1949]

Terms can form party of a contract even if not detailed on a signed document

For this to work however it must be brought to the attention of the party before, or at the point of acceptance; the term cannot be included in the initial contract ex post facto, it would have to be accepted as a part of a new contract with fresh consideration

(very nice example)

O and her husband enter into a contract with M, a hotel. They agreed in advance to pay for a weeks bed and board. After entering their room they saw a notice stating that the proprietors will not hold themselves responsible for good lost or stolen unless it is in the safekeeping of the manageress.

Due to the negligence of the hotel staff the room was burgled and the couples property stolen. It was held that because they O could not have seen the notice until after the contract was made it was not a contractual term. As such he could sue for breach.

Thornton v Shoe Lane Parking Ltd [1971]

Terms can form party of a contract even if not detailed on a signed document

For this to work however it must be brought to the attention of the party before, or at the point of acceptance; the term cannot be included in the initial contract ex post facto, it would have to be accepted as a part of a new contract with fresh consideration

Another controversial example held that terms printed on the back of a ticket issued by an automatic ticket dispenser in a garage were not binding since the contract was concluded one the money was paid -

Parker v South Eastern Railway Co (1877)

Notice: reasonably sufficient

When making a contract the terms may be printed on a ticket, receipt or common form document and as such one is receiving the terms as one makes the contract

The issue is when one is bound by such notice:

a. One is not bound if one did not see or know the ticket contained writing

b. One is bound if one knows their was writing and believes or knows the writing contained conditions

c. One is bound if one knows that the ticket contains writing and, while one does not believe it contains a condition, the delivery was such that the writing could be seen

Parker v South Eastern Railway Co (1877)

Subjective ignorance, about existence of terms, will not affect the incorporation of said terms provided the delivering party did what was reasonably sufficient to give notice

P deposits a bag worth £24 10s in a railway cloakroom. He receives a ticket which, on its face said, 'see back' and on the back were a number of printed terms. One term excluded liability for bags with a value higher than £10.

P admitted he knew their was writing on the back but stated he did not read it, nor did he believe it contained terms. The jury found that he had knowledge of the existence of the writing and hence at first instance the judge ruled against him. On appeal however a new trial was ordered as the jury had been misdirected. The true question was whether he had received sufficient notice.

Thompson v LM & S Railway Co [1930]

What constitutes, 'reasonable sufficient' notice?

Liberal approach -

Passenger travelling on an excursion ticket is injured due to railway's negligence. Issue was whether terms contained in the railway's timetable was sufficient.

It was held that it was merely because the ticket referred to the timetables and adverts and the timetable and adverts in turn referred to the tickets.

Richardson, Spence & Co v Rowntree [1894]

What constitutes, 'reasonable sufficient' notice?

Conservative approach -

Term limiting liability of a steamship company to $100 printed on a ticket. Handed to the customer folded and with the conditions obliterated in part by a red ink stamp. Held that while the customer was aware of the writing sufficient notice had not been given.

Thompson v LM & S Railway Co [1930]

Must bear in mind that one asks two questions, first were they subjectively aware of the writing, and secondly was reasonably sufficient notice given

A disability or handicap may be relevant to the first question but not to the second

Similar with illiterate individuals

(clause incorporated regardless)

Henderson v Stevenson (1875)

While the test is strictly speaking a matter of fact courts have consistently presumed that a ticket without reference on the front to any terms on the back is defective -

J Spurling Ltd v Bradshaw [1956]

If a term is particularly onerous or unusual then mere knowledge of writing is insufficient, additional notice must be given for it to be sufficient

Some clauses, 'WOULD NEED TO BE PRINTED IN RED INK ON THE FACE OF THE DOCUMENT WITH A RED HAND POINTING TO IT BEFORE THE NOTICE COULD BE HELD TO BE SUFFFICENT' -

Ocean Chemical Transport v Exnor Craggs [2000]

The RED INK test is probably not true in commercial contexts where the full terms can be expected to be read -

Interfoto Picture v Stiletto [1989]

Case does not actually concern an exception clause. Interfoto hired 47 transparencies to Stiletto. They were dispatched in a bag. The bag contained conditions printed in small but visible lettering on the face of the document. Condition 2 stated, 'a holding fee of £5 plus VAT per day will be charged for each transparency which is retained...longer than...14 days.' This rate was very high however Stiletto did not object. Sending the transparencies back 4 weeks later Interfoto demanded £3,783.50.

The court held that after Stiletto accepted the order through telephone confirmation the contract was created and the terms incorporated. That said with regards to condition 2 its onerousness meant it was not incorporated.

Dillion LJ gave the usual reason that the party seeking to rely on an onerous term ought to have fairly brought it to the attention of the other party. _____________ went slightly further saying the same but noting the term was not incorporated purely on the grounds Interfoto did not draw attention to the condition. As such even if, as he believed they had, Stiletto had in fact read the terms this was sufficient.

Thompson v LM & S Railway Co [1930]

Exhibited notices

These include things like notices on ticket counters, signs in luggage rooms, etc

They have been deemed valid if referenced in the ticket

Harling v Eddy [1951]

Exhibited notices

These include things like notices on ticket counters, signs in luggage rooms, etc

Probably also valid if sufficiently prominent and seen prior to contracting

Suggestions however that where not referred to in the ticket the terms of notice must be, 'brought home' to the party affected and that party must then accept -

(The brought home idea is preferable as it is not always apparent whether or not exhibited notices contain terms or merely information and hence it would be unfair to incorporated merely by knowledge of writing alone)

Chapelton v Barry UDC [1940]

Must be the sort of document that a reasonable person would assume might contain terms otherwise no sufficient notice is given

C wished to hire a deck chair on the beach. Paid 2d and took two chairs from the defendant receiving two tickets in return. Sat on the chair, canvas gave way and injuries sustained. C sues defendant for personal injuries. The defendant pleas that the ticket contained an exemption clause on the back. While C had seen writing he had put it in his pocket unread. Due to the nature of the document sufficient notice was deemed not to have been given.

Henry Kendall v William Lillico [1969] (3 or 4 times a month over five years)

Just because the parties have always employed an exemption clause in the past does not necessarily mean it will be incorporated into a present contract

It can be read in however if each part reasonable led the other to believe that rights and duties could be ascertained by reference to terms in previous transactions -