TERMS OF THE CONTRACT PART II – INCORPORATION OF EXPRESS TERMS (ENGLISH & MALAYSIAN LAW)

Sources of Contractual Terms

• Two principal sources of contractual terms:
  • Express terms
  • Specifically agreed upon by the parties, either orally or in writing.
  • Implied terms
  • Not specifically agreed but inserted into the contract by:
    • Courts (common-law implication).
    • Statute.
• Malaysian Contracts Act $1950$ does not itself classify terms as express or implied, but Malaysian case law adopts the English common-law classification.

Incorporation of Written Terms – Three Principal Methods

• $1.$ Incorporation by signature – a party signs a document that contains contractual terms.
• $2.$ Incorporation of unsigned written terms by notice – reasonable steps taken to draw attention to the terms before or at the time of contracting.
• $3.$ Incorporation by previous course of dealing – consistent, regular past dealings import identical terms into the present contract.

Incorporation by Signature

• General rule:
  • A person is bound by the terms of any document they sign whether or not they have read or understood it, absent fraud, misrepresentation, or the defence of non est factum.
• Key authority: L’Estrange v F. Graucob Ltd $[1934]$ $2$ KB $394$
  • Exclusion clause printed in “regrettably small print” upheld because the buyer signed.
  • Scrutton LJ: once signed, the party “is bound” – reading or understanding is immaterial.
• Malaysian position mirrors English law:
  • Subramaniam v Retnam $[1966]$ $1$ MLJ $172$ – signer bound even though he did not understand English.
  • Sebor (Sarawak) Trading Sdn Bhd v Syarikat Cheap Hin Toy $[2003]$ $2$ MLJ $486$ – exclusion clause on reverse of Bill of Lading binding; director signed that side.

Exceptions to the Signature Rule

• Non est factum – signer, through no fault of their own, does not understand what they signed and receives no explanation.
  • (Illustrated in dicta in L’Estrange).
• Fraud or misrepresentation inducing the signature.
  • Curtis v Chemical Cleaning & Dyeing Co $[1951]$ $1$ KB $805$ – assistant mis-described scope of exclusion; clause not enforceable.
• Document signed is administrative only, not one which a reasonable person would expect to contain contractual terms.
  • Grogan v Robin Meredith Plant Hire $[1996]$ CLC $1127$ – time-sheets merely recorded hours; CPA conditions not incorporated though signed.
• Borderline/consumer fairness question – Canadian case Tilden Rent-A-Car v Clendenning $83$ DLR (3d) $400$:
  • Court refused to enforce onerous insurance clause on signature where it was unreasonable for party relying on it to believe the customer assented.

Why Treat Signature as Conclusive? (Policy)

• Atiyah: signature is a widely recognised formal device; its value would be reduced if not conclusive in ordinary circumstances.
• McKendrick: provides certainty and is relied on by third parties.

Incorporation of Unsigned Written Terms by Notice

To enforce terms in an unsigned document/notice, Proponent (P) must prove all three:

\begin{aligned}
1.&\ \text{Notice given before or at the time of contracting.}\
2.&\ \text{Reasonable steps taken to bring terms to the other party's (D’s) attention.}\
3.&\ \text{Document/notice is of a type intended to have contractual effect.}
\end{aligned}

(a) Notice Given Before or At Contract Formation

• Olley v Marlborough Court Hotel $[1949]$ $1$ KB $532$
  • Contract concluded at reception; notice in hotel bedroom too late → term not incorporated.
• Denning LJ (obiter): party relying on exemption must prove incorporation by one of: signed document, pre-contract written notice, prominent public notice at the point of contract, or express oral stipulation.
• Thornton v Shoe Lane Parking $[1971]$ $2$ QB $163$
  • Automatic machine: offer made by machine; acceptance when customer pays.
  • Exclusion clause inside car-park/ticket came after contract – too late.
  • Very onerous clauses require “red hand/red ink” notice.

(b) Reasonable Steps to Bring Terms to Attention

• Factual assessment: size, location, prominence, clarity, previous dealings, literacy, etc.
• Parker v South Eastern Railway $[1877]$ $2$ CPD $416$ – “See back” sufficient; P bound even if he did not read.
  • Mellish LJ tripartite test:
    $\bullet$ If receiver neither saw nor knew of any writing → not bound.
    $\bullet$ If knew/believed writing contained conditions → bound.
    $\bullet$ If knew of writing but not of conditions → bound if ticket’s delivery made that obvious.
• White v Blackmore $[1972]$ $3$ All ER $158$ – no words on front directing to back ⇒ back conditions not incorporated.
• Thompson v LMS Railway $[1930]$ $1$ KB $41$ – reference to timetable sufficient even for illiterate passenger; railway took reasonable steps.
• Interfoto Picture Library v Stiletto Visual Programmes $[1989]$ QB $433$ –
  • “Holding fee” £${5}$-per-day per transparency = very onerous.
  • Lack of special notice → clause unenforceable; quantum meruit awarded.
• Malaysian authority: Sanggaralingam v Wong Kook Wah $[1987]$ $2$ CLJ $255$ – workshop notice not incorporated; no evidence customer’s attention drawn.

(c) Document Must Be Intended to Have Contractual Effect

• Chappelton v Barry UDC $[1940]$ $1$ KB $532$ – deck-chair ticket merely a receipt; contractual terms were those on nearby notice (which lacked exclusion); exclusion clause on ticket ineffective.

Incorporation by Previous Course of Dealing

• Requirements:
  $\bullet$ Regularity – dealings frequent enough to put party on notice.
  $\bullet$ Consistency – same terms consistently used.

Key Cases

• J Spurling Ltd v Bradshaw $[1956]$ $1$ WLR $461$
  • Many prior storage transactions; landing account + invoice always contained “owner’s risk” term ⇒ incorporated.
• Hollier v Rambler Motors $[1972]$ $2$ QB $71$
  • Only $3$ to $4$ transactions over $5$ years; not sufficiently regular ⇒ exclusion clause not incorporated.
• Henry Kendall & Sons v William Lillico & Sons $[1969]$ $2$ AC $31$
  • Continuous sales of nuts for >$3$ years; “sold notes” always followed ⇒ term as to latent defects incorporated.
• McCutcheon v David MacBrayne $[1964]$ $1$ WLR $125$ (HL)
  • Sometimes risk note signed, sometimes not; inconsistency defeated incorporation.
• Malaysian illustration: Popular Industries v Eastern Garment Manufacturing $[1989]$ $3$ MLJ $360$
  • $16$-year uniform practice (EGM names ship & date, PIL opens LC).
  • EGM omitted this step ⇒ PIL not obliged to open LCs; EGM in breach.

Practical & Theoretical Implications

• Signature rule promotes certainty but may operate harshly; courts carve out limited equitable exceptions.
• Notice rule balances freedom of contract with protection against “unexpected” terms; greater notice demanded where clause is onerous or unusual.
• Previous-dealing rule respects commercial expectations; regularity & consistency function as constructive notice.
• Consumer-protection statutes (e.g., Unfair Contract Terms Act in UK; Malaysian equivalents) further police unfair clauses – but analysis here assumes common-law framework.

Study Checklist / Key Takeaways

• Memorise three methods of incorporation and their tests.
• Be ready to apply exceptions to signature rule (non est factum, misrepresentation, administrative documents).
• For notice cases, structure answer around the three requirements and illustrate with case law.
• When arguing previous course of dealing, emphasise frequency + uniformity; compare Spurling (yes) vs Hollier, McCutcheon (no).
• Remember heightened notice for “onerous or unusual” terms (red hand rule – Thornton, Interfoto).
• In problem questions, pinpoint timing of contract formation to determine whether notice came early enough.