Standard Terms And Conditions - The Rule In L'estrange V Graucob - The Incorporation Of Terms (Applebey 4, 5, 6)

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STANDARD TERMS AND CONDITIONS

THE RULE IN L'ESTRANGE v GRAUCOB

THE INCORPORATION OF TERMS

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Attempts to deal with standard form contracts:

The Unfair Contract Terms Act 1977 (inrelation to exemption clauses in contracts andalso in the tort of negligence)

The Unfair Terms in Consumer ContractsRegulations 1999 (consumer contracts generally) (Now the Consumer Rights Act2014 ss62-70) (on Unfair Terms)

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L'ESTRANGE V GRAUCOB - THE RULE

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“When a document containing contractual terms is signed, then, in the absence of fraud, or, I will add, misrepresentation, the party signing is bound, and it is wholly immaterial whether he has read the document or not.” (Scrutton LJ, [1934] 2 KB at p 403)

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L'ESTRANGE V GRAUCOB [1934]

THE EFFECT OF SIGNATURE ON A DOCUMENT

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The claimant purchased a cigarette vending machine for use in her cafe. She signed an order form which stated in small print 'Any express or implied, condition, statement of warranty, statutory or otherwise is expressly excluded'. She did not read the order form. The vending machine did not work and the claimant sought to reject it under the Sale of Goods Act for not being of merchantable quality.

Held as the buyer had signed the writtencontract, and had not been induced to do so by any misrepresentation, she wasbound by the terms of the contract, and it was wholly immaterial that she hadnot read it and did not know its contents; the action failed and the sellerswere entitled to judgment.

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Areas of Interest from L’Estrange v Graucob

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(i) The use of standard form contracts many of the terms in small print. Thewell worn expression ‘terms and conditions apply’

(ii) Exemptionsand limitations of liability. The law isnow a mixture of common law, and the Unfair Contract Terms Act 1977

(iii) Theclassification of terms; conditions and warranties. There is now a third Category ‘Intermediate Terms’(since 1962)

(iv) Theuse of implied terms (now Sale of Goods Act 1979, then 1893 Act)

(v) Remediesfor breach of contract, rescission and damages

(vi) Therelationship between written and oral terms in the same contract

vii) ‘Objective’and ‘subjective’ views of intention (See Applebey pp.23-27)

(viii) Isthe rationale for the rule estoppel?

(ix) Theeffect of signature on a contract

(x) Incorporationof terms, the ‘reasonable steps’ rule.

(xi) Subsequentdevelopment of Contract law. How would case be dealt with now? The Unfair Contract Terms Act 1977s 6 and Schedule 2, paragraph ( c)

(xii) Conceptsin Contract Law

(i) Inequality ofbargaining power (ii)Fairness (iii)Freedom ofContract

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‘The Luna’ [1920]

INDEMNITY CLAUSES - SIGNATURE - ANOTHER LANGUAGE - THE EFFECT OF SIGNATURE ON A DOCUMENT

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Themaster of the Dutch fishing vessel L, who spoke very little English and couldnot read English at all, engaged the tug K to tow his vessel from the mouth ofthe Humber to dock and from dock to sea for £15. He verbally agreed the termswith one of the partners of the firm owning the K who wrote them down on adebit note form and the master signed it. The form contained a printed clauseof condition of towage under which the owners of vessels towed undertook toindemnify the tug owners against all liability whatsoever and against all costsand charges in respect of any actions that might be brought against the tugowners in relation to loss or damage to any other ship through collision orotherwise. The master, though he knew he was signing a contract, was not awarethat the printed conditions contained an indemnity clause. In the course of thetowage the K towed the L into the F and J, a vessel at anchor, whose ownerssued both the K and the L, and the K was held alone to blame. In third partyproceedings by the owners of the K against the owners of the L for anindemnity: Held the master of the L was bound by the conditions of towage andhad authority to bind his owners, and accordingly the owners of the K wereentitled to be indemnified by the owners of the L against the damages assessedagainst the K in the collision action, and the costs payable to the owners ofthe F and J in that action, and also against the K’s own costs in that action.

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Tilden Rent-a-Car v Clendenning (1978)

THE EFFECT OF SIGNATURE ON A DOCUMENT

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Drented a motor car from P and elected to pay an additional premium for fullinsurance against damage. D signed the document without reading it. On the faceof the document it provided that the cover should not apply if the vehicle wasdriven in violation of any of the provisions of the agreement. On the back, infine and faint print, it was provided that the vehicle was not to be operatedby anybody who had drunk any quantity of intoxicating liquor. The car wasdamaged while being driven by D who gave evidence, accepted at trial, thatthough he had consumed some alcohol, he was not intoxicated and was capable ofcontrolling the vehicle. Held,a signature can only be relied on as manifesting assent to a document when itis reasonable for the party relying on the signed document to believe that thesigner really did assent to its contents. In a transaction such as a car rentalcontract, where P emphasises in its advertising the speed and ease of thetransaction, it can be held to know that its customers do not really assent toall the provisions of the documents they sign, and in such circumstances cannotrely on unusual and onerous printed terms not drawn to the customers'attention.

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EXCEPTIONS TO THE RULE

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(i) If the term is an exemption clause may be subject to the Unfair Contract Terms Act 1977 andeither void or subject to reasonableness.(onlyin relation to exemption clauses).

(ii)Nonest factum (means that the signature on the contract was signed by mistake, without knowledge of its meaning, but was not done so negligently).

(iii)Misrepresentation or fraud

(iv)Document signed is only a memorandum oforal agreement not intended to be the full contract; Document signed must be contractual; Objective approach to construction

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Lloyds Bank v Waterhouse [1993]

exceptions to the rule - non est factum

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W appealed against judgment in favour of L formonies arising under a guarantee executed by W for his son's indebtedness to L.W, who was illiterate, had made enquiries and was of the opinion that theguarantee was for sums lent to enable his son to purchase a farm. However, Wsigned a standard form all monies guarantee. W argued that he was entitled torely on the defence of non est factum. Held: Appeal allowed. W satisfied the three criteria necessary for a successfulplea of non est factum: (1) He was under a disability (i.e. illiteracy): (2)That the document was fundamentally different from the document he thought hewas signing (i.e. an all monies guarantee rather than the purchase price of thefarm) and (3) That he had taken care to discover the contents of the document(i.e. by his enquiries at the bank). W was not required to disclose hisdisability to L. Per Woolf L.J. - the matter could not only be decided on theplea of non est factum but also in terms of L's negligent misrepresentation toW.

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Barclays Bank v Schwartz (1995)

exceptions to the rule - non est factum

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ILLITERACYDOES NOT EQUATE WITH MENTAL INCAPACITY, NON EST FACTUM…S, who owned and was theprincipal director of a number of companies, applied for an extension of timeand leave to appeal against a judgment that he was liable for the debts ofthose companies as a result of signing a number of personal guarantees between1983 and 1988. S claimed that, because he was born in Romania and hisunderstanding of English was very poor, he was entitled to have the guaranteesset aside on the ground that the bank was aware of his unfamiliarity with theEnglish language and had failed to explain to him the nature of the documentshe was signing. Held, dismissing the application, that illiteracy could not beequated with mental incapacity or drunkenness, either of which could form adefence to a claim in contract, because someone who was illiterate was awarethat he did not understand a transaction. Illiteracy could not, therefore, forma defence, even if the other contracting party was aware of it. In order tofound a claim in equity on the ground that the transaction was a harsh andunconscionable bargain it was necessary to establish that the stronger partyhad gained an unfair advantage because the transaction was substantiallyunfair. In the present case the court shared the scepticism of the lower courtin relation to the alleged inability of S, who clearly knew enough of thelanguage to carry on a substantial business over many years, to understand theconsequences of legal instruments.

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Curtis v Chemical Cleaning and Dyeing Co [1951]

exceptions to the rule - misrepresentation or fraud

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The claimant took her wedding dress to the cleaners. She was asked to sign a form. She asked the assistant what she was signing and the assistant told her that it excluded liability for any damage to the beads. The form in fact contained a clause excluding all liability for any damage howsoever caused. The dress was returned badly stained. Held:The assistant had misrepresented the effect of the clause and therefore could not rely on the clause in the form even though the claimant had signed it. There plainly had been a misrepresentation, andowing to that misrepresentation the exception never became part of the contractbetween the parties

If a person wishes to exempt himself from a liabilitywhich the common law imposes on him, he can only do it by an expressstipulation brought home to the party affected and assented to by him as partof the contract. If the party affected signs a written document, knowing it tobe a contract which governs the relations between both parties, his signatureis irrefragable evidence of his assent to the whole contract, including theexempting clauses, unless the signature is shown to be obtained by fraud ormisrepresentation. Any behaviour by words or conduct is sufficient to be amisrepresentation if it is such as to mislead the other party about theexistence or extent of the exemption.

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J. Evans (Portsmouth) v Andrea Merzario [1976]

MISREPRESENTATION – EXCLUSION CLAUSES – PRINTEDCONDITIONS – ORAL PROMISE

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D gave oral assurance that goods would be carried below deck but they were placed above deck and were consequently washed overboard during a storm. The printed standard condtions of the forwarding trade allowed D to carry containers above deck if they wished to do so.

Held: there was a breach of contract and D could not rely on the written agreement. The promise to carry goods below deck was an enforceable collateral contract and the oral assurance was an express term, which was partly oral, written and by conduct. (1) the oral assurance amounted to anenforceable contractual promise; (2) the oral promise overrode the printedconditions

Lord Denning said: ‘But even in respect of promises as to the future, we have a different approach nowadays to collateral contracts. When a person gives a promise or an assurance to another, intending that he should act on it by entering into a contract, and he does act on it by entering into the contract, we hold that it is binding.’

Where printed conditions in a contract are repugnantto a binding oral promise they do not provide exemption from liability forbreach of that promise.

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Peekay Intermark Ltd v Australia and New ZealandBanking Group [2006]

MISREPRESENTATION

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The claimant alleged mis-selling of an emerging markets investment product. The defendant claimed that whilst there might have been a misrepresentation, by the time the contract was formed, correct information had been provided and incorporated in the contract.

Held: The later correction did not correct the earlier misrepresentation. The claimant’s agent had signed every page of the contract, but given the representations made, it was likely that the claimant had only given cursory examination to the document before signing it.

An investor could not argue that he had been inducedinto entering a contract to make an investment by a misrepresentation as to thenature of that investment when the true nature of the transaction had beencommunicated to him in the final terms and conditions of the contract, which hehad signed without actually reading.

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Roe v Naylor (No2) [1919]

Document signed is only a memorandum oforal agreement not intended to be the full contract

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Where a seller of goods hands to the buyer a sold note which the buyer accepts as being the contractual document, it is no part of the seller's duty to call the buyer's attention to the terms of the note, and the buyer is bound by any conditions contained in the note, although he may not have read them, or have known that the note contained any conditions, unless the conditions are printed in such a manner or are in such a position in the note as to mislead a reasonably careful business man; in which case the note must be read as if it did not contain the conditions.

Atraveller for defendants saw plaintiff, a builder, and showed him aspecification of various kinds of timber which defendants had on offer forsale. Plaintiff marked items that he wished to buy, and the traveller said hemight have them. Next day the traveller delivered to plaintiff a sold notestating the transaction, but bearing in small print along one side the words:‘Goods are sold subject to their being on hand and at liberty when the orderreaches the head office.’ Plaintiff denied that he ever saw this condition, andthere was evidence as to the difficulty of reading it. Some of the items oftimber not having been delivered, plaintiff sued for damages for breach of theoral agreement in the county court, and defendants relied in defence on thecondition, or, in the alternative, on a custom of the trade corresponding tothe condition. The county court judge gave judgement in favour of plaintiff,holding (a) the alleged custom was not proved, and (b) plaintiff, never saw thecondition, and that an ordinary business man acting with ordinary care might beexcused for not doing so: Held by the Court of Appeal, there was evidence tosupport the county court judge’s finding; as the sold note contained acondition not part of the original verbal contract and not assented to byplaintiff, it was not a proper memorandum in writing of the agreement betweenthe parties; and plaintiff was entitled to succeed on the oral contract, thedefence that there was no sufficient memorandum in writing of the agreement nothaving been pleaded.

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Grogan v MeredithPlant Hire (1996)

document signed must be contractual

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TCE,a civil engineering contractor, appealed against a decision that it shouldindemnify RM against liability for personal injuries. TCE hired a plant driverfrom RM who presented a time sheet for the signature of TCE's agent at the end ofeach week which contained the words "All hire undertaken under CPAconditions". TCE argued that this did not vary the contract to incorporatethe CPA conditions and therefore they were not bound to indemnify RM againstthird party liability. Held,allowing the appeal, that a time sheetfor work done under an existing contract was a record of a party's performanceof contractual obligations. It was not a document with contractual effect.Contractual effect could only be established by variation of the originalcontract. The CPA conditions were therefore not incorporated and TCEwere not bound to indemnify RM.

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Harvey vVentilarorenfabrik Oelde [1989]

objective approach to construction

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Wherethere were two sets of documents and one did not contain a jurisdiction clausethe court could ask whether one party did not assent to the incorporation ofthe jurisdiction clause and was misled. P contracted with D to supply twomachines. The contract was concluded orally, the negotiations being in Englishas P could not speak German. P sued on the grounds of unmerchantable qualityand the issue was whether the official referee was correct in giving leave toissue a concurrent writ and serve it on D in Germany. The oral agreement wasconfirmed in writing, P having been sent two sets of acknowledgment of hisorders. He signed one and returned it to D, retaining the other. The setreturned by him contained in German printed conditions on the back including ajurisdiction clause that any disputes would be governed by German law to besettled at the court at Oelde. The set retained by P had nothing printed on theback. There was no reference on the face of the sets of documents to printedconditions on the back of one set, and there had been no discussion aboutjurisdiction in the oral discussions. The judge held that P was bound by thewritten terms. Held, that even where adocument was intended to be contractual, and this was recognised by the offereein signing it, there was still scope for inquiring whether the offeree wasmisled in some way which went towards negativing his assent to one or moreterms of the document. Viewedobjectively, a reasonable person in the position of the plaintiff could naturallyconclude that the printed material on the back, which he did not understand,could be regarded as irrelevant. The court could draw the inferencethat the plaintiff was misled by the difference between the two sets ofdocuments and did not in reality assent to the incorporation of thejurisdiction clause.

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Spurlingv Bradshaw [1956]

The 'special notice' test - 'unusual and onerous terms' - consistent course of dealings - unsigned documents - whether reasonable steps were taken

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J Spurling Ltd had a warehouse in East London. Mr Andrew Bradshaw had seven barrels of orange juice. He asked Spurling Ltd to store them. In the contract was the "London lighterage clause" which exempted warehousemen from liability due to their negligence. When the barrels were collected, they were damaged. When Bradshaw refused to pay Spurling Ltd, the company sued for the cost. Bradshaw counterclaimed for damages for breach of an implied term of a contract of bailment to take reasonable care. Denning, Morris and Parker LJ held that although the warehouse employees were negligent, the clause effectively exempted them.

DENNING LJ: "I quite agree that the more unreasonable a clause is, the greater the notice which must be given of it. Some clauses which I have seen 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 sufficient."

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InterfotoPicture Library v Stiletto Visual Programmes [1988]

The 'special notice' test - 'unusual and onerous terms'

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Proportionality is applicable to all clauses (not just exemption clauses) - the more onerous, the more notice required. Interfoto delivered 47 photographic transparencies to Stiletto in a jiffy bag. Stiletto was planning to use them for a presentation, but in the event it did not. It never opened the transparency bag or read Interfoto's standard terms and conditions, which were inside the bag. Condition 2 said there was a holding fee of £5 per transparency for each day over fourteen days. After around a month, Interfoto sent a bill for £3,783.50. The Court of Appeal held that the holding fee was ineffective. Dillon LJ said that a ‘particularly onerous or unusual’ term must have special notice. However, Interfoto was entitled to a small restitutory charge of £3.50 per transparency per week for their holding.

Bingham begins by considering civil law systems and the obligation that parties should act in good faith in such systems, something the common law in England has not done. Instead the law has produced piecemeal solutions as needed. When considering sufficiency of notice cases they can be read on two levels:

• contractual analysis - classical, offer and acceptance; and
• regime of fairness – moving more towards substantive rather than procedural fairness.
• After analyzing the various cases he concludes that one should look to several factors in determining whether one party should be bound:
• the nature of the transaction;
• the character of the parties;
• the sufficiency of the notice/proportionality;
• and is it fair to hold them to the condition in question? Applying this to the case at bar, he holds that the clause was sufficiently onerous that notification was required and thus comes to the same conclusion as Dillon.

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OceanChemical Transport Inc v Exnor Craggs Ltd [2000]

The 'special notice' test - 'unusual and onerous terms'

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EC, an English company, supplied OCT, a United States company, with bunkers through an agency, for use by a vessel in the Suez. EC's terms and conditions referred to separate general terms and conditions which contained a time limit of six months for notification of all claims under the contract. The vessel was arrested 17 months later by another company claiming non-payment for the bunkers and was only released upon payment of a large security bond. OCT sued EC for damages for breach of the terms as to unencumbered title and quiet possession implied by the Sale of Goods Act 1979 s.12. EC defended the action relying on the time limit which, it argued, was incorporated into the contract and was not excluded by the Unfair Contract Terms Act 1977 s.6 by virtue of s.26(3)(b). At first instance the court held that the clause was validly incorporated into the contract and that s.26(2)(b) was effective to exclude the operation of the 1977 Act. OCT appealed, contending that (1) s.6 applied notwithstanding s.26(2)(b), and (2) the clause should be construed narrowly and not enough had been done to bring it to their attention for it to be regarded as incorporated. Held, dismissing the appeal, that (1) the reference in s.26(3)(b) of the 1977 Act to parties was a reference to principals not to agents, and (2) the issue of incorporation must depend upon the meaning and effect of the clause in question in the circumstances prevailing, Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd [1989] Q.B. 433 and AEG (UK) Ltd v Logic Resource Ltd [1996] C.L.C. 265 considered. Given the nature and effect of the term, EC had discharged its duty of bringing it to OCT's notice particularly in the light of OCT's express acknowledgement. Had the parties considered the risk of such a claim arising in similar circumstances it was unlikely they would have found a commercial advantage in rewording the contract.

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PhotolibraryGroup Ltd v Burda Senator Verlag [2008]

The 'special notice' test - 'unusual and onerous terms'

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On the evidence, it was clear that a contract for the supply of analogue photographic transparencies incorporated the terms of the delivery notes. The delivery notes provided that loss fees were payable in the event of loss and there was an established course of dealing to show that the defendants had accepted the terms, even though they had not signed the delivery notes.

HighCourt considered the circumstances in which a delivery note used by a supplier could form part of the contract between vendor and customer.Over a number of years Photolibrary Group Ltd (PGL) supplied photographic transparencies to Burda Senator, a German publisher of gardening magazines (Burda). The transparencies were sent to Burda's London offi ce with a delivery note that included standard terms of business. These provided that in the event of loss while in the possession of the customer, a fee varying between £450 and £750 per item should be paid to PGL. During the transaction in question, PGL sent a parcel of 1,856 transparencies to Burda's London representative. These were then sent to Germany but were lost in transit. Relying on the loss fees set out in the delivery note, PGL claimed £1,085,100PGL argued that the delivery note formed part of the contract made between them and the publishing company and that the compensation provisions applied.Burda submitted that there was never a contract relating to the transparencies and that their only obligation was to take reasonable care of them while in their possession. The judge held that the delivery of transparencies accompanied by a delivery note was to be treated as an offer, which was accepted by the acceptance of the transparencies and their onward transmission to Germany.In each case, over the course of dealing between the parties, a contract was made in that way and it incorporated the terms of the delivery notes.

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Parkerv SE Railway Co (1887)

ticket case - unsigned document - were reasonable steps taken

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If a plaintiff does not see writing that contains "conditions" of the contract and no reasonable effort was made to ensure he was aware of it, then he is not bound by its terms; if he does see it and either does not read it, or does not think that it contains conditions, then he will be bound by its terms so long as the defendant delivered it in a manner that gave him reasonable notice that there were conditions on the ticket.

FACTS Parker and Gabell checked their luggage on a train. They were given tickets with a number on one side, and small print on the other side. The small print stated that the railway would not be responsible for bags lost worth more than £10. Both respondents had received the tickets before but had never read the small print. They both lost their bags, and brought actions against South Eastern for the value of the bags and their contents – both were greater than £10. In the lower court both respondents were successful; this is the appeal by South Eastern. Appeal allowed. Mellish, writing for the majority, states that there is no definite law in situations like this, for it depends on the specific circumstances. If the person receiving the ticket does not know that there is writing on the back of the ticket, then he cannot be bound by its conditions. However, if he knew that there was writing and he either neglected to read it, or read it and did not think that it contained conditions of the contract then he is bound by the terms as long as the ticket was delivered to him in a manner that gave him reasonable notice that there were conditions on it. Thus the judge states that a new trial must be awarded and the jury must determine if there was reasonable notice that the writing contained conditions.Bramwell substantially agrees, but goes further to state that if the plaintiff sees the writing and either does not read it, or reads it and does not object, he must be held to consent to its terms and be bound. He states that this is a question of law, and therefore is not for a jury to decide – he states that the verdict must be given for South Eastern here.

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Thorntonv Shoe Lane Parking [1971]

ticket case - unsigned document - were reasonable steps taken

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A clause cannot be incorporated after the contract is concluded – once an offer is accepted new conditions cannot be added to the contract.If they don’t do what is reasonable to make P aware of the conditions (bring it to their attention), then the conditions don’t form part of the contract.

Thornton parked his car in the Shoe Lane parking lot while he was at a musical performance. He received a ticket from an automatic machine. On the ticket was printed the time of issue, and a statement that the ticket is issued subject to the conditions posted in the parking lot. These conditions were posted in the office where you had to pay upon departure, and on the wall opposite the ticket machine, however the poster was not very prominent. The conditions included exempting Shoe Lane from any liability for injury caused to the customer while their car was in the parking building. Thornton was seriously injured when placing goods in his trunk before leaving by another car. At trial the judge found that Thornton was 50% responsible for the act, but awarded him 50% damages from Shoe Lane, which they appealed. Lord Denning MR held that the more onerous the clause, the better notice of it needed to be given. Moreover the contract was already concluded when the ticket came out of the machine, and so any condition on it could not be incorporated in the contract. Exemption clause did not form part of the contract – P wins – Ds cant escape liability.

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Chapletonv Barry UDC [1940]

ticket case - unsigned document - were reasonable steps taken

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The claimant hired a deck chair from Barry UDC for use on the beach. There was a notice on the beach next to the deck chairs stating that the deck chairs could be hired at 2d for three hours and also 'respectfully requested' the public to obtain tickets issued by the chair attendants. The claimant obtained a ticket and put it in his pocket without reading it. In fact there was an exclusion clause printed on the ticket excluding the council's liability for personal injury caused in using the deck chair. The claimant was injured when he sat on the chair. The fabric of the deck chair split away from the frame. He brought an action against the council and they sought to rely on the exclusion clause contained in the ticket. Held: The exclusion clause was not incorporated into the contract. A reasonable person would regard the ticket as nothing more than a receipt and would not expect it to contain contractual terms. Furthermore, the wording of the notice suggested that a person could obtain the deck chair and get a ticket later. The notice constituted an offer and collecting the chair would amount to acceptance. It would not be open to the council to introduce new terms after the contract had been formed. The Court of Appeal upheld Mr Chapelton's claim. He held that there was a valid offer when the chairs were on display, accepted when picked up the chairs from the defendant. Therefore, the ticket was merely a receipt of the contract, and the exclusion clause could not be incorporated as a term, because it was too late.

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Olley v MarlboroughCourt Hotel [1949]

ticket case - unsigned document - were reasonable steps taken

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The claimant booked into a hotel. The contract was made at the reception desk where there was no mention of an exclusion clause. In the hotel room on the back of the door a notice sought to exclude liability of the hotel proprietors for any lost, stolen or damaged property. The claimant had her fur coat stolen. Held: The notice was ineffective. The contract had already been made by the time the claimant had seen the notice. It did not therefore form part of the contract. Denning LJ, Singleton LJ and Bucknill LJ found, firstly, that the Hotel had failed to take reasonable care as they were required to do contractually and under Innkeepers' Liability Act 1863 s 1. Secondly, the disclaimer was not part of the contract and the hotel could not rely upon it. The contract for the storage of the coat was formed at the reception desk. There was no way that Mrs Olley could have been aware of the disclaimer at that point and so it could not be part of the contract.

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McCutcheonv David MacBrayne Ltd [1964]

consistent course of dealings - unsigned document - were reasonable steps taken

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The claimant's car sank in a car ferry owned by the defendant. The claimant had used the car ferry on a few occasions previously. Sometimes he had been asked to sign a document containing an exclusion clause sometimes he had not been asked to sign a form. On this occasion he had not been asked to sign a document. The defendant sought to rely on the exclusion clause claiming it had been incorporated through previous dealings.Held: The House of Lords held, reversing the decision of the Court of Session, that there was no regular course of dealing with McCutcheon and no consistent course of dealing with McSporran, and therefore David MacBrayne Ltd could not say that its term shifting the risk of an accident had been incorporated. Lord Reid explained that the term could not be incorporated through reasonable notice or a signature on this occasion alone...

A party is bound to a contract if signed. Knowledge of terms is tested subjectively, thus prior relations are therefore not enough unless there was actual subjective knowledge of the condition.