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10 november 2015

Cases on incorporation of terms; interpretation of terms; implying


something
McCutcheon v. David MacBrayne, Ltd.
Facts: Ps brother contracted w/D to send car to mainland via
ship, ship sank. P says D should be liable b/c D failed to deliver the car.
Ship sank b/c of negligent navigation. Risk agreement drawn up, but
not given to P, who only signed receipt, given conditions on back of
receipt. D says past conditions should apply.
Terms: ferry car transportation agreement.
Breach: ferry sinks; car is lost.
Issue: does a risk note previously signed by P for a prior
instance hold P to those terms in this agreement?
Rule: The fact that P had signed contract w/risk agreement in the
past does not affect this specific transaction when form not used
unless proof of actual/constructive knowledge of terms. Doctrinally,
this is a duty to readincentive for people to try to make an informed
decision. The particular exemption clause of this note was not known
to him during his previous times.
Holding: Court says that here where the formalities werent
followed, D would not get the benefit of something that wasnt more
than a formality. The court held that unless P signed a risk note for
this agreement the prior agreement would not hold P to those terms in
this transaction. Judgment for P. There was a monopoly as there was no
choice to get to the mainland without taking the ferry.
My Comments:
If you dont sign something you must have knowledge of the terms of
contract. Does he have knowledge because he signed these contracts
in the past? No. Because he didnt read the clauses of his previous
contracts, he just signed them. What if this clause was a perfectly
reasonable term? The court is obviously compelled by the fact this
company was a monopoly, and the clause had a very large and general
limitation of liability. It seems harsh if it was a totally reasonable
clause. The argument here is that this rule is applied irrespective of the
reasonableness of the clause.
British Crane Hire Co v. Ipswich Plant Hire Ltd

Facts:
o Defendants urgently required a crane; appellants quickly supplied
one.
o Arrangements made over the phone
o Two previous transactions between parties, although IPHL
manager who ordered crane unaware of them.
o Crane arrived and used before written contract signed
o First mishap: driver drove crane over marsh despite IPHLs
manager telling him to wait for navimats, crane sank, removed
expensively
o Second mishap: navimats arrived but machine sank into marsh
again
Issue: Who is to bear the cost of the mishaps?
Holding: Plaintiffs pay for first; defendants pay for second.
Reasoning:
Denning:
o First mishap was due to drivers negligence, so plaintiffs must pay.
o Although previous dealings irrelevant, both parties are in the
same trade and are of equal bargaining power
o Defendants themselves use similar conditions when hiring out
cranes, both parties used a variation of a standard form
o Therefore conditions are incorporated into the contract by
implication (because both parties AWARE of them)
o Common understanding may be derived from conduct of parties:
crane requested urgently, delivered quickly, on the assumption that
defendants accepted plaintiffs terms.
Sachs:
o Would be different if parties were from different walks of life
o Conditions of contract are reasonable; and they are of a nature
prevalent in the trade which normally contracts on the basis of such
conditions.
Ratio: Where consent is not determined, knowledge of terms is
necessary for their implication into a contract. Knowledge
requirement is satisfied by the fact that conditions were part of
industry standard.

My Comments:
On the surface it doesnt look much different from previous case
(McCutcheon). Whats the difference? It wasnt clear that the
plaintiffs knew the condition or clause even though they guessed it.
Denning argues that even if there was not a condition, judges can
imply a term. For example, if you ask for delivery without them
giving you an hour of delivery, theyre implying the term that it
would be delivered during business hours, even though its not
stipulated. The clause here was reasonably fair unlike the first case.

When Judges interpret of contracts:


1) First, its a question of consent did you agree to these clauses?
What would you expect irrespective of the content of the clause or
whether the party was a monopoly?
2) Secondly, theres a question of circumstance was the
agreement just or fair?
These two approaches get mixed together in the common law,
because there were relatively few substantive rules on contract
terms (freedom of contract limited control of contract terms in
common law) or the tests of consents were either too strict or too
easy to satisfy. Judges like denning did not like that and In some
ways, the judges would then manipulate the question of consent to
deal with the content of the agreement. In other words, they would
interpret documents to make them fairer. Interpretative techniques
are being used to control the fairness of contract terms.
In the civil law, there are more ways in order to vitiate terms that
are explicitly unfair. For example, if an exemption clause is deemed
abusive by a French judge, they can simply vitiate the clause.
In the MacBrayne case, the judge says you have to have knowledge
of the clause, but here, the plaintiff could have guessed the clause,
if asked. Its not as black and white whether simple knowledge is
sufficient. But what knowledge do you need to have? The
knowledge of the conditions? Or the actual knowledge of that
specific clause?
A course of dealing can be used to imply terms. If you have a lot of
previous contracts where youve had the exactly same terms, courts
have held parties to the terms in the previous ones. The problem is
to determine how many dealings is sufficient to constitute a course
of dealing? The courts are inevitably influenced by the unfairness of
the clause as well.
Important: Aforementioned information only matters when contracts
were not signed. If you sign a contract, youre bound.
But what about if that document refers to another document
(implying terms from another document)- for example, industry
terms; Those terms may be in other contracts or elsewhere
(External clause). In principle, the CML rule applies.
If you sign you are bound.

Civil law takes the same rule but has an exception for contracts of
adhesion or consumer contracts (Art 1435-37).
Art 1435 you have to show knowledge that the consumer know of
the terms of the other document (external clause). Comments: You
need to know what the specific conditions were, not just that there
might be such terms ex. subject to the conditions.
Parker v South Eastern Railway [1877]
Facts:
P put bag in coat check and received paper ticket. On back of
ticket it said company not responsible. P went back no bag. P never
saw notice on the ticket
Issue(s):
Was P bound by the conditions on the ticket?
Ratio:
If he knew of the writing but did not know or believe there were
conditions, he is still bound, if when delivered to him he could see the
writing and there was reasonable notice given of these conditions if
no reasonable notice given then not bound.
The onus is on D (the giver of the ticket) to do what is necessary to
make him reasonably aware of the conditions.
TEST: Have they done what is reasonable to bring it to their
attention?
What is reasonable depends on the circumstances
Analysis:
When document is signed it is immaterial if they have read the
doc and its contents, in the absence of fraud it will be enforceable.
When a doc w/o signature there must be evidence that the parties
assented to it. If they have assented, in the absence of fraud, it is
immaterial if they have read the doc or knew the contents of the doc.
If the person receiving the ticket did not see or know that there was
any writing on the ticket he is not bound by the conditions.
If he knew of the writing and that included the conditions he is bound,
whether he read them or not.
My Comments:
You can be bound if you signed or assented. Ex. If somebody gives you
a ticket and you know or SHOULD HAVE KNOWN that the ticket has
conditions, then the argument is that you have assented.
Issue: Do you just have to know that the ticket has conditions or know
of the specific conditions?

Rule: According to the case, you can be bound by the conditions on the
back of the ticket, provided that a reasonable person would have
known that there are conditions there. It does not matter that you did
know yourself or did not know what the conditions were. Hardass,
mechanical approach.
What if you are illiterate and you cannot read the terms or you cannot
read the language? CML uses unconscionability or unfair business
practices (taking advantage of someone).
What happens in civil law when the contracts are outside consumer or
adhesion contracts?
Not sure

Why do we never read contracts? The argument is that provided that


one or two people read the contract, it would be self regulated based
on the market. Even if no one reads it, if a company tries to enforce an
unconscionable term, the consequential negative publicity would
change it.
Thornton v Shoe Lane Parking Ltd, [1971] 2 QB 163
Facts:
Automatic car park. On door said all cars parked at own risk. P
got ticket from machine. Ticket said on back subject to conditions
displayed on premises. P saw writing but did not read. Signs posted on
random pillars. Accident and D says not liable
Issue(s):
Is P subject to the exemption clause?
Ratio:
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 dont do what is reasonable to make P aware of the
conditions (bring it to their attention), then the conditions dont form
part of the contract.
Analysis:
If the conditions are brought to your attention after you
have accepted the offer then they do not form part of the
contract.
The greater the limitations of liability, the greater the effort must
be taken to bring it to your attention higher standard of
reasonableness.
If you are to limit liability for much more then people would expect,
then you must do a great deal to bring it to their attention
Proportional notice
Here the offer was the condition at owners risk and acceptance
was when he drove up and a ticket was given to him.
The conditions on the ticket are not part of the contract because the
contract was already entered in to.
Holding:
Exemption clause did not form part of the contract P wins Ds
cant escape liability
My Comments:
2 ways to deal with this case:
the conditions came after offer accepted.
Did they do what was reasonable to bring to attention ? Then offer
and acceptance doesnt matter.

Denning said you are only bound if you knew of the condition (provided
that you can refuse, ex. You can give back ticket if you dont agree to
the conditions) or were given reasonable notice. He did not say that
you have to know about the specific terms of the conditions per se.
Because the clause in this case was so unusual and unfair, you would
need explicit notice. The more unreasonable the clause, the greater
need for explicitness is required.
Some clauses would need to be printed in red ink with a red hand
pointing to it before the notice could be held to be sufficient.
This modifies parker rule; but it does not mean you have to have read
the clause, just need to have notice of it.
Civilian approach
Tries to go more directly at the clauses instead of whether you have
consented them.
Adhesion contract is one that you do not negotiate the terms
(unilateral contract).
Art 1435 External terms of adhesion or consumer contracts need to
expressly be brought to the attention of the consumer or adhering
party.
Art 1436 if a clause in a consumer and contract of adhesion is
incomprehensible to a reasonable person, then it is null and void.
Art 1437 an abusive clause in a consumer or contract of adhesion is
null and void. A clause that is excessively and unreasonably
detrimental to the consumer or the adhering party and therefore is not
in good faith. (This article is mostly about unfair exemption clauses).
Abusive clauses cannot simply just be you paid too much.
The courts are especially severe with companies who monopolize the
competition.

Dell Computer Corp. v. Union des Consommateurs (2007) Supreme Court

Jurisdiction Quebec, Canada Civil law


Facts
Due to a pricing error, two computers were offered for sale on
Dells website for a fraction of their true cost
Dell removed the links to these products pages but Dumoulin
used a deep link to access the pages and ordered a computer at
the lower price
Dell then posted a notice that they would not process orders for
computers at the incorrect price
Dumoulin filed a motion to start a class action against Dell
Dell applied for a referral to arbitration, citing the arbitration
clause in their sales agreement
This clause was part of the Terms and Conditions of Sale, which
were accessible via hyperlink at the bottom of every page
The arbitration clause contained a further hyperlink to the National
Arbitration Forums website, which could be searched to find the
NAF Code
Issues
Was the arbitration clause valid?
Holding
Yes Dell
Reasoning
Majority:
Not too onerous of the consumer to click on this link
o Could make it even easier but that would be treating them
like a child
The arbitration clause was brought to Dumoulins attention via
hyperlink on every page and was thus reasonably accessible
The fact that the NAF Code was on a third party website does not
prevent it from being reasonably accessible, since all a consumer
has to do is click on a hyperlink, which is functionally equivalent
to scrolling further down a single page
Thus the clause was valid and there can be no class action
Dissent:
Cant deprive citizens of benefit of law
Can we agree on arbitration clause in contract of adhesion at all?
o Non-abusive contract of adhesion
o Just because theres an inequality issue can we say theres
no contract?
Contracts of adhesion are proper contracts
Residual left after on or off instead of
arbitration
Cant say not a true consent
o Need explicit rules for arbitration losses
Arbitration clauses create private jurisdiction
They consider external clauses and find that hyperlinks should be
functional and clearly visible

My Comments:
Is hyperlink clause valid? It was easy to get to the clause (one simple
click), so yes.
If you have reasonable notice, then you are bound to the term.

Specht v. Netscape Communications Corporation


Brief Fact Summary. This case arises from consolidated class-action
matters. The Plaintiffs, Specht and others (Plaintiffs), brought suit
against the Defendant, Netscape (Defendant). Plaintiffs alleged that
because they downloaded Defendants SmartDownload program, along
with Netscape Communicator, Defendant was able to unlawfully
eavesdrop on their internet communications. In this matter, Defendant
attempted to stay the court action and initiate an arbitration based on
an online contractual agreement.
Synopsis of Rule of Law. This case stands for the proposition that
online contracts must be held to the same standards as other written
documents and terms therein must also be conspicuous.
Facts. Plaintiffs acted upon Defendants invitation to download their
free software, SmartDownload. Because of the way Netscape had its
download setup online, Plaintiffs were not required to read the full
terms of the contractual agreement, including an arbitration clause,
before they clicked the download button. The District Court found that
the downloading of software did not constitute an acceptance of
Defendants terms because there was no reasonably conspicuous
notice and because a reasonable internet user would not expect to
submit to an arbitration clause upon installing a free download.
Defendant appealed.
Issue. The issue here is whether Plaintiffs will be held to an arbitration
clause and contractual terms that were inconspicuous due to their
online placement.
Held. Affirmed.
Defendants Motion to Compel Arbitration was denied. In this case,

unlike bundled software and electronics, the court held that a


reasonably prudent consumer would not assent to contractual terms
that are so inconspicuous that they could completely overlook them.
Discussion. Note also the equity afforded in this remedy. The internet,
arguably, gives businesses more opportunities to exploit consumers
who may or may not read licenses before clicking on a strategicallyplaced button. If a reasonable consumer is not alerted to contractual
terms, he cannot assent to same.
My comments:
US case; not binding in common or civil law.
Not bound, because it was not as simple to go to the conditions the
download button was above the condition which you had to scroll down
to get to.

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