LWZ118 Lecture 4: Contracts-Lecture-4-notes
Lecture 4
Contracts
INCORPORATION OF TERMS INTO WRITTEN AGREEMENT
EXPRESS TERMS
SIGNATURE
Signing a written contractual document will bind a person to its terms even if they have not read or
understood the document: L’Estrange v F Graucob Ltd [1934] 2 KB 394;
Affirmed by the High Court in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at 184-185
where the Court said, ‘Where a person has signed a document, which is intended to affect legal relations,
and there is no question of misrepresentation, duress, mistake, or any other vitiating element, the fact that
the person has signed the document without reading it does not put the other party in the position of
having to show that due notice was given of its terms……and it is immaterial that the person has not read
the document.’
Additional aspects of the signature rule:
Signing a document which refers to the terms of a contract that are contained in a separate
document is the same as those terms being incorporated into the contract: nge v First East Auction
Holdings Pty Ltd (2011) 284 ALR 638.
Document signed after the agreement has been performed? Additional written terms generally not
incorporated as express terms of the contract: DJ Hill & Co Pty Ltd v Walter H Wright Pty Ltd [1971] VR
749.
Oral agreement reached and a document containing additional terms subsequently signed (but
before performance)? Written document may act as a variation of the earlier oral agreement, but only
if it can be established that this was the parties’ intention.
Exceptions to the signature rule:
Documents signed as a result of fraud, misrepresentation, duress, undue influence, or
unconscionable conduct: L’Estrange v F Graucob Ltd [1934] 2 KB 394 and Toll (FGCT) Pty Ltd v
Alphapharm Pty Ltd (2004) 219 CLR 165.
Non est factum (a species of mistake) although not mistake generally: Toll (FGCT) Pty Ltd v
Alphapharm Pty Ltd (2004) 219 CLR 165.
BY NOTICE - ‘notice is closely akin to a question of awareness: the party affected by sufficient notice, even
if not actually aware of the term in question, is regarded as having constructive knowledge of it, i.e. as
being constructively aware of it.’ HIH Casualty & General Insurance Ltd v New Hampshire Insurance
Company [2001] 2 Lloyd’s Rep 161 at 199 per Rix LJ
What constitutes ‘reasonable notice’?
Timing of the notice (must be given at or before entry into the contract); and
Reasonableness (how important the clause is and how much effort was made to bring it to
the other party’s attention).
By Notice: Timing
Notice of the term has to be given at or before entry into the contract: Baltic Shipping Co, The
Mikhail Lermontov v Dillon (1991) 22 NSWLR 1 at 25
In Thornton v Shoe Lane Parking Ltd [1971] 2 QB 163, the Plaintiff parked his car in a car-park owned
by the Defendant. Outside a notice listed the charges and other terms. One term was 'All cars parked at
1
find more resources at oneclass.com
find more resources at oneclass.com
Lecture 4
Contracts
own risk'. Inside, he was issued a ticket. Fine print read, 'This ticket is issued subject to the conditions of
issue as displayed on the premises', which were displayed inside the parking garage. The Plaintiff could
have only seen them after the purchase of the ticket. One of the conditions exempted the Defendant from
liability from 'injury to the customer however caused'.
Lord Denning held on TIMING
The court distinguishes cases of automated machines such as this from normal ticket cases.
In the case of automated machines, where the customer cannot get his money back, "the offer is
made when the proprietor of the machine holds it out as being ready to receive the money. The
acceptance takes place when the customer puts his money into the slot. The terms of the offer are
contained in the notice placed on or near the machine stating what is offered for the money. The
customer is bound by those terms as long as they are sufficiently brought to his notice beforehand,
but not otherwise. He is not bound by the terms printed on the ticket if they differ from the notice,
because the ticket comes too late. The contract has already been made."
Thus, terms could only be incorporated if they were displayed next/before the ticket machine. In
this case, the terms stated on the ticket itself (which refers to a location which can only be accessed
after purchasing it) cannot be incorporated, since the contract had already been made.
The offer was accepted when Plaintiff drove up to the entrance and, by the movement of his
car, turned the light from red to green, and the ticket was thrust at him. The contract was then
concluded, and it could not be altered by any words printed on the ticket itself. In particular, it could
not be altered so as to exempt the company from liability for personal injury due to their negligence."
Thus, only the terms on display outside the parking garage are incorporated.
Knowledge or notice
Lord Denning also considered the outcome if there is no distinction between a ticket clerk or an automated
machine.
In this case, the usual ticket cases apply and terms can be incorporated through the ticket itself.
However, a clause can only be incorporated if the customer "knows that the ticket is subject to it;
or, if the company did what was reasonably sufficient to give him notice of it."
The Defendant claimed that whilst the company didn't do what was reasonably sufficient to give
notice, the Plaintiff was aware that the ticket included conditions (thus satisfying one of the
requirements)
The court found no evidence that the Plaintiff was aware that the ticket included conditions,
and therefore this claim was rejected.
The knowledge or notice requirement therefore fails, and the Plaintiff is not bound by the
exempting clause.
IN RE: TICKET CASES Lord Denning observes in Thornton v Shoe Lane Parking, ‘We have been referred
to the ticket cases of former times … None of those cases has any application to a ticket which is issued by
an automatic machine. The customer pays his money and gets a ticket. He cannot refuse it. He cannot get
his money back. He may protest to the machine, even swear at it. But it will remain unmoved. He is
committed beyond recall. He was committed at the very moment when he put his money into the
machine. The contract was concluded at that time.
‘‘The terms of the offer are contained in the notice placed on or near the machine stating what is
offered for the money. The customer is bound by those terms as long as they are sufficiently brought to
his notice before-hand, but not otherwise. He is not bound by the terms printed on the ticket if they differ
from the notice, because the ticket comes too late. The contract has already been made’.
2
find more resources at oneclass.com
find more resources at oneclass.com
Lecture 4
Contracts
By Notice: Reasonableness
If a party actually knows that the document or sign contains contractual terms then they are
bound, irrespective of whether they read those terms: Parker v South Eastern Railway Co (1877) 2 CPD
416
A distinction is drawn between documents that are contractual in nature and those which are not:
Contractual in nature: mere delivery will amount to reasonable notice
Not contractual in nature: reasonable steps to draw terms to recipient’s attention.
‘Reasonable notice’ depends upon the facts and circumstances of each case.
Lord Denning In Thornton v Shoe Lane Parking Ltd observed, ‘[The exclusion clause] is so wide and
so destructive of rights that the court should not hold any man bound by it unless it is drawn to his
attention in the most explicit way. ... In order to give sufficient notice, it would need to be printed in red
ink with a red hand pointing to it - or something equally startling.’
By Prior Dealing - Parties have regularly contracted in the past on the same terms.
Henry Kendall & Sons v William Lillico & Sons Ltd [1969] 2 AC 31 at 113:
‘SAPPA had regularly received more than a hundred similar contract notes from Grimsdale in the course of
dealing over three years. They knew of the existence of the conditions on the back of the contract note.
They never raised any query or objection … The only reasonable inference from the regular course of
dealing over so long a period is that SAPPA were evincing an acceptance of, and a readiness to be bound
by, the printed conditions of whose existence they were well aware although they had not troubled to read
them. Thus the general conditions became part of the oral contract.’
Pre-Contractual Representations - Typically, pre-contractual statements are classified as either:
1. Term of a contract;
2. Collateral contract;
3. Mere representation (as a statement may be both a term and a representation the word 'mere' is
used here to refer to representations that are not also terms); or
4. Sales puff.
In Ellul & Ellul v Oakes (1972) 3 SASR 377, The plaintiffs purchased a house from Defendant. In doing so
they relied on a statement contained in a real estate agent’s listing form that the property was sewered,
which actually, wasn’t. This form had been signed by Oakes. Elluls claimed damages for breach of contract.
His Honour adopted the position set out in Oscar Chess Ltd v Williams and Dick Bentley Products
Ltd v Harold Smith (Motors) Ltd where Lord Denning stated (at 627)
'a representation made in the course of dealings from a contract to actually inducing him to act
upon it, by entering into the contract, that is prima facie ground for inferring that it was intended as a
warranty [term]. It is not necessary to speak of it as being collateral. Suffice it that it was intended to be
acted upon and was in fact acted upon.'
Justice Zelling held that this was the case here – the representation as to sewerage was made to
induce a purchaser to buy the property. It was successful in the case of the Elluls. This provided prima
3
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Signing a written contractual document will bind a person to its terms even if they have not read or understood the document: l"estrange v f graucob ltd [1934] 2 kb 394; Signing a document which refers to the terms of a contract that are contained in a separate document is the same as those terms being incorporated into the contract: nge v first east auction. Additional written terms generally not incorporated as express terms of the contract: dj hill & co pty ltd v walter h wright pty ltd [1971] vr. Written document may act as a variation of the earlier oral agreement, but only if it can be established that this was the parties" intention. Documents signed as a result of fraud, misrepresentation, duress, undue influence, or unconscionable conduct: l"estrange v f graucob ltd [1934] 2 kb 394 and toll (fgct) pty ltd v.
