Topic 4 Incorporation and Clauses

• What case demonstrated representation and what is it

  Representation is an assertion as to the fact that is given to induce another party to enter into a contract or take other action.

  Oscar Chest Ltd v Williams

  Private seller who sold a car to a dealer stating it was 1948 but was actually 1939. The log book was altered without knowledge. This was representation and not a term because the dealer was in a position to establish the actual age.
• Which case determined the difference between representation and a Term?

  Dick Bentley Productions Ltd v Harold Smith

  Dick purchased a 2nd hand Bentley from Harold whose employee misread the mileage. It was 100,000 instead of 20,000 so sued for breach of contract under the principle that it was a term. This suceeded.
• In the case of Harlingdon and Leinster Enterprises LTD v Christopher Hull Fine Art Ltd why was it not considered to be representation?

  The case involved art work sold, the seller had no expertise and sold by description. The buyer had specialism in German art and sent experts to assess and found it was fake after the sale. The seller did not rely on description therefore was not representation.

  It was deemed a warranty and only damages were awarded
• How are Exemption clauses introduced into a contract (name a case) and what are they?

  Exemption clauses attempt to limit or remove a party's liability in a contract.

  L'estrange v F Graucob Ltd- travelling salesman sold L'Estrange a cigarette vending machine but she did not read the sales agreement which had a sales agreement. Scrutton LJ stated that a signsignatureiture on a contract would mean an agreement of all terms even if one party did not read them (unlesss there was misrepresentation)
• What was the basis of Curtis v Chemical cleaning co.

  The basis was exemption clauses are invalid if it was obtained via misrepresentation.

  Claimant was given a receipt which had an exemption clause which excluded liability for 'any damage whatsoever' but was told it only included beans and sequins. This signiture was given by false representation so was invalid
• What is the court's position on exemption clauses and what is their method to face hurdles?

  Tend to be against clauses because of the potential to abuse the clauses. They impose board exclusions of liability such as if the claimant did not read the contract.

  Courts tend to now use incorporation and interpretations as hurdles to counter exclusions of liability.
• What is the principle of Timing of Incorporation? (Provide a case example)

  Notices of terms must be given before or at the time the contract is made to be effective.

  Olley v Marlborough Court LTD- O stayed in a hotel ran by M. After signing the contract, the room's backdoor had a clause which stated that the hotel is excluded from taking responsibility of stolen goods. His items were stolen so he sued for damages. Determined that exclusion clause was not incorporated because terms cannot be introduced after signing.
• What is the principle of the 'place and method of incorporation' provide a case


  There needs to be valid notice given to both parties of the presence of the notice.

  Chapelton v Barry Urban DC. Rented a chair for 3 hours and was provided with a receipt which had an exclusion clause at the back. The chair collapsed so he sued. The clause was not incorporated because there was a lack of notice and the ticket was a mere receipt.
• Do all contractural documents require signatures? Provide relevant case law.

  No, it can be introduced by notice. But certain conditions need to be met.

  Parker v The South Eastern Railway Company- ticket had the words 'see back' on its face and there was a notice with the same exclusion on the cloakroom which excluded liability of stolen bags under £10. They lost his bag so P sued but the courts stated that the greater lengths to ensure sufficient notice the more likely it is to be incorporated so there was a retrial
• What is meant by: notices must be made on a 'Contractual document' for it to be effective.

  Notices should be where a reasonable person would expect to find the terms.

  Thompson v London Midland& Scottish railway co stated that a ticket which had 'exclusion for conditions see back' was subject to conditions on company timetables. The train was unaligned and the woman fell. The clause meant the company was not liable. However, T was illiterage but this did not alter the legal position because the contract was made on acceptance of the ticket.
• What are Onerous terms and provide 2 case examples

  Onerous terms are a condition in a contract which would not be incorporated unless it has been brought to the counterparts attention.

  J Spurling Ltd v Bradshore

  Photo Production Ltd v Securicor Transport Ltd
• What was the principles and facts established in J Spurling Ltd v Bradshaw and Photo Production Ltd v Securicor Transport Ltd?

  Photo Production Ltd v Securicor Transport Ltd- A patrol service had a clause which excluded liabilities for fire damage. Employee starts a fire which destroyed the property. It was deemed that the exclusion clause was valid

  J Spurling Ltd v Bradshaw- 8 casks of juice was stored which had documents with exclusion of liability. The caskets were all returned empty or damaged. This case there was sufficient notice
• What was the principle and facts in Interfoto Picture library v stiletto Visual programmes Ltd?

  47 photo transparencies for 14 days with a fee of £5 per day everyday after. They were unused and returned 2 weeks late and a fee of £3783.50 claimed but was seen as exorbitant and the defendant could not foresee this cost so was rejected on the principle that the onerous term should be given notice
• What are the issues with automated contracts and provide a case.

  How do you provide notice on a machine and give sufficent notice.

  Thornton v shoe Lane Parking- There was the use of automatic parking which stated park at own risk. The ticket stated subject to conditions on premises which was inside the parking lot. it was unenforceable because the plantiff was already inside the parking lot.
• What is the principle of Course of Dealings & Knowledge. Provide cases (4)


  Even without signed terms or reasonable notice, terms can be incorporated into a contract through an established course of dealing between the parties. This may include trade customs too.

  Hardwick Game Farm v Suffolk AA (1969)- Long term dealing which excluded liability was incorporated despite no signing.

  Hollier v Rambler Motors- dealings of 3-4 times in 5 years was not sufficient enough

  McCutcheon v David MacBrayne Ltd - 4 previous occasions not enough
• what is the Contra Proferentem Principle?


  • The person responsible for including a clause in the contract should bear the consequences of any ambiguity.
  • The contra proferentem principle is pivotal when dealing with consumers, ensuring protection in cases of ambiguity.
  • Clarity in wording is crucial, and even in commercial contracts, a well-drafted and unambiguous clause is more likely to withstand strict scrutiny.
• What are Limitations and Exclusion Clauses?

  • Limitation clauses seek to limit the extent of one party’s liability under a contract
  • They will often seek to ‘limit’ the maximum liability under a particular head of damage 
  • That limitation will often be a maximum sum of money 
  • Exclusion clauses are ones that seek to exclude entirely a form of liability, of one party, for a breach of the contract
  • An exclusion of all liability under a certain head of damage is an even great restriction as all potential damage is excluded.
• How do courts interpret Exclusion clauses?

  The normal rule of contractual interpretation is based on the parties’ intention at the time of drafting (only actors contracts (non-consumer contracts))- Business-Business. 

  A stricter rule is applied normally applied to exclusion clauses

  • The term will be construed against the party seeking to rely on it to exclude liability – Contra Proferentem - Hollier v Rambler Motors 
  • That is especially the case where there is perceived to be an imbalance of bargaining power and one party has imposed the exclusion on the other
• What is the definition of Negligence and strict liability under the principle of exclusion of liability for negligence?

  Negligence- When a person breaches a duty to take reasonable care; a claimant must therefore prove fault. This can be imposed by tort or contract law

  Strict liability describes a no-fault obligation. However there is a reluctance to exclude liability for negligence stems from the expectation that parties intend to hold each other to a standard of reasonable care.
• What is the 3 stage test for exclusion of negligence?

  • Express reference to negligence?
  • Are the words used wide enough to cover liability for negligence?
  • If the words used are wide enough, could the party desire protection from some other form of liability.  If he could, and that ground is not so fanciful or remote, it is likely that the words will be taken to refer to the non-negligent liability only.
• Name 2 cases related to the exclusion of liability for negligence

  Canada Steamship Lines Ltd v R [1952]

  • The lease for the dockside shed contained exclusion clauses about all damage to stored goods on the property. The shed it was negligently set alight. The wording of the clauses was not sufficient enough to exclude liability
  • White v John Warwick: Clause excluding liability 'for any personal injuries' interpreted narrowly, covering strict liability under the contract but not negligence
• What was the purpose of the Unfair contract Terms Act 1977?

  grants courts the power to strike down unreasonable exemption clauses, which influences judicial approaches.
• What was the basis of section 2 and 3 of the Unfair contract terms act 1977?

  • Section 2 deals with exclusions of liability for negligence:
  • A person cannot exclude or restrict his liability for death or personal injury resulting from negligence
  • In the case of other loss or damage, a person cannot restrict his liability for negligence except in so far as the term or notice satisfies the requirement of reasonableness. (sufficient notice) 
  • Section 3 applies the requirement of reasonableness to ‘standard form’ contracts which seek to exclude business liability
• What is a penalty clause?

  It is a clause which cannot be recovered and subject to consideration of the courts it is a stipulate to intimidate people from doing something. It does not put the claimant in the position where the contract occurred- So not enforceable.
• What is a liquidate clause?

  Liquidation is genuine and enforceable and puts the claimant in the position had the contract actually had been performed, the sum will be recoverable.
• How do courts determine whether a clause is liquidated damages or a penalty clause? Name a case example.

  • It will be decided upon the terms and inherent circumstances of each particular contract, judged as at the time of making the contract, not as at the time of breach. 
  • If the parties had fixed a sum in a clause because they were agreed in limiting the damages recoverable to an amount less than that which a breach would probably cause, although it is not an estimate of the probable loss, it will be accepted by the Court. 
  • Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd
• What was the principle behind Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd?

  Dunlop made tyres and distributed them to retailers. New garage enter a contract which stated that they cannot sell below RRP. Each breach was £5, they sold below the price so NG argued penalty clauses but it was ruled as a liquidated damages.

  Test set out: Stating a clause is invalid it is subject to courts, Penalty- money agreed to scare offending party, liquidation- pre estimate of damage. Sum is determined based upon the circustances of the contract, not breach. A penalty is an extravagant sum.
• What 2 cases need to be considered together to determine if a clause is a penalty?

  Dunlop Tyres.

  • ParkingEye v Beavis provided parking with notice that the maximum free stay was 2 hours and after was £85. This was ignored and demanded it to be dropped. It was not a penalty because there was commercial justification and not a deterrent.
• What was the facts and principles in the case of Wall v Rederiaktiebolaget Luggude?

  Principles of a penalty clause. if the clause is a penalty, it is void and the plaintiff can ignore the clause and sue for loss.