Incorporation:
Successfully integrating terms into a contract is called incorporation. It is necessary to incorporate a term to make it legally binding.
Express Terms:
By signing (whether read or not).
Serving written notice.
Following existing framework of agreement.
The plea of non est factum (“not my deed”) can be used in limited circumstances when a person signs a contract without reading it. It stems from a time when illiterate people relied on others to read out deeds to them, which they signed without actually reading. This usually cannot be used by a person who has full capacity, as it would negatively impact 3rd parties who rely on the signature.
‘The party is bound, and it is wholly immaterial whether he has read the document or not.’ [2]
Red Hand Rule:
Unusual or unreasonable terms need to be brought to the attention of the other party to be properly incorporated.
‘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.’ [1]
Valid Incorporation:
Notice of terms must be given before conclusion of contract.
Terms must be set in a document intended to have contractual effect.
Reasonable steps must be taken to make the other party aware of the terms.
In Thornton v Shoe Lane Parking, car park had signs stating ‘all cars at owners risk’. T entered and paid through automated ticket machine. Back of the ticket stated the T&C’s were displayed on the premises (though not obvious). T is involved in an accident. Denning LJ accepts the contract, but since the ticket is issued after the contract is made, the exclusion clause is not incorporated. This is because T cannot get his money back once the exclusion clause has been added. The term is held not to be binding.
In O’Brien v MGN, O won £50,000 on a newspaper scratch card. More people won the prize than the newspaper had expected. The competition rules stated that if there was more than 1 winner, a prize draw would be held to decide the overall winner of the money. These specific rules were not printed on the newspaper, but a notice that ‘Normal Mirror Group Rules Apply’ was. O's case was unsuccessful as the terms were said to be incorporated.
In Interphoto Picture Library v Stiletto, S requested photos from IPL. IPL delivered with a delivery note that stated a return date and holding fees for late return. Dillon LJ and Bingham LJ state that since IPL failed to ‘give notice’ of the new terms, they were not incorporated.
Interpretation of Intention:
Where a contract is in writing, the court will try to look to the intention of the parties to resolve contractual disputes - it will look to ‘the true construction of the contract’.
The court ‘cannot introduce terms to make it fairer or more reasonable. It is concerned only to discover what the instrument means.’ [3] The contract is to be interpreted as to how it would be by an ordinary reasonable person, which is an objective test.
The role of the court is ‘not to probe the real intentions of the parties… Intention is determined by reference to expressed rather than actual intention’. [4]
Mistakes in the Terms:
When there is a mistake in the terms of a contract, the objective test is applied. This prevents a party from using the mistake as a reason for breach of duty.
However, the courts will sometimes allow mistakes when there has been misunderstandings.
Standard Form Contracts:
A standard form contract is where one party has little or no power to negotiate on the terms of the contract. One party has the power, undermining the doctrine of consent.
Standard form contracts are frequently used, yet controversial. Some argue that by changing the contract, other terms may be disrupted. Therefore, standard form contracts shouldn’t be amended. However, others argue the terms can be changed when they become obsolete.
Resources:
References:
[1] J Spurling Ltd v Bradshaw [1956] EWCA Civ 3 [2] Curtis v Chemical Cleaning [1951] 1 KB 805 (Scrutton LJ) [3] Attorney General of Belize v Belize Telecom Ltd [2009] UKPC 10 [4] Deutsche Genossenschaftsbank v Burnhope [1993] 2 Lloyd's Rep. 518
Cases Mentioned:
Thornton v Shoe Lane Parking Ltd [1970] EWCA Civ 2
O’Brien v MGN Ltd [2001] EWCA Civ 1279, [2002] CLC 33
Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd [1987] EWCA Civ 6
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