Circle Freight International Ltd v Medeast Gulf Exports Ltd
Court of Appeal
Citations: [1988] 2 Lloyd’s Rep 427; [1989] CLY 444.
Facts
The claimants were freight forwarding agents. The defendants exported goods to the Middle East. The defendants frequently used the claimant’s services. In 1983, the defendants used the claimants’ services to export some dresses. Some of those dresses were stolen from a van controlled by the claimants’ employee. When the claimant sued for their fee, the defendant counterclaimed for £6,371 in relation to the stolen dresses.
The claimant argued that the contract was subject to the IFF conditions – standard contracting terms for the freight industry. This meant that the counterclaim was blocked by clause 18 (an exclusion clause) of the IFF conditions. Alternatively, it was limited by clause 19 (a limitation clause). Clause 18 stated that the claimant was not liable for:
‘loss or damage caused by any failure to carry out or negligence in carrying out…instructions, or by any failure to perform or negligence in performing the Company’s obligations (whether such obligations arise by contract or otherwise), unless such loss or damage is due to the wilful neglect or default of the Company or its own servants.’
Clause 19 limited any liability for wilful neglect or default to the lesser of the value of the goods, £15,000 per claim or £800 per 1000 kilos on the gross weight of the goods. If clause 19 applied, the defendant would be limited to £192 in damages.
The defendant contested the incorporation of the IFF conditions into the parties’ contract. The claimants had told the defendant by letter some time prior to contracting that future business would be carried out under IFF conditions. Additionally, in their previous 11 dealings the claimant had sent the defendant an invoice. There was small print at the bottom of the invoice stating that all company business used the IFF conditions. The invoices were the only document involved in the parties’ transactions – orders were made and accepted orally. The defendant never read any of these documents, and none of them actually set out the IFF conditions.
Issue(s)
- Had clauses 18 and 19 been properly incorporated into the contract?
Decision
The court held that the claimant had given sufficient notice that the contract would be on IFF conditions over the course of the parties’ past dealings. It did not matter that the defendant never obtained a copy of the actual IFF terms. In the circumstances, the conduct of the claimant’s employee amounted to wilful default or neglect, so the applicable term was clause 19. The defendant was limited to recovering £192.
This Case is Authority For…
Where the claimant relies on common or standard terms in that particular industry, those terms can be incorporated even if the defendant never obtains a copy of them. The claimant can give adequate notice by identifying and relying on the relevant terms and telling the defendant that a copy of those terms are available on request.
Where the claimant shows that the parties have a course of dealing on a particular set of contract terms, there is no need for the notice of the conditions to be contained in a ‘contractual document’.
Other
Taylor LJ did note that other ‘considerations apply if the conditions or any of them are particularly onerous or unusual.’ In particular, parties must be given notice of the specific clause if it is unusual or onerous. Notice of the general terms is not enough.
Exclusion and limitation clauses are often considered inherently unusual or onerous. However, this case indicates that they will not always be considered onerous or unusual. They will be treated as ordinary terms if the parties are both commercial companies and those terms are standardly or commonly used in the relevant industry.
Taylor LJ distinguished Hardwick Game Farm v Suffolk Agricultural Poultry Producers Association [1969] 2 AC 31 from the present case.
In Hardwick, the previous contracts had been written, while the contract in issue was oral. This was a departure from past practice which the parties would perceive as significant. This indicated that they did not intend to contract on the same terms as the prior written contract.
By contrast, in this case all the contracts were oral and involved a written invoice – there was no material departure from past practice.
