McCutcheon v David MacBrayne Ltd
House of Lords
Citations: [1964] 1 WLR 125; [1964] 1 All ER 430; [1964] 1 Lloyd’s Rep 16; (1964) 108 SJ 93; [1964] CLY 568.
Facts
The claimant delivered a car to the defendant (a shipping company) for carriage overseas. Their agent received a receipt for the fee paid. The receipt stated that:
‘Passengers, passengers’ luggage and livestock are carried subject to the conditions specified in the company’s sailing bills, notices and announcements.’
The claimant had used the defendant’s services several times before. It was the defendant’s normal practice to give the claimant a ‘risk note’ containing an exclusion clause. The claimant’s agent would sometimes sign this risk note. However, on this occasion, the defendant forgot to give the agent a risk note. Neither the claimant nor their agent had ever read the risk note or any other document containing the defendant’s conditions of carriage. However, they were vaguely aware that the defendant had standard conditions of carriage.
The ship sank due to the negligence of the defendant’s employees. The claimant sued for the value of the car. The defendant sought to rely on the exclusion clause. The claimant argued that the clause was not incorporated into the parties’ contract.
Issue(s)
- Was the exclusion clause incorporated into the parties’ contract?
Decision
The House of Lords held that the parties had contracted orally, and that contract did not incorporate the exclusion clause. The fact that the claimant was aware that the defendant had standard conditions for contracting did not by itself incorporate those conditions. The defendant had failed to make an offer on those terms. As such, the offer the claimant accepted was free of the exclusion clause. The receipt made no difference. It was only presented to the claimant after the contract was formed.
This Case is Authority For…
Where the parties have never formed a written contract, one party cannot be bound by where they are generally aware that there are conditions but are ignorant of specific terms.
Incorporation requires the claimant to have notice of terms before contracting. Giving the claimant a document (such as the receipt in this case) after the fact has no legal effect.
Additionally, the document must be ‘contractual’. It must be of a kind which a reasonable person would think might contain contract terms. A reasonable person ought to realise that if they accept or sign the document they may objectively be taken to accept the terms contained within.
Other
Lord Devlin noted that parties’ past course of dealing is only relevant if those dealings prove that the parties knew or ought to have known of the relevant clause and consented to them. Lord Guest commented that this is unlikely to be the case where the contract has a different character to the previous contracts.
Similarly, Lord Pearce thought it was significant that the parties usually contracted on written terms (the signed risk note) but this time contracted purely orally. This difference made it difficult for the defendant to argue that there had been a consistent course of dealing.
Lord Reid thought that the defendant in this case might have succeeded if they proved that the claimant knew they normally had to sign the risk note, realised that the defendant had forgotten to present the risk note, and said nothing. This would be a case of bad faith.
