contractual issues for freight forwarders

Contractual Issues for Freight Forwarders1

Contractual Issues for Freight Contractual Issues for Freight ForwardersForwarders

“Incorporation of terms”“Incorporation of terms”

Hamish Austin

Barrister

13 July 2006


Incorporation of contractual terms - basic Incorporation of contractual terms - basic principle:principle:

Generally speaking, for terms to be incorporated into a

contract, they must be incorporated as at the time of the

formation of the contract.

Examples:

Olley v Marlborough Court Ltd [1949] 1 KB 532

Thornton v Shoe Lane Parking Ltd [1971] 2 QB 163

Oceanic Sun Line Shipping Co Inc v Fay (1988) 165 CLR 197


Olley v Marlborough Court LtdOlley v Marlborough Court Ltd [1949] 1 KB 532 [1949] 1 KB 532

It was held that a contract to hire a room at a hotel was formed

when the plaintiff paid at the reception desk and therefore a

notice excluding liability for valuables not handed in for safe

custody did not form part of the contract when placed in the

bedroom.


Thornton v Shoe Lane Parking LtdThornton v Shoe Lane Parking Ltd [1971] 2 QB [1971] 2 QB

163163

It was held that exclusionary terms which could only

be seen after the plaintiff parked his car in the

parking station were not part of the contract.


Oceanic Sun Line Shipping Co v FayOceanic Sun Line Shipping Co v Fay (1988) (1988) 165 CLR 197165 CLR 197

It was held that as a passenger on a cruise had only received

a ticket setting out certain conditions upon his boarding of the

cruise ship, the conditions were not part of the contract.


Incorporation of contractual terms - methods:Incorporation of contractual terms - methods:

Incorporation of terms may be effected by:

signature;

adequate notice;

by reference;

a prior course of dealings.


Signature – general principle:Signature – general principle:

"When a document containing contractual terms is signed,

then, in the absence of fraud, or, I will add, misrepresentation,

the party signing it is bound, and it is wholly immaterial

whether he has read the document or not.”

See L'Estrange v F Graucob Ltd [1934] 2 KB 394


Signature - Signature - Toll (FGCT) Pty Ltd v AlphafarmToll (FGCT) Pty Ltd v Alphafarm Pty Pty LtdLtd (2004) 219 CLR 165 (2004) 219 CLR 165

Facts: The carrier was engaged to transport flu vaccine. Before the carriage

occurred, the carrier presented to the customer’s agent a document headed

“Application for Credit” which contained exclusion clauses on its reverse. The

agent signed the document without reading the terms. The goods were

damaged and the agent and its principals sued the carrier.

Decision: The High Court held that the signing of the document meant that

the agent and its principals were bound. There was no need to prove that

sufficient notice of the terms had been given by the carrier.


By reference – general principle:By reference – general principle:

Parties may, in their agreement, record the bare essentials

and refer to terms contained in some other document as being

incorporated into the agreement. This is effective to the extent

that the terms sought to be incorporated by reference are not

inconsistent with the express terms of the contract.


By notice - general principle:By notice - general principle:

In the absence of a signed contract, terms may be

incorporated where one party does all that is reasonable in the

circumstances to bring the terms to the attention of the other

party prior to or at the time of the entry into the contract.


By notice - By notice - Oceanic Sun Line Shipping Co v Oceanic Sun Line Shipping Co v FayFay (1988) 165 CLR 197 (1988) 165 CLR 197

Facts: The plaintiff booked, in New South Wales, a cruise of the Greek

Islands. He was later injured on the cruise and sued the owner of the vessel in

New South Wales. The owner sought a stay of the action on the basis of a

clause printed in its passenger ticket giving the courts of Greece exclusive

jurisdiction.

Decision: The contract had already been formed in New South Wales long

before the passenger received the ticket on boarding the vessel. The only step

which the owner took to bring the clause to the plaintiff's notice before the fare

was paid was a note in a brochure given to the plaintiff in New South Wales

that the conditions of carriage were printed in the then-unavailable “Passenger

Ticket Contract which may be inspected at any Sun Line office.”


Prior course of dealing - general principle:Prior course of dealing - general principle:

One must ask what each party by his words and conduct

reasonably led the other party to believe were the acts which

he was undertaking a legal obligation to perform. What is

required to be proved is a consistent course of dealing, the

only reasonable inference from which is that the party to be

charged was "evincing an acceptance of, and a readiness to

be bound by, the printed conditions".


The first line of authority – terms must be The first line of authority – terms must be contained in a “contained in a “contractual documentcontractual document”:”:

DJ Hill & Co Pty Ltd v Walter H Wright Pty Ltd [1971] VR 749

Rinaldi & Patroni Pty Ltd v Precision Mouldings Pty Ltd [1986]

WAR 131

Brambles Holdings Ltd v WMC Engineering Services Pty Ltd

[1999] WASCA 1010


DJ Hill & Co Pty Ltd v Walter H Wright Pty Ltd DJ Hill & Co Pty Ltd v Walter H Wright Pty Ltd [1971] VR 749[1971] VR 749

Facts: A carrier of goods alleged that it was entitled to rely upon an exclusion

clause contained on the reverse of a delivery docket it presented for signing

by the customer at the time of delivery of the goods. The carrier had carried

goods for the consignee on about 10 occasions over a 7 month period prior to

the events giving to a claim, and on each occasion, the form was presented

and signed.

Decision: The form was presented after an oral contract had already been

concluded and could not have effect as contractual on that occasion.

Moreover, the prior dealings did not assist the carrier. On each occasion, the

contract was made orally, and the form presented after delivery and never

became “contractual.”


Rinaldi & Patroni Pty Ltd v Precision Mouldings Rinaldi & Patroni Pty Ltd v Precision Mouldings Pty LtdPty Ltd [1986] WAR 131 [1986] WAR 131

Facts: A carrier argued that an exclusion clause contained in conditions on

the reverse of its cart notes, brought into existence after the contract was

made and during its performance, protected it from liability to its customer. A

copy of the cart note would be sent to the customer with the invoice requiring

payment.

Decision: The carrier conceded, and the trial judge had held, that the cart

note performed the function of an invoice. In light of that finding, the Full Court

held that the cart notes were not “contractual documents” and it was for this

reason that the terms printed on the back of them cannot establish a course of

dealing.


Brambles Holdings Ltd v WMC Engineering Brambles Holdings Ltd v WMC Engineering Services Pty LtdServices Pty Ltd [1999] WASCA 1010 [1999] WASCA 1010

Facts: Equipment carried by road was damaged and the road carrier admitted

negligence but relied on terms on the reverse of its consignment note. Upon

delivery, the driver would obtain a signature on the cart note acknowledging

receipt. He would then give a copy of the cart note to that person. A copy of

the cart note would be attached to an invoice sent to the customer.

Decision: The cart notes used in this way were not contractual documents,

but were post-contractual. Their purpose appeared to have been to provide

proof of performance of the contract of carriage to which they related and to

support the invoice rendered in respect of that work. There were also

inconsistencies in the observance of the cart note procedure where long and

short distance haulage were concerned. The conditions were not incorporated.


The second line of authority – no enquiry as to The second line of authority – no enquiry as to the “the “contractualcontractual” nature of the document:” nature of the document:

Chattis Nominees Pty Ltd v Norman Ross Homeworks Pty Ltd

(Receiver Appointed) (in liq) (1992) 28 NSWLR 338

Associated Alloys Pty Ltd v Metropolitan Engineering &

Fabrications Pty Ltd (1996) 20 ACSR 205


Chattis Nominees Pty Ltd v Norman Ross Chattis Nominees Pty Ltd v Norman Ross Homeworks Pty Ltd Homeworks Pty Ltd (1992) 28 NSWLR 338(1992) 28 NSWLR 338

Facts: The parties had dealt with one another for 3 years. The

supplier sent out invoices, which accompanied its goods or went out

at the time of delivery of those goods, containing a retention of title

clause.

Decision: The regularity of the dealings indicates that in the absence

of objection, the conditions must be taken to have been accepted as

being incorporated into the contracts as entered into.


Associated Alloys Pty Ltd v Metropolitan Associated Alloys Pty Ltd v Metropolitan Engineering & Fabrications Pty LtdEngineering & Fabrications Pty Ltd (1996) 20 (1996) 20

ACSR 205ACSR 205Facts: A supplier of steel had, for the previous 5 years, been supplying steel

to the defendant and raising invoices which usually, but not always, contained

a retention of title clause on its reverse.

Decision: The purchaser must be taken to have known from the course of

business of some years that the supplier supplied steel on the basis that its

retention of title clause would appear on the back of its invoices and would be

incorporated in its agreements for sale. Thus, the purchaser was bound by the

clause in cases where the clause appeared on the backs of the relevant

invoice and the purchaser accepted delivery and raised no objection.


The third line of authority – reconciliation of the The third line of authority – reconciliation of the disparate principles?disparate principles?

Circle Freight International Ltd v Medeast Gulf Exports [1988] 2 Lloyd’s Rep 427

Ralph McKay Ltd v International Harvester Australia (Receivers & Managers Appointed) [1999] 3 VR 675

Pondcil Pty Ltd v Tropical Reef Shipyard Pty Ltd (1994) ATPR ¶46-134


Circle Freight International Ltd v Medeast Gulf Circle Freight International Ltd v Medeast Gulf Exports Exports [1988] 2 Lloyd’s Rep 427[1988] 2 Lloyd’s Rep 427

Facts: A freight forwarder sued for its unpaid charges. Its customer

counterclaimed for loss to some of its goods. The freight forwarder relied on its

having sent 11 previous invoices to the customer setting outs its contractual

terms.

Decision: It was necessary for the freight forwarder to show that it had given

reasonable notice of the relevant terms. It was sufficient if adequate notice

was given identifying and relying upon the conditions and they are available

on request. Other considerations applied if they were particularly onerous or

unusual. It was not necessary that the notice be contained in a contractual

document where there had been a course of dealing.


Ralph McKay Ltd v International Harvester Ralph McKay Ltd v International Harvester Australia (Receivers & Managers Appointed) Australia (Receivers & Managers Appointed)

[1999] 3 VR 675[1999] 3 VR 675

Facts: A supplier of machinery sued for the return of goods supplied to a

company which had been placed in receivership. The supplier had supplied its

goods with a delivery docket and later sent the purchaser an invoice. Both

documents contained its standard terms including a retention of title clause.

The supplier had also taken additional steps to bring its standard terms to the

attention of its customers, having written letters advising of changes to its

standard terms and enclosing copies.

Decision: The Court referred to the two lines of authority concerning whether

a course of dealing may be established by reliance upon delivery dockets or

invoices. Without any detailed analysis, the Court concluded that a course of

dealing had been established.


Pondcil Pty Ltd v Tropical Reef Shipyard Pty Ltd Pondcil Pty Ltd v Tropical Reef Shipyard Pty Ltd (1994) ATPR ¶46-134(1994) ATPR ¶46-134

Facts: The owner of vessel sued a repairer, who owned and operated a slipway, for

damages for defective repairs. The repairer relied on its standard terms to exclude

liability, which were contained in a “job card,” which had not been signed or presented to

the owner at or before the making of the contract. It relied on a prior course of dealing.

The owner had contracted with the repairer on 4 occasions in the 2 years prior to the

incident. On each occasion, the job card containing the conditions was never signed, but

a copy was sent with the invoice.

Decision: The sending of the job card with the invoice did not give rise to a course of

dealing. The job card was expressed to require a signature, before the job was

undertaken, to apply. The sending of the job cards with the invoice could not reasonably

be said to be done in order to give the owner notice of the repairer’s conditions.


Pondcil Pty Ltd v Tropical Reef Shipyard Pty Ltd Pondcil Pty Ltd v Tropical Reef Shipyard Pty Ltd (1994) ATPR ¶46-134(1994) ATPR ¶46-134

Cooper J:

There was no inconsistency between DJ Hill & Co Pty Ltd v Walter H

Wright Pty Ltd and Rinaldi & Patroni Pty Ltd v Precision Mouldings

Pty Ltd, on the one hand, and cases such as Circle Freight

International Ltd v Medeast Gulf on the other. In each of the

Australian authorities, on the facts as found, there was nothing in the

conduct of one party which would objectively reasonably have led the

other party to believe that the standard terms were the basis upon

which it was prepared to contract.


Conclusions:Conclusions:

Techniques to maximise the efficacy of the incorporation of standard terms:

Wherever possible, a signed acceptance of standard terms should be obtained prior to or

at the time of making the contract i.e. not during or after performance;

If credit applications are an aspect of the business, standard terms should be included on

the reverse and attention drawn to them;

Alternatively, wherever possible, explicit notice of the application of the standard terms

should be provided prior to or at the time of making the contract i.e. not during or after

performance;

Where regular customers are concerned, letters or other documents should be sent

informing of the application of standard terms and/or giving notice of any changes.

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