Interpretation of contract:

• Modern approach places greater emphasis on the context in which the words appear,
in particular the ‘factual matrix’ in which the contract was made: look to
surrounding circumstances, purpose and context of the contract
• Law Society of Ireland v Motor Insurers’ Bureau of Ireland [2017] IESC 31 – Irish
Supreme Court - context remains important, and can be used to override plain
meaning of words, particularly if there is ambiguity
• Rainy Sky SA v Kookmin Bank [2011] UKSC 50, [21].
• “The language used by the parties will often have more than one potential meaning. I
would accept the submission made on behalf of the appellants that the exercise of
construction is essentially one unitary exercise in which the court must consider the
language used and ascertain what a reasonable person, that is a person who has
all the background knowledge which would reasonably have been available to
the parties in the situation in which they were at the time of the contract, would
have understood the parties to have meant. In doing so, the court must have regard
to all the relevant surrounding circumstances. If there are two possible constructions,
the court is entitled to prefer the construction which is consistent with business
common sense and to reject the other.”
• Law Society of Ireland v Motor Insurers’ Bureau of Ireland [2017] IESC 31, [8].
• ‘These principles represent a significant staging point in the development of what
might be described as a modern approach to the interpretation of contracts, a
development which, as the principles recognise, has not necessarily reached its
terminus. The common law is treated as a coherent and consistent body of law
developing incrementally by subtle changes, and only on occasion by sharp and
dramatic turns. It is sometimes only after a period of time that the significance of a
development is understood and it becomes apparent that the direction of the law
has altered considerably. The modern approach to the interpretation of contracts is
one which would probably be unrecognisable to, and might be regarded as heresy, by
the Victorian judges who expounded so confidently on commercial matters.”
• Rearden-Smith v Hansen Tangen (The Diana Prosperity)
• [1976] 1 WLR 989, 995-997.
• ‘No contracts are made in a vacuum: there is always a setting in which they have to
be placed. The nature of what is legitimate to have regard to is usually described as
“the surrounding circumstances” but this phrase is imprecise: it can be illustrated but
hardly defined. In a commercial contract it is certainly right that the court should
know the commercial purpose of the contract and this in turn presupposes
knowledge of the genesis of the transaction, the background, the context, the
market in which the parties are operating…. It is often said that in order to be
admissible in aid of construction, these extrinsic facts must be within the knowledge
of both parties to the contract, but this requirement should not be stated in too narrow
a sense. When one speaks of the intention of the parties to the contract, one is
speaking objectively – the parties cannot themselves give direct evidence of what
their intention was – and what must be ascertained is what is to be taken as the
intention which reasonable people would have had if placed in the situation of the
parties. Similarly when one is speaking of aim, or object, or commercial purpose,
one is speaking objectively of what reasonable persons would have in mind in the
situation of the parties … [w]hat the court must do to place itself in thought in
the same factual matrix as that in which the parties were.’
• Investors’ Compensation Scheme v West Bromwich Building Society (1998)
adopted in Ireland in Analog Devices BV v Zurich Insurance Company [2005] 1
IR 274 at 280–281. Factual Matrix
• What meaning does the document convey to a reasonable person having all the
background knowledge that the parties had when making the contract – look to
everything that would have affected the way the language would have been
understood by a reasonable person
• Previous negotiations and declarations of subjective intent excluded from
consideration
• Meaning of document not necessarily the same as the meaning of its words – looking
at overall context, one may find contract means something different from literal
meaning of words
• Where more than one meaning possible – give meaning that gives words commercial
common sense
• UK – Arnold v Britton [2015] UKSC 36: stricter test with more emphasis on words
used; took a more literal approach and placed limits on commercial common sense
approach
• Irish courts still favour an approach that places strong emphasis on context and
purpose of contract – Law Society of Ireland v Motor Insurers’ Bureau of Ireland
[2017] IESC 31
• The idea of business common sense is one which is often-noted. However, it does not
have a uniform meaning for all judges. Consequently the following instruction should
be kept in mind:
• ‘the court must be careful before departing from the natural meaning of the
provision in the contract merely because it may conflict with its notions of
commercial common sense of what the parties may, must or should have thought
or intended. Judges are not always the most commercially-minded, let alone the most
commercially experienced, of people and should, I think, avoid arrogating to
themselves overconfidently the role of arbiter of commercial reasonableness or
likelihood’: Skanska Rasleigh Weatherfoil Ltd v Somerfield Stores Ltd [2006]
EWCA Civ 1732, [22] (Neuberger LJ, as he then was).
• Tradax (Ireland) Ltd v Irish Grain Board [1984] IR 1
• “It is not the function of a court to write a contract for parties who have met
upon commercially equal terms; if such parties want to enter into unreasonable,
unfair, or even disastrous contracts, that is their business, not the business of the
Courts.”
• Arnold v Britton [2015] UKSC 36
• ‘the reliance placed in some cases on commercial common sense and surrounding
circumstances … should not be invoked to undervalue the importance of the language
of the provision which is to be construed.’ [17]
• While commercial common sense is important, a court should be very slow to reject
the natural meaning of a provision as correct simply because it appears to be a
very imprudent term for one of the parties to have agreed. [20]
• Arnold v Britton [2015] UKSC 36
• A caution from the Supreme Court regarding business common sense
• ‘the reliance placed in some cases on commercial common sense and
surrounding circumstances … should not be invoked to undervalue the
importance of the language of the provision which is to be construed.’ [17]
• ‘The less clear words are, the more ready the court can be to depart from their natural
meaning. But the clearer the natural meaning, the more difficult it is to justify
 departing from it. The court should not embark on an exercise of searching for
drafting infelicities in order to facilitate a departure from the natural meaning.’ [18]
• Commercial common sense should not be invoked retrospectively. [19]
• While commercial common sense is important, a court should be very slow to reject
the natural meaning of a provision as correct simply because it appears to be a
very imprudent term for one of the parties to have agreed. [20]
• Jackie Greene Construction Ltd v Irish Bank Resolution Corporation [2019] IESC
2
• Here the court interprets [10.4]-[10.5] from Law Society v MIBI (in earlier slide):
• “5.4 … it is important to give due recognition both to the text of any document
creating legal rights and obligations and to the context in which the words used
in the measure concerned were chosen. To fail to give adequate weight to the words
is to ignore, or downplay, the fact that those were the words that were chosen to
define the relevant legal arrangement. To fail to give adequate weight to context is to
ignore the fact that all language is inevitably interpreted by reasonable persons in the
light of the context in which that language is used.

Parol evidence rule:

• Where a contract is reduced to writing, the parol evidence rule acts to prevent
oral (and other extrinsic/outside) evidence being used to overrule or override
(change) the written terms
• In other words, the written terms prevail over any alleged oral agreement
• Purpose – to prevent parties from seeking to contradict written record of
agreement
• Bank of Australasia v Palmer [1897] AC 540
• “Parol evidence cannot be received to contradict, vary or add to or subtract from the
terms of a written contract or the terms in which the parties have deliberately agreed
to record any part of their contract.” (545)
• But can ‘shut out true facts’.
• Facts: Written lease said that rent was to be paid in advance. Tenant alleged an
earlier oral agreement that rent could be paid in arrears
• Held: Court of Appeal ruled that rent was due in advance as written agreement could
not be varied by reference to oral evidence
• 1. Rectification – equitable doctrine
• Allows a written document to be fixed if it
• a. purports to be a written record of an oral agreement and
• b. it can be shown that it fails to record the agreement accurately
• Oral evidence can be introduced to show written document did not record oral
agreement correctly
• 2. Interpretation of ambiguous (unclear) terms
• Revenue Commissioners v Moroney [1972] IR 372: oral evidence admitted to show
what appeared from the written contract to be a sale of property was in fact a
gift
• 3. Custom or trade usage
• Parol evidence can be admitted to show that a word used in a contract has a
specific meaning in a particular trade or locality
• Smith v Wilson (1832) 3 B & Ald 728: where a lease referring to 1,000 was found to
mean 1,200 rabbits on the basis of a local custom.
• 4. Written document does not record totality of contract
• Couchman v Hill [1947] 1 KB 554 (CA)
• Facts: catalogue for auction contained exclusion clause denying liability for faults,
imperfections and errors of description in catalogue
• Held: the catalogue was not exhaustive - not the totality of the contract - and that the
contract also consisted of oral statements to the effect that heifer was not served
• Written document not intended to be the complete and final word on the agreement
• 5 An oral statement limits or qualifies operation of contract
• Under what circumstances was the contract intended to commence or cease
• Pym v Campbell (1856), 6 E & B 370: parol evidence allowed to show that sale of
invention was conditional on approval of invention by independent engineer
• 6. Collateral contract
• Collateral contract is a parallel contract supplementing the main contract
• Separate agreement running alongside written agreement
• Godley v Power [1961] 95 ILTR 135: sale of pub; during negotiations, parties
orally agreed bottles on premises at time of sale would be included in sale
• This was not included in the written contract for the sale of the pub, but was deemed
to be part of a collateral contract to be read alongside the written agreement
• 7. Proving amount of consideration
• An entire agreement clause is a clause in an agreement stipulating that the
written agreement comprises and contains the whole agreement
• Displaces the use of extrinsic evidence and requires parties to look within the four
corners of the contractual document
• Prevent oral representation and statements from forming part of the contract
• A condition is a contractual term the breach of which allows a party to repudiate a
contract – contract may be treated as terminated by such a breach
• A warranty is a term of a contract the breach of which entitles one only to damages –
contract remains intact
• Unless expressly labelled as a condition or warranty, whether a term is treated as one
or the other depends on the seriousness of the breach of that term – if the effects are
serious, it is treated as a condition; if not, it is treated as a warranty

Implied terms:
• Not all terms have to be expressly stated or set out in the contract
• Some terms are implicit or may be implied
• This means that although they are not written down, a court will regard the term as
present in the contract – it is tacit or implicit
• Unspoken/unstated terms
• Terms may be implied
• By statute (Act of Parliament)
• By custom
• By the Courts
• Court implied terms:
• - Terms implied in fact (by reference to presumed intention of the parties)
- Terms implied in law
• Courts will not imply a term unless it (1) reflects the intention of the parties or (2) is
mandated by law
• While it may be tempting to imply terms based on the merits, this is not permitted at
common law at least
• Tradax v Irish Grain Board [1984] I.L.R.M. 471: Courts should be careful not to
imply terms simply because they seem “reasonable, desirable or commercially
sensible” (Enright, 159)
 • Courts have
• “no role in acting as contract makers, or as counsellors, to advise or direct
what agreement ought to have been made by two people...” (O’Higgins CJ)
•
Dakota Packaging v AHP Manufacturing t/a Wyeth 2003 8739 P, [2004] IESC 102
• Facts: Plaintiff had supplied defendant with specialist packaging on an ongoing basis
• HC Held: Implied a term into parties’ relationship that defendant had to give 12
months’ notice of intention to switch from using plaintiff’s packaging
• SC Held: overruled this
• There was in fact no contract into which this term could be implied (each order was a
separate contract. There was no overarching supply agreement). No long-term
purchase agreement here. Cannot imply a term into a non-existent contract. Therefore
there was no such obligation.
• “Quite clearly, therefore, there must be a contract before a term can be
implied. Peart J., having determined that there was no contract of the relevant
type, was not entitled to infer or imply any term. …There must be a contract.”
• Would not have been possible to determine boundaries of the term with any precision
• Fennelly J:
“…the courts do not have "a broad discretion" to imply terms. It is not enough
that a term to be implied is "fair and reasonable."
• Lord Denning – terms should be implied where reasonable to do so – generally not
followed/rejected by other judges
• Tradax Ireland v Irish Grain Board [1984] I.L.R.M. 471 McCarthy J:
• “It is not the function of the court to write a contract for parties who have
met upon commercially equal terms, if such parties want to enter into
unreasonable, unfair or evem disastrous contracts, that is their business,
not the business of the courts.”
Sweeney v Duggan [1997] 2 IR 531 (SC)
• Murphy J: terms implied on basis of:
• 1. Presumed intention of the parties (The Moorcock) – something so obvious it goes
without saying
• 2. The nature of the contract itself
• Terms may be implied in fact on the basis that it is presumed the parties would
both/all have intended such terms to apply
• Terms implied in fact:
• Custom in the trade
• By reference to past conduct
• What an officious bystander would regard as obviously intended
• A term that is necessary to give the contract Business Efficacy
• Custom must be well-established and well-known
• Ó Conaill v Gaelic Echo (1958) 92 ILTR 156: term implied into contract with
journalists that they were entitled to paid holidays, as this was customary in the trade
in Dublin
• BP Refinery (Westernport) Pty Ltd v the President, Councillors and Ratepayers of
Shire of Hastings (1978) 52 ALJR 20 at 26:
• Lord Simon: Terms must be -
• 1. Reasonable and Equitable (but that is not enough in itself)
• 2. Necessary to supply business efficacy
• 3. So obvious that it ‘goes without saying’
• 4. Capable of clear expression
 • 5. Not in conflict with express terms
• Collins, The Law of Contract (2003) – cited in Enright (2007)
• You buy a lock for your bike on the internet
• The lock is delivered to you but there is no key
• The written terms of the contract make no reference to a key
• Are you legally entitled to the key?
• Officious bystander test (emphasizes necessity and not reasonableness): ‘... that
which is left to be implied and need not be expressed is something so obvious that
it goes without saying; so that if, while the parties were making their bargain, an
officious bystander were to suggest some express provision for it in their agreement,
they would testily suppress him with a common "Oh, of course." (MacKinnon LJ,
227).
• Something so obvious to both of the parties that it goes without saying
• Kavanagh v Gilbert [1875] IR 9 CL 136: auctioneer had sold plaintiff’s land at
auction to the highest bidder but failed to draw up and sign a written memorandum to
give legal effect to this.
• The Court held that it was an implied term of the contract with the auctioneer
that he would take whatever measures were necessary to give legal effect to an
oral agreement for the sale of land
• Must have been obvious to both parties
• Carna Foods v Eagle Star Insurance [1997] 2 IR 193: not likely that
defendant would have accepted alleged term as express term
• ‘one can imply a term into a contract only when the implied term
gives effect to the true intentions of all the parties to the contract
who might be affected by such implied term’. (200)
• 2. Must not be inconsistent with express terms of agreement:
O’Toole v Palmer (1945) 9 Ir Jur Rep 59
• Facts: The plaintiff agreed with the auctioneer (who was the first defendant) that if
the plaintiff found a buyer for a certain house and lands (the property of the second
defendant), the auctioneer should share with him equally the commission of 5% on
condition that the purchaser paid this fee. The plaintiff introduced the purchaser to the
two defendants and a contract of sale was drawn up. For some reason, no provision
was made in the contract for the payment of the auctioneer’s fees. The plaintiff
claimed a sum equal to 2½% of the purchase sum on the ground that it was an implied
term of the contract that the auctioneer would not prevent him from earning his share
of the commission payable.
• Held: No term implied. Gavin Duffy J held that there was no necessity for such a
term: ‘In this particular case I do not think that there is any necessity to imply a
term for the purpose of giving the contract business efficacy. Here the terms are
clearly expressed in writing and the plaintiff has undertaken an ordinary
business risk. The plaintiff is entitled to a share of commission only if
commission has been paid by the purchaser and the purchaser never paid
commission.’ (60)
• Sweeney v Duggan [1997] 2 IR 531 (SC)
• Worker, injured in a work accident, claimed that his employer had an implied duty to
obtain employer’s liability insurance or at least to warn him that such insurance was
not in place
• Supreme Court refused to imply this term
• Agreed that “the courts would imply a term into a contract when such a term could be
inferred on the basis of the presumed intention of the parties. The relevance of the
presumed intention of the parties differed in different cases.”
• But… “a term could not be implied if it was inconsistent with the express wording
of the contract and it would be difficult to imply a term which could not be
formulated with reasonable precision.”
• “…the term asserted by the plaintiff could not be implied in pursuance of The
Moorcock doctrine since the contract of employment operated effectively without
such term.”
• Also, it was not obvious that the employee would in fact have agreed such a term
has it been raised as a possibility at time of contracting
• “…a term might be implied independently of the intention of the parties where it was
necessary as a matter of law and logic to enable the provisions of the agreement to
have operative effect and that no such necessity existed in the present case.”
• Business Efficacy Test
• Implication of a presumed intention
• Presumed that parties intended their contract to be effective from a business
perspective
• Terms will be implied where necessary to give a contract business efficacy
• Not just to make the contract more desirable or efficient but a term must be
necessary to give the contract business efficacy – if the contract would function
well without the term, it will not be implied
• Without this clause, the contract will not work
• The Moorcock (1889) 14 PD 64 (CA)
• Facts: Defendants agreed that plaintiffs could unload and moor a steamship at their
jetty. Damage caused to boat due to hitting uneven, rocky river bed at low tide. No
express statement that mooring was safe.
• Held: implied term to check that the river bed was safe and warn shipowners if it
was not was necessary to give contract ‘business efficacy’.
• Obvious that if boat was to be moored there that it should be not be unduly hazardous.
Otherwise the plaintiffs “would be simply buying an opportunity of danger”.
• “[i]n business transactions such as this, what the law desires to effect by the
implication is to give such business efficacy to the transaction as must have been
intended at all events by both parties who are business men”
• Lord Esher MR:
• “it is implied that they have undertaken to see that the bottom of the river is
reasonably fit, or at all events that they have taken reasonable care to find out that the
bottom of the river is reasonably fit for the purpose for which they agree that their
jetty should be used, that is, they should take reasonable care to find out in what
condition the bottom is, and then either have it made reasonably fit for the
purpose, or inform the persons with whom they have contracted that it is not so.”
•
•
• At common law – some terms implied by reference to policy rather than the
intention of the parties (by law)
• Necessary to do so given the nature of the contract
• Not based on the parties’ presumed intention
• Liverpool City Council v Irwin [1977] AC 239 (HL): implied term that tenants in a
high-rise residential block would have access to their properties and that common
areas would be kept in good repair. Implied by law (not based on presumed intention)
 • Liverpool City Council v Irwin [1977] AC 239 (HL)
• 15 storey council apartment block – the ‘Piggeries’
• Lifts, lighting and rubbish chute rarely worked due to vandalism
• Tenants refused to pay rent – rent strike
• Council sought to evict tenants
• Tenancy agreement listed obligations of tenants but not of Council
• House of Lords –term could not be implied under business efficacy test; while it may
have been necessary to keep common areas in good repair, there was nothing to
suggest landlord had agreed to do this.
• Officious bystander test – would Council have said ‘yes of course’ if asked whether
they intended to keep common areas functional? More than likely not
• Lord Denning (dissenting in Court of Appeal) – contractual term should be implied
because it is reasonable to do so
• House of Lords disagreed – Rejected implication of terms where ‘reasonable’ to do
so – posited test of necessity
• Held (HL): Term was implied on the basis that in leases of this nature - public
authority leasing multiple occupancy buildings - the duty to maintain building
should lie with landlord
• Implied term: landlord had a duty to take reasonable care to ensure building was kept
in good repair
• But…on the facts, the landlord had taken reasonable care, and was not in breach, and
tenants also had duty to take reasonable care (i.e. council could not absolutely prevent
vandalism)
• Court found it unlikely that Council would have agreed to term, had it been asked for
explicitly
• Term was not needed to give business efficacy
• …but, regardless of the parties’ presumed intention, “a term must be implied from the
very nature of the fact that the tenants had to gain access to their apartments by and
through the common areas of a fifteen storey tower block that some party would have
to keep them in repair.”
• Roskill LJ (Court of Appeal):
• "Unless the law, in circumstances such as these, imposes an obligation upon the
council at least to use reasonable care to keep the lifts working properly and the
staircase lit, the whole transaction becomes inefficacious, futile and absurd. I
cannot go so far as Lord Denning M.R. and hold that the courts have any power to
imply a term into a contract merely because it seems reasonable to do so. Indeed, I
think that such a proposition is contrary to all authority….unless a warranty or term is
in all the circumstances reasonable there can be no question of implying it into a
contract, but before it is implied much else besides is necessary, for example that
without it the contract would be inefficacious, futile and absurd."
• Test for implied terms by law – necessary or just reasonable?
• Lord Wilberforce – necessary
• Lord Edmund-Davies – the touchstone is always necessity and not merely
reasonableness
• Lord Cross – leans towards reasonable
• Some debate (see Enright pp.170-171) – some commentators suggest that, in practice,
the test is not one of strict necessity

Exemption/ exclusion clause: Exemption clauses are sometimes called exclusion clauses.
Exclusion clauses purport to remove tort liability for one of the parties to a contract
 • Exclude liability or responsibility for a breach of contract or tort
• (A tort is a type of civil (non-criminal) wrong perpetrated by a person e.g. nuisance,
negligence resulting in damage, defamation, trespass)
• Saying ‘’I am not responsible and cannot be sued if you suffer a loss or particular
loss”
• Assignment of risk – the risk of something happening is being assigned to one party,
freeing the other party from liability
https://www.ryanair.com/ie/en/useful-info/help-centre/terms-and-conditions
Terms and conditions
• “14.4.6 We are not liable for any Damage caused by your Baggage. You shall be
responsible for any Damage caused by your Baggage to other persons or property,
including our property.”
• “14.4.8 We are not responsible for any illness, injury or disability, including death,
attributable to your physical condition or for the aggravation of such condition.”
Limited Liability Clauses
• Limit or reduce liability under a contract or in tort
• Caps the amount of liability for breach of contract or for a tort
• “If this happens, I will only be liable to pay you damages up to a maximum of
€10,000 and no more”
• Managing or assigning risk by ensuring that if the anticipated event happens, your
liability will be capped at a particular, manageable level
https://www.ryanair.com/ie/en/useful-info/help-centre/terms-and-conditions
• “14.4.4 Our liability in the case of Damage to Baggage shall be limited to 1,131 SDRs
(or equivalent) per passenger unless you have had a declaration of higher value by
check-in at the latest and paid a supplementary fee.”
• Definition: ““SDR” means a Special Drawing Right as defined by the International
Monetary Fund. (The current value of this currency unit may be found in the financial
pages of major newspapers.)” SDR = 80c
Clauses/Notices denying the existence of contractual obligations
• In some cases, a clause will be inserted in a document the effect of which is to
deny the existence of any contract or assumption of risk/responsibility
• For an exclusion or limited liability clause to be legally effective – and thus to
exclude liability for a particular loss or injury to another person:
• It must be worded in such a way that it actually addresses the loss sustained
(courts interpret such clauses strictly and against the person relying on the
clause)
 • It must have been ‘incorporated’ into a contract (actual or implied) with the
other person – by (1) that person’s signature, (2) by taking reasonable steps to
give reasonable notice to the person, (3) owing to a past course of dealing or
(4) by explicit reference to terms and conditions standard in the relevant
industry
• It must not be prohibited or restricted by law – it must comply with
legislation (Acts of Parliament)
• Legislature (Parliament) and EU have also become increasingly reluctant to
allow certain obligations to be avoided by means of exclusion clause
• By signature – as a general rule, if you sign an agreement containing an
exclusion clause, you are bound by that clause, even if you did not read the
document: L'Estrange v Graucob [1934] 2 K.B. 394 (CA)
• You are bound by everything in the contract, even if you did not read it
• There are some exceptions e.g. where there is:
• Fraud
• Misrepresentation
• Document must be one in which you would normally expect to find contractual terms
• Chitty on Contracts (London; Sweet and Maxwell; 2012; 31st ed; volume I) at para.12
– 009:
• “Contractual Documents:
• [T]he document must be of a class which either the party receiving it knows,
or which a reasonable man would expect, to contain contractual conditions…”
• Grogan v Robin Meredith Plant Hire [1996] CLC 1127: signature on a time
sheet did not have contractual effect as this was a document on which one
would not normally expect to find terms and conditions
• James Elliott Construction v Irish Asphalt
• [2014] IESC 74
• Delivery dockets recording delivery and quantity of crushed rock were not
contractual documents
• Instead they were ‘post-contractual’ documents – administrative rather than
contractual
• Reference on dockets to terms and conditions available elsewhere but not
listed on docket was not sufficient to incorporate terms into a contract
• If terms and conditions are to be incorporated:
• They must either be listed in full
• Or reference must be made to well known or commonly understood terms and
conditions e.g. industry standard t&cs
• In the present case, the documents relied on to argue that the terms and
conditions were incorporated by signature are the delivery notes. The delivery
notes did not contain the terms and conditions. They contained a proviso
that “the material is sold subject to the terms and conditions available on
request”, but, in the view of the Court as explained previously, this is not
sufficient for the purpose of incorporation by
• Deceit or misrepresentation:
• Curtis v Chemical Cleaning and Dyeing Co Ltd. [1951] 1 KB 805 (CA):
Staff misrepresented the effect of an exclusion clause. Said it only applied to
certain specific types of damage, when in fact it was wider
• Non est factum: it was not my deed
• Tedcastle McCormack and Company v. McCrystal (Unreported, High Court,
Morris J., March 15, 1999).
• In order to invoke non est factum, a person must show:
• “(a) That there was a radical or fundamental difference between what he
signed and what he thought he was signing;
• (b) That the mistake was as to the general character of the document as
opposed to its legal effect; [AND]
• (c) That there was a lack of negligence i.e. that he took all reasonable
precautions in the circumstances to find out what the document was.”
• A signature is an indication of assent
• Law Commission of England and Wales – signature should demonstrate
intention to authenticate document
• It is possible (though not certain) that the following may be treated as
signatures (though see the discussion in Enright, at 184-185) provided they
can be treated as indicating assent:
• Clicking on a button online or ticking a box online to indicate that you agree
with terms and conditions (if not a signature, will constitute reasonable notice)
• Clicking on an ‘accept’ button
• Adding a handwritten signature that has been scanned
• Typing your name at the end of an e-mail to indicate it is from you
• See MEHTA V J PEREIRA FERNANDES SA [2006] EWHC 813 (Ch):
• Court noted (obiter) that if Mr Mehta’s name had been typed at end of the
email, that would have been sufficient as a signature. An electronic signature
 should be treated as a signature so long as it demonstrates an intention to
authenticate the relevant document.
• But see Spreadex v Cochrane [2012] EWHC 1290 (Comm)
• Online trading of commodities
• Cochrane’s son’s girlfriend had access to the account and lost £50,000
• Clause in online terms and conditions – “you will be deemed to have
authorised all trading under your account”
• Found not to be binding – terms in customer agreement were not a contract in
themselves but formed part of a contract each time a trade was made
• No contract for trades not entered into by Mr Cochrane as there was no
consideration for such contract
• Also found that the terms were unfair under the UK equivalent of the Unfair
Terms in Consumer Contracts Regulations 1995
• Terms and conditions spanned 49 pages – “it would have come close to a
miracle” if he had read the relevant clause, still less understood it
• Electronic Commerce Act 2000: electronic documents usually treated the
same as hard copy documents, though person must consent to its use
• “electronic signature” means data in electronic form attached to,
incorporated in or logically associated with other electronic data and
which serves as a method of authenticating the purported originator, and
includes an advanced electronic signature (s.2(1))
• “S.13(1) If by law or otherwise the signature of a person or public body is
required (whether the requirement is in the form of an obligation or
consequences flow from there being no signature) or permitted, then, subject
to subsection (2), an electronic signature may be used.”
• Click-wrap – click on an icon or box to indicate agreement
• Several cases in the USA – generally you are deemed bound by the terms if
you click on the icon agreeing to or accepting those terms
• Either
• Indicating assent to terms or, if not
• Indicating that you have been notified of the presence of terms and conditions
=> reasonable notice.
• By reasonable notice – even if you have not signed a contract, you may be bound by
an exclusion clause if reasonable steps are taken to notify you of the clause before you
enter into a contract:
• The notice must be sufficiently prominent and clear
 • The more onerous the terms, the more that needs to be done to constitute
‘reasonable steps’
• It must be contained in a document or in a place where you would normally
expect to find such legal terms
• Reasonable steps must be taken to notify you before or at the time the
contract is made
• If these reasonable steps are taken, you will be bound by it even if you did not
actually know of the clause

• Reasonable notice – Parker v. South Eastern Ry (1877) 2 CPD 416 (CA)

• If you read the ticket and the clause, you are bound
• But even if you did not read the ticket, you are bound by the exclusion if
reasonable steps are taken to bring it to your notice
• Test is whether the party relying on the exclusion clause took reasonable steps
to bring the notice to the attention of the other party (not whether the other
party actually read the notice).
• Timing of the notice – must be notified before the contract comes into being
• Olley v Marlborough Court Ltd [1949] 1 K.B. 532
• Agreed to rent a hotel room – agreement made at reception – notice in hotel room
excluding liability for lost or stolen goods – not binding as only notified after the
contract was made
• The more onerous the terms, the more needs to be done to bring them to your
attention
• Interfoto Picture Library Ltd v. Stiletto Visual Programmes Ltd
• [1989] QB 433 (CA)
• Facts: The plaintiffs ran a photographic transparency lending library. Following a
telephone inquiry by the defendants, the plaintiffs delivered to them 47 transparencies
together with a delivery note containing nine printed conditions. Condition 2
stipulated that all the transparencies had to be returned within 14 days of delivery
otherwise a holding fee of £5 a day and value added tax would be charged for each
transparency retained thereafter. The defendants, who had not used the plaintiffs'
services before, did not read the conditions and returned the transparencies four weeks
later whereupon the plaintiffs invoiced the defendants for £3,783.50. The defendants
refused to pay and the plaintiffs brought an action to recover that sum. The judge gave
judgment in favour of the plaintiffs for the amount claimed.
• Held: Adopts the Court of Appeal’s rule in Thornton v Shoe Lane Parking: ‘if one
condition in a set of printed conditions is particularly onerous or unusual, the party
 seeking to enforce it must show that the particular condition was fairly brought to the
attention of the other party.’
• Thornton v Shoe Lane Parking [1971] 2 QB 163 (CA) – Lord Denning’s red hand –
• “I do not pause to enquire whether the exempting condition is void for
unreasonableness. All I say is that it is so wide and so destructive of rights that the
court could not hold any man bound by it unless it is drawn to his attention in the
most explicit way."
• “Some clauses I have seen would need to be printed in red ink with a red hand
pointing to it before the notice could be considered sufficient”
• Carroll v An Post National Lottery [1996] 1 IR 443
• Plaintiff submitted lottery slip to newsagent but newsagent failed to enter lottery slip
and instead entered another twice
• As luck would (not) have it, the lottery slip that had not been entered had the winning
numbers
• At the base of the slip was a blue arrow and the words “See instructions on reverse”
• On reverse, reference was the lottery rules
• An express exclusion clause on the reverse stated that the defendant was not liable for
the fault of the agent:
• “Players acknowledge that Lotto agents are acting on their [i.e. the players’] behalf in
entering plays into the National Lottery computer system.”
• Carroll v An Post National Lottery [1996] 1 IR 443
• “...as the plaintiff knew there were rules printed on the back of the playslip (but did
not bother to read them) the defendant company can rely on both exemption terms
because it was not required to give special notice of these particular terms to the
purchasers of Lotto tickets. If I am wrong in this conclusion it seems to me that the
defendant company had, in all the circumstances, done what was reasonably
necessary to bring to the notice of purchasers of Lotto tickets the exempting term
relating to the status of the agent printed on the back of the playslips by drawing
the attention of purchasers to "instructions" on the rear of the playslip and by
printing the exempting term in such a way as to make it readily accessible to,
and understandable by, readers of the matter printed on the reverse side of the
playslip.”
• Place where notice is given must be a place where one would normally expect to find
terms and conditions of a contractual nature
• Chapelton v. Barry U.D.C.
• [1940] 1. K.B. 532 (CA)
• plaintiff hired deckchairs – received tickets with exclusion clause –
• court found that tickets were in the nature of receipts, and not somewhere where one
would normally expect to find such conditions (simply an acknowledgement of
payment)
• By past course of dealing – if you have a regular, ongoing course of dealing and it
has been common in previous dealings to include such a term, such a clause may be
deemed incorporated by reference to those past dealings
• Must be sufficiently frequent and consistent course of dealing
• Consider where the term is standard in a particular industry
• J Spurling Ltd v Bradshaw [1956] 2 All ER 121 (CA)
• Facts: The owners of barrels of orange juice left them with the plaintiff under a
contract of bailment. The goods were damaged or destroyed and the plaintiff
subsequently sued for non-payment of warehouse rent. On several previous occasions
the defendant had left goods with the plaintiff and had been given receipts which
contained exemption clauses.
• Held: Denning LJ said:
• ‘… it was said that the landing account and invoice were issued after the goods had
been received and could not, therefore, be part of the contract of bailment: but Mr
Bradshaw admitted that he had received many landing accounts before. True he had
not troubled to read them. On receiving this landing account, he took no objection to
it, left the goods there, and went on paying the warehouse rent for months afterwards.
It seems to me that by the course of business and conduct of the parties, these
conditions were part of the contract.’
• Hollier v Rambler Motors (AMC) Ltd
• [1972] 2 QB 71 (CA)
• Facts: Plaintiff brought an action for damages against the defendant garage after his
car had been badly damaged in a fire at the defendant’s premises. Car had been left
with the defendants for repair work. Defendants sought to rely on an exclusion clause
contained in an invoice (‘The Company is not responsible for damage caused by fire
to customers’ cars on the premises.’) Plaintiff had signed the invoice on at least two
previous occasions. He was not asked to sign it this time. Repairs had been conducted
by the defendants for the plaintiff on 3 to 4 other occasions over a five year period.
• Held: The term was not incorporated. ‘Not quite one dealing a year’ was insufficient
to constitute a course of dealing. A greater degree of regularity was needed.
• Fundamental breach:
• If the exclusion clause purports to exclude liability for a serious breach of the core
obligation in the contract, it will not be enforceable
• Once considered a rule of law (and possibly still considered as such in Ireland) – can
never exclude liability for breach of core obligation
• Cf main purpose rule – exclusion clause cannot exclude main purpose of the
contract
• During the 1970's, Lord Denning gave the phrase a special meaning (interpreting
Suisse Atlantique v Rotterdamsche Kolen Centrale [1967] 1 AC 361 (HL)). His idea
was that some breaches were so fundamental that they were repudiatory and they also
destroyed exclusion clauses attempting to limit the liability of the guilty party to pay
damages. These breaches destroyed both the “primary” obligations of performance,
and the “secondary” obligations governing the payment of damages.
• Whether such a breach or breaches do constitute a fundamental breach depends
on the construction of the contract and on all the facts and circumstances of the
case. The innocent party may accept that breach or those breaches as a repudiation
and treat the whole contract as at an end and sue for damages generally, or he may at
his option prefer to affirm the contract and treat as continuing on foot, in which case
he can sue only for damages for breach or breaches of the particular stipulation or
stipulations in the contract which has or have been broken’: Lord Upjohn, Suisse
Atlantique, 422.
• The House of Lords, in Photo Production Ltd. v. Securicor [1980] A.C. 827,
disapproved of Lord Denning’s interpretation and instead affirmed the understanding
in the following decision.
• Facts: Factory destroyed by fire set by security guard to keep warm-£615,000 loss
• Held: Securicor was not liable because the exclusion clause covered the damage
which arose: “Under no circumstances shall the company be responsible for any
injurious act/default by any employee of the company”
• Clayton Love v B&I (1970) 104 ILTR 157 (SC): as a rule of law the core obligation
of a contract cannot be excluded by an exclusion clause.
• “In my opinion the basis on which [the doctrine of fundamental breach] rests
requires that a party, who like the defendants, has been held to be in breach of a
fundamental obligation cannot rely on a time bar in the contract to defeat a
claim for damages. Equally with other exempting provisions such a time clause
cannot be prayed in aid.”
• Western Meats v National Ice and Storage Co. [1982] ILRM 99 (HC)
• Obiter – prepared to follow Photo Productions (UKHL): exclusion clause excluding
Securicor’s liability was enforceable because it was sufficient clear and wide enough
to cover the breach of contract
• The court should respect of the express intention of the parties where they agree that
one party alone will assume the risk of something happening.
• McDermott & McDermott [11.75]: “In the absence of a definitive Irish judgment,
the post Photo Production position may be tentatively summarised as follows:
• (i) Whether an exemption clause applies to a breach of contract in any particular
case is ultimately a question of the proper construction of the clause. It is
 necessary that the clause should clearly cover the events which have happened,
particularly where the consequences are very serious. If the clause does cover those
events the courts will give effect to it. There is a rebuttable presumption that a
deliberate breach falls outside of the clause.
• (ii) Injustice to the party not in breach generally only occurs in consumer
transactions where there is unequal bargaining power and no real opportunity to
negotiate about the terms. The Sale of Goods and Supply of Services Act 1980 and
the European Communities (Unfair Terms in Consumer Contracts) Regulations 1995
deal with this and provide consumers with sufficient protection.
• (iii) Notwithstanding the likely demise of the doctrine of fundamental breach in
this jurisdiction as an absolute rule it retains some force as a principle of
construction. In addition there remain certain other rules which may still survive and
control the operation of exemption clauses. For example the cases of non-performance
or totally different performance appear to remain in force. In Photo Productions Lord
Diplock stated that ‘the agreement must retain the legal characteristics of a contract’.
It is arguable that cases of non-performance or totally different performance do not
retain the legal characteristics of a contract. A limitation clause cannot be used to
avoid coming under any contractual obligations at all. The main purpose rule also
appears to survive as a rule of construction.
• (iv) There may be some residual discretion based on overriding considerations of
public policy whereby a court could refuse to enforce an exclusion clause
although such a discretion could only be used in a rare case.
• And so, the contra proferentum rule is: any ambiguity in contractual terms will be
construed against the party who introduced it.
• (see also Art. 5(2) of the European Communities (Unfair Terms in Consumer
Contracts) Regulations 1995):
• “(2) Where there is a doubt about the meaning of a term, the interpretation most
favourable to the consumer shall prevail.”
• It may be deemed unlawful or unenforceable by a specific law, e.g. if it is contained
in a consumer contract:
• Sale of Goods Act 1893/Sale of Goods and Supply of Services Act 1980
• European Communities (Unfair Terms in Consumer Contracts) Regulations 1995
• Consumer Rights Directive (2013 Regulations)
•

•
•
Postal rule:
This means that an offer is truly only made when the offeree receives the offer. The
acceptance is made as soon as a letter is sent out, and the offeror does not actually need to
receive it in order for the offer to be accepted. An example of this is in the case of Adams v
Lindsell [1818]. Another feature of the postal rule is that there has been acceptance in a case,
even if the offeror never gets to receive the acceptance letter, or only receives it after a delay,
as long as it has been sent, it is held to be valid. A case which is an example of this is the case
of Household Fire and Carriage v Grant [1879]. However, an exception of this rule is that if
the parties made it very clear that an acceptance must be received, then acceptance cannot be
valid if it is only sent out and not in fact received by the offeror in this case. A case
highlighting this fact is the case of Holwell Securities Ltd v Hughes [1974]. The postal rule
also does not apply if the offeree happens to put the wrong address on the acceptance letter
and in this case, the offeror is not entitled to accept it. A case showing this fact is the case of
Korbetis v Transgrain Shipping BV [2005]. For the postal rule, even if the offer is withdrawn
before the acceptance is received by the offeror, the revocation is not valid. A case which
showcases this is the case of Byrne v Van Tienhoven [1880]. 265

Counter offer:
An issue found in this question is counter offer. This supersedes and also destroys an original
offer, making the original offer not available anymore. Counter offer also causes the
revocation of an offer in a bilateral contract. A case which is an example to this is the case of
Hyde v Wrench [1840]. In this case, the defendant made two offers to the plaintiff, both of
which he did not accept. Afterwards, the plaintiff said that he would accept the last offer
however, this was a counter offer meaning that the defendant was not entitled to accept. The
courts held that there was in fact no binding contract between them. 110

Agreements to agree:
Agreements to agree arise when an agreement contains an obligation to enter into a
subsequent agreement in the future, the terms which are not certain at the time of the initial
agreement. As a result of this, such agreements often lack sufficient certainty to constitute a
legally enforceable contact. An example of this is the case of May and Butcher v The King
[1975]. In this case, there was an agreement made to purchase all the tentage that came
available. Important factors of the contract, such as the delivery time, price and specific
amount still had to be agreed on. Therefore, all the terms were too vague which would end up
to uncertainty eventually. The court therefore held that due to the fact that it was an
agreement to agree, there was no enforceable contract made. 136

Past consideration:
Past consideration is a promise or act that was made before the making of a contract. This is
extremely insufficient, as the consideration of a contract must be linked to the promise, as
consideration is a way of ‘buying’ the promise. An example of past consideration is the case
of Roscorla v Thomas (1842). In this case, the defendant agrees to sell a horse to the plaintiff
and only after the agreement, decided to add that the horse has no problems. Due to the fact
that the promise was made after the agreement, the promise could not be enforced as the
consideration was past. However, an exception to this is if parties agree that the act could be
done before the actual promise was received. An example of a case that shows this is the case
of Pau On v Lau Yiu Long [1980]. 144

Part Payment of Debt:

A case that would help to better explain this topic is the case of Foakes v Beer (1883). This
case seeked to figure out whether part payment of a debt was considered to be consideration.
In this case, Dr. Foakes paid his debt in instalments until everything was paid off, and the
only thing remaining was the interest. The House of Lords held in this case that, as the rule
highlighted in Pinnel’s case (1602), part payment of a debt could not be satisfaction of the
whole. It was also said in this case that Dr. Foakes did not give any consideration. The
Pinnel’s case (1602) is here to explain this rule even better. In this case, the court held that
making a payment early, or providing ‘the gift of a horse, hawk or robe’, is in fact good
consideration. This is due to the fact that it provided a benefit to the plaintiff, as something
non- monetary might be more better on in fact beneficial to someone. 168