Contractual Issues for Freight

Forwarders

“Incorporation of terms”

Hamish Austin
Barrister
13 July 2006

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Contractual Issues for Freight Forwarders
 Incorporation of contractual terms - basic
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

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Contractual Issues for Freight Forwarders
Olley v Marlborough Court Ltd [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.

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Contractual Issues for Freight Forwarders
Thornton v Shoe Lane Parking Ltd [1971] 2 QB
163

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.

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Contractual Issues for Freight Forwarders
 Oceanic Sun Line Shipping Co v Fay (1988)
165 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.

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Contractual Issues for Freight Forwarders
Incorporation of contractual terms - methods:

Incorporation of terms may be effected by:

 signature;
 adequate notice;
 by reference;
 a prior course of dealings.

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Contractual Issues for Freight Forwarders
 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

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Contractual Issues for Freight Forwarders
Signature - Toll (FGCT) Pty Ltd v Alphafarm Pty
Ltd (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.

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Contractual Issues for Freight Forwarders
 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.

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Contractual Issues for Freight Forwarders
 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.

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Contractual Issues for Freight Forwarders
By notice - Oceanic Sun Line Shipping Co v
Fay (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.”

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Contractual Issues for Freight Forwarders
 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".

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Contractual Issues for Freight Forwarders
 The first line of authority – terms must be
contained in a “contractual 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

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Contractual Issues for Freight Forwarders
 DJ Hill & Co Pty Ltd v Walter H Wright Pty Ltd
[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.”

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Contractual Issues for Freight Forwarders
Rinaldi & Patroni Pty Ltd v Precision Mouldings
Pty Ltd [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.

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Contractual Issues for Freight Forwarders
 Brambles Holdings Ltd v WMC Engineering
Services Pty Ltd [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.

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Contractual Issues for Freight Forwarders
 The second line of authority – no enquiry as to
the “contractual” 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

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Contractual Issues for Freight Forwarders
 Chattis Nominees Pty Ltd v Norman Ross
Homeworks Pty Ltd (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.

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Contractual Issues for Freight Forwarders
 Associated Alloys Pty Ltd v Metropolitan
Engineering & Fabrications Pty Ltd (1996) 20
ACSR 205
Facts: 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.

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Contractual Issues for Freight Forwarders
 The third line of authority – reconciliation of the
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

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Contractual Issues for Freight Forwarders
 Circle Freight International Ltd v Medeast Gulf
Exports [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.

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Contractual Issues for Freight Forwarders
 Ralph McKay Ltd v International Harvester
Australia (Receivers & Managers Appointed)
[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.

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Contractual Issues for Freight Forwarders
Pondcil Pty Ltd v Tropical Reef Shipyard Pty Ltd
(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.

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Contractual Issues for Freight Forwarders
Pondcil Pty Ltd v Tropical Reef Shipyard Pty Ltd
(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.

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Contractual Issues for Freight Forwarders
 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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Contractual Issues for Freight Forwarders