McCutcheon v David Macbrayne Ltd

Exemption conditions are not incorporated into a contract of carriage merely because the carrier used them in earlier transactions. Where the contract on the occasion in question is made orally, and no contractual document is issued or signed before conclusion, the carrier must show incorporation by express agreement or by a sufficiently consistent and known course of dealing.

Prior dealings do not of themselves import terms. They may do so only where they establish actual knowledge of the relevant terms and a basis for implying that both parties contracted on the same footing again. A party is not bound by unknown printed conditions simply because he knew that some conditions were usually imposed.

The pursuer's car was delivered to the defenders for carriage by sea from Islay to West Loch Tarbert. The arrangement was made orally by the pursuer's brother-in-law, who paid the freight and received a receipt after payment. No "risk note" containing the defenders' printed exemption conditions was signed on that occasion, although such notes had sometimes been signed in earlier transactions.

The vessel later sank through negligent navigation by the defenders' servants, and the car was lost. The pursuer sued for its value. The House of Lords had to decide whether the defenders' printed conditions, which would have excluded liability, were incorporated into the oral contract by the receipt, by notice, or by a course of previous dealing.

1. Appeal allowed. The House restored the Lord Ordinary's interlocutor. The oral contract of carriage did not incorporate the defenders' exemption conditions, and the defenders remained liable at common law for loss caused by their servants' negligence.

2. Per Lord Reid, the contract was complete before any receipt was handed over. The receipt therefore could not operate as a contractual document in the sense used in the ticket cases. Since neither party referred to additional terms when the bargain was made, the defenders could succeed only if the printed conditions were imported on some other recognised basis.

3. Per Lord Reid, Lord Hodson, Lord Guest and Lord Pearce, the ticket authorities such as (1877) 2 CPD 416 and [1918] AC 837 did not govern an oral contract concluded without any contractual document. Those cases proceed on acceptance of a document tendered as contractual. Here there was no such document before conclusion of the contract.

4. Per Lord Reid and Lord Pearce, a course of dealing can sometimes justify implication of terms into a later contract, but only where the prior transactions are sufficiently regular and apt to show that both parties contracted on the same basis. The evidence did not establish a consistent course: sometimes a risk note was signed and sometimes not.

5. Per Lord Guest and Lord Devlin, previous dealings could not by themselves incorporate unknown conditions into a fresh oral contract. At most they might prove actual knowledge of a term so as to support implication. General awareness that some conditions existed was insufficient, particularly where the consignor did not know their substance and had not agreed to them on the occasion in question.

6. Per Lord Devlin, there can be no contractual conditions unless they enter the bargain by expression, incorporation, or implication. One party's habitual use of printed conditions in other transactions does not of itself make them part of a later contract. In the absence of fraud or relevant mistake known to the other side, the carrier must abide by the oral contract actually made.

7. Per Lord Hodson and Lord Pearce, the defenders also failed on their alternative arguments based on the receipt and on notices posted on the pier and vessel. The receipt was given only after the contract had been concluded, and the posted notices were not shown to have been brought home to the pursuer or his agent in a way capable of making them contractual terms.

• House of Lords: appeal allowed; the interlocutor of the Lord Ordinary was restored.
• Court of Session, Second Division of the Inner House: had held in favour of the defenders on the basis that the exemption conditions were binding by reason of prior dealings.
• Lord Ordinary: had held that the pursuer was not bound by the defenders' printed conditions and that the defenders were liable for the loss.