McCutcheon v David Macbrayne Ltd

Where parties make an oral contract for carriage and no ticket, risk note or contractual reference to conditions is supplied, the carrier cannot incorporate exemption clauses merely through previous dealings or the consignor’s general knowledge that conditions existed. A course of dealing may imply a term only where consistent dealings establish actual knowledge of the specific term and assent to it. Ticket-case principles depend on a contractual document or incorporation by reference. A receipt delivered after formation cannot add terms. Without an effective special contract, the ordinary contract of carriage applies and the carrier remains liable for negligence.

The appellant’s agent delivered his car to the respondents for carriage, paid the freight and received a receipt after the oral contract had been completed. The usual risk note containing exclusion clauses was not signed. The vessel sank through negligent navigation. The Lord Ordinary found for the appellant, but the Second Division of the Inner House held that previous dealings bound him by the respondents’ conditions. The House of Lords considered whether the conditions could be incorporated by prior dealings, the post-contract receipt, public notices or the parties’ previous knowledge.

All five Law Lords allowed the appeal and restored the interlocutor of the Lord Ordinary.

1. Lord Reid held that the contract was oral and complete before the receipt was handed over. The receipt therefore could not introduce terms. Conditions could enter the contract only by expression, incorporation or implication. The previous dealings did not establish a consistent course or show that either the appellant or his agent knew that exclusion of liability for negligence was intended.
2. Lords Hodson, Guest and Pearce held that a course of dealing cannot operate where the carrier departed from its established practice by omitting to obtain the risk note. Previous knowledge that some conditions existed did not amount to assent to their specific terms. The carrier bore the onus of proving an effective special contract.
3. Lords Reid, Guest, Devlin and Pearce distinguished the ticket cases, including Parker v. South-Eastern Railway Company and Hood v. Anchor Line. Those cases depend on a ticket or other contractual document containing, or referring to, conditions, together with reasonable steps to give notice. Their reasoning could not be extended to an oral contract with no such document or reference.
4. Lord Hodson held that the receipt, given after formation, was not an offer or contractual document. The respondents also failed to show that displaying or posting their conditions was reasonably sufficient to incorporate them.
5. Lord Devlin emphasised that uncommunicated conditions cannot form part of a contract. He treated the ordinary rule concerning a signed contractual document, associated with L'Estrange v. F. Graucob, Ld., as explaining why a signed risk note would have produced a different result. He separately observed that the estoppel reasoning attributed to Blackburn J in Harris v. Great Western Railway Company might require closer examination and could be misleading. That observation was not necessary to the decision.

In the absence of an effective special contract, the ordinary contract of carriage applied and the respondents were liable for the loss caused by their servants’ negligence.

• House of Lords unanimously allowed the appeal and restored the Lord Ordinary’s interlocutor.
• Court of Session, Second Division of the Inner House decided in favour of the defenders by holding that the appellant was bound by their conditions through previous dealings.
• Lord Ordinary accepted the evidence of the appellant and his agent and made the interlocutor later restored by the House.