Contract law: Incorporation and interpretation

Two types of contract

First part of contract you can incorporate terms

Four ways of incorporating

How are terms implied

Ways the courts imply terms

Statutes/ Regulations

Signing a written contract results in being bound by its terms.

A hotel guest’s property was stolen after staff negligence, and the hotel relied on an exemption notice only visible inside the bedroom. A term is not incorporated if it is communicated only after the contract is formed.

A delivery note imposed an unexpectedly high holding fee of £5 per photo per day. Onerous or unusual terms must be brought fairly and prominently to the other party’s attention to be incorporated.

A fire caused by the Crown’s negligence damaged a leased shed, and an indemnity clause was invoked. Ambiguous exclusion clauses are construed strictly, and a clause will only cover negligence if it clearly and expressly does so.

A software system failed, and the supplier relied on limitation and exclusion clauses. Where commercial parties of equal bargaining strength negotiate terms, courts will generally uphold exclusion clauses as reasonable under UCTA

A credit agreement allowed contractual interest to continue running after judgment. A term not relating to the core price or subject matter may be assessed for fairness, and this particular term was ultimately held fair.

A defective drilling rig caused delay and significant spread costs. Clear exclusion clauses allocating risk for consequential losses, including spread costs, will be upheld in commercial contracts.

A clause excluded liability for “any claim in relation to asbestos,” and the dispute concerned asbestos-related negligence. Broadly worded clauses can exclude negligence where sufficiently clear, and contra proferentem is applied very narrowly in commercial agreements.

A customer’s car was damaged by fire at the garage, and previous dealings had sometimes involved signing an exclusion clause. Past dealings incorporate terms only when consistent and regular, and the clause was not incorporated because the dealings were too few and infrequent.

A customer entered an automated car park, forming the contract at the point of payment, with the exclusion clause revealed only afterwards. Exclusion clauses presented after contract formation or not given sufficient prominence, especially if onerous, are not incorporated.

A crane was hired without signed conditions, but both parties operated within the same trade where such terms were standard. Terms can be incorporated through common industry understanding and shared knowledge of standard conditions, even without prior consistent dealings