Incorporating express terms in a contract and the rule in L’Estrange V Graucob
Issue
Whether Jenny would be bound to the exclusion clause which the bus services have attempted to incorporate into the contract
An express term is a term of the contract which has been contemplated by the parties and can be added in a contract via a notice or signature.
In the case of L’Estrange V Graucob [1934] 2 KB 394 a rule had been made by the judges according to which any person who has got into a contract through signature would be bound by all its clauses even if he claims that he has not read the terms of the document. This rule is however not absolute and can be challenged in a few specific situations. For instance, in the case of Curtis v Chemical Cleaning Co [1951] 1 KB 805 the plaintiff had went to dry cleaners to get her dress cleaned. She had been asked to sign a document which had an exclusion clause but she was told that the document was a regular receipt. The court in this case held that the plaintiff was not bound to the clause even if she had signed as the staff had misrepresented the real nature of the document from the plaintiff.
There is a requirement that any express term would become a contractual term generally if it has been brought to the attention of the other party before contract is created via prior notice. The rule had been discussed in the case of Oceanic Sun v Fay [1988] HCA 32. In this case, the plaintiff had booked for a ship journey which was in Queensland but she was notified that she would be provided with a ticket in Greece. She was provided the ticket which had an exclusion clause limiting the liability of the defendant. The court stated in this case that the clause can only be added to the contract if the plaintiff had been given prior notice with respect to the terms. This means that the notice is to be provided before or at the time when the contract is formed. The rule had been further asserted in the case of Olley v Marlborough Court Ltd [1949] 1 KB 532 the court stated that the attempt of the defendant to add a term in contract by hanging a notice behind the door inside a hotel room is not valid. The cause of the decision is that the agreement between the parties was concluded at the desk when the plaintiff was legally obliged to make payment for the room hire. In Thornton v Shoe Lane Parking [1970] EWCA Civ 2 also it had been concluded that the plaintiff was not provided with any form of prior notice about an exclusion clause as it was inside the parking and the contract had been created when the person entered the parking and paid for it. Further the court was of a view that where the terms are of an unusual nature they party who seek to enforce it must provide special notice in relation to its existence.
The requirement of prior notice for express terms to become contractual terms
Whether Jenny would be bound to the exclusion clause which the bus services have attempted to incorporate into the contract depends upon the incorporation of the clause into the contract between her and the bus service. An express term is a term of the contract which has been contemplated by the parties and can be added in a contract via a notice or signature. The term in context is an express term. This can be added by signature and notice. Jenny has signed the paper on which this term was present. The application of L’Estrange V Graucob denotes that any person who has got into a contract through signature would be bound by all its clauses even if he claims that he has not read the terms of the document. Jenny would be bound to the terms as well. This rule is however not absolute and can be challenged in a few specific situations. Thus in the situation of Jenny the application of the case of Curtis v Chemical Cleaning Co can be done. The application would mean that Jenny is not bound to the term. This is because when she had been asked to sign the term the staff had misrepresented the true nature of the document by stating that it only confirm her personal information. Further, there is a requirement that any express term would become a contractual term generally if it has been brought to the attention of the other party before contract is created via prior notice. This rule would mean that the exclusion clause is not a part of the contract. This is because Jenny had purchased the ticket form a local travel agent and the contract was formed between the parties when the purchase was made and not when the ticket had been before Jenny entered the bus. There was no prior notice provided to Jenny. This argument is supported by the cases of Parker v South Eastern Railway Co and Olley v Marlborough Court Ltd as here also the court denied the inclusion of the exclusion clause without prior notice being provided to the other party. Further, the exclusion clause in an unusual term according to Thornton v Shoe Lane Parking as for adding the term in the contract there is requirement of providing a special notice such as highlighting the term. In this situation no such special notice have been provided with respect to the exclusion clause to Jenny. The application of the rules regarding the inclusion of exclusion clause into the contract suggest that even if the document was signed by Jenny the cause has not been incorporated legally.
Conclusion
Jenny would not be bound to the exclusion clause which the bus services have attempted to incorporate into the contract even if she has signed it because there was no prior notice provided to her and the signature was obtained by misrepresentation.
Issue
The initial issue is in relation to whether Cavers Pty Ltd are entitled to make any assumption under the Corporations Act 2001 (Cth) or common law with respect to the contract.
Application of Curtis v Chemical Cleaning Co to the situation
The issues is also to find out who is liable to pay Irish Linen Ltd under the rules of the CA.
Under 112 of the CA a company becomes a separate legal entity once it has been brought to existence through incorporation procedures.
Powers have been provided to a company registered in Australia to function as a natural person like owing property, getting into contract and being a party to a court case. These powers are expressed under s 124 of CA.
As a company is not a natural person the CA expresses two ways which can be used execute contracts on behalf of corporations. These ways have been mentioned in s 126 and 127 respectively. A contract under 126 is entitled to be executed by a person who is acting as an agent of the company under the authority provided by it even without a common seal. A contract can also be executed if the company has attached its common seal to it and it has been witnessed by either two directors or a director and a secretary. This is allowed under s 127 (2). Even if either two directors or a director and a secretary sign the contract it is deemed to be executed without the seal under s 127(1). In the case of Knight Frank Australia Pty Ltd v Paley Properties Pty Ltd [2014] the provisions of s 127 have been interpreted by the court by stating that the reliance on assumptions under s 129 is only possible if the execution of the document is under s 127.
In Royal British Bank v Turquand (1856) 6 E&B 327 the court made a rule that a third person who is a party to the contract with a company can assume that the people to whom the company has provided authority have complied with all its internal rules and regulations. However, the third party must act in good faith to be able to rely on these provisions.
Section 131 of CA expresses rules regarding contract which are formed between a company and a third party before the company has been formed. These are called pre-registration contracts. Under s 131(1) a contract entered for the benefit of the company before registration the company will be bound in case the contract is ratified in a time agreed or within a reasonable time.
In case the contract is not ratified in the time discussed above the person who acted on behalf of the company would be made liable. This is provided under s 131(2). The third party can make a claim against the person. In s 131(3) it is stated that if the company has not ratified the contract the court has the right to do anything such as order the person to pay all damages in relation to the contract or tell the company to transfer the property which it has received under the contract to the third party. The company may also be ruled to compensate the third party in relation to the breach of contract. In case the contract is ratified by the company it is liable to pay all cost in relation to the contract. In addition, the person can also be order to pay for the contract in case the company does not pay.
The inclusion of exclusion clause into the contract and the absence of prior notice
Adam and Poh have formed a company called Master Plate Pty Ltd. This means that Powers have been provided to a company registered in Australia to function as a natural person like owing property, getting into contract and being a party to a court case. These powers are expressed under s 124 of CA. it has been further provided that Adam has gone into a contract with Irish Linen Ltd before the company is formed. This means that it is a pre-registration contract and the provisions of s 131 will be applicable. It has been provided that the contract had been formed on 22 February and the company was registered on 24 February and the contract was ratified on 30 March. This can be considered as a reasonable time. In s 131(3) it is stated that if the company has not ratified the contract the court has the right order the person to pay all damages in relation to the contract or tell the company to transfer the property which it has received under the contract to the third party. In case the contract is ratified by the company it is liable to pay all cost in relation to the contract. In addition, the person can also be order to pay for the contract in case the company does not pay. Thus here if the either the company will have to pay because of the ratification or Adam needs to pay under s 131(4).
It has been further stated that Adam has signed a contract with Cavers Pty Ltd and affixed the common seal. A contract can also be executed if the company has attached its common seal to it and it has been witnessed by either two directors or a director and a secretary. This is allowed under s 127 (2). Thus means that the contract is not executed according to s 127. The application of Knight Frank Australia Pty Ltd v Paley Properties Pty Ltd signifies that the reliance on assumptions under s 129 is only possible if the execution of the document is under s 127. However under the application of the Turquand case the other company can assume that the people to whom the company has provided authority have complied with all its internal rules and regulations. However, the third party must act in good faith to be able to rely on these provisions.
Conclusion
Either Master Plate or Adam may be required to pay Irish
Cavers can rely on the assumptions provided by the Turquand case.
References
Fitzpatrick J, Symes C, Veljanovski A & Parker D, Business and Corporations Law 3rd ed. (2017), LexisNexis Butterworths Australia.
McKendrick, E., 2014. Contract law: text, cases, and materials. Oxford University Press (UK).
Knapp, C.L., Crystal, N.M. and Prince, H.G., 2016. Problems in Contract Law: cases and materials. Wolters Kluwer Law & Business.
Fitzpatrick et al. 2017 Business and Corporations Law 3rd edition
Milman, D., 2017. A review of developments in partnership law 2017. Sweet and Maxwell’s Company Law Newsletter, (399), pp.1-5.
Talbot, L., 2015. Critical company law. Routledge.
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
