Legal Principles and Key Points
- In the case of McCutcheon v David Macbrayne Ltd  1 W.L.R. 125, it was held that, in absence of any contractual document, a consignor of goods cannot, by a course of previous dealing, be bound by conditions of which they are generally aware but lacks knowledge of the specific terms used.
Facts of the Case
- In October 1960, C asked his brother-in-law to have his motor car sent by D, a shipping company, to a peninsula.
- The brother-in-law took the car to port. He went into D’s office and arranged for the car to be freighted. He paid the fees and delivered the car to D.
- While the car was being shipped, the vessel sank due to the negligent navigation of D’s employees. C sued D for the value of the car.
- D argued that they were absolved from liability according to the terms and conditions of carriage displayed in their office.
- D’s normal practice in accepting goods was to give the consignor a receipt for the freight and a risk note. The freight stated that the goods were subject to the ‘conditions specified in D’s sailing bills, notices and announcements.’
- The ‘risk note’ printed the conditions of carriage with a docquet signed by the consignor agreeing to ship the goods ‘on the conditions stated above.’
- In previous transactions with D, C had sometimes signed this ‘risk note,’ but in this case no risk note was issued or signed.
- Although C and his brother-in-law knew that certain conditions of carriage were normally imposed, neither knew specifically what they were.
- Did the freight receipt and risk note import the exclusion term into the oral contract between C and D?
Held by the House of Lords (Scotland)
- Finding for C, that the exclusion terms could not be binding on the basis of a previous course of dealing when C lacked knowledge of these specific terms. Previous dealings could be only capable of importing a term into a later contract, but this requires actual or constructive knowledge of the term and both parties must agree to them.
- This is not a familiar ticket case. The contract was an oral one. No document was signed or changed hands until the contract was completed. The terms of the receipt cannot be regarded as terms of the contract.
- D exhibited their conditions in their office, but neither C nor his brother-in-law had read these notices, and they can play no part in the decision of this case. D’s practice was to require consignors to sign risk notes which included these conditions before accepting any goods for carriage, but on this occasion no risk note was signed.
- D’s clerk made out a risk note to be signed, but when C’s brother-in-law arrived, she was not in the office and he dealt with the vessel’s purser, who forgot to ask him to sign the risk note.
- Here, in making the contract neither party referred to, or had in mind, any additional terms. If it could be said that when making the contract C knew that D always required a risk note to be signed and that the purser was simply forgetting it, then it might be said that he could not take advantage of the error of which he was aware.
- “The only other ground on which it would seem possible to import these conditions is that based on a course of dealing. If two parties have made a series of similar contracts each containing certain conditions, and then they make another without expressly referring to those conditions it may be that those conditions ought to be implied. If the officious bystander had asked them whether they had intended to leave out the conditions this time, both must, as honest men, have said ‘of course not.’ But again, the facts here will not support that ground. According to the brother-in-law, there had been no constant course of dealing; sometimes he was asked to sign and sometimes not. And, moreover, he did not know what the conditions were. This time he was offered an oral contract without any reference to conditions, and he accepted the offer in good faith” .