McCutcheon v David MacBrayne Ltd [1964]

Court: House of Lords

Facts: McCutcheon regularly used David MacBrayne Ltd’s ferry service to transport his car. On one occasion, the ferry sank, resulting in the loss of McCutcheon's car. David MacBrayne Ltd typically required customers to sign a risk note that excluded liability. Although McCutcheon had signed similar risk notes on previous occasions, he was not asked to sign on the day of the sinking, and his brother-in-law, who made the arrangements, did not sign the note. McCutcheon was aware that the risk note contained conditions but was unaware of their specific content.

Issue: Whether the risk note excluding liability was incorporated into the contract through a consistent course of dealing, and whether McCutcheon was bound by its terms despite not signing it on this occasion.

Held: The House of Lords held that the risk note was not incorporated into the contract. The exemption clause was not effective due to the lack of a consistent course of dealing and insufficient notice of the terms.

Key Judicial Statements:

• Lord Reid: Emphasised that for a term to be incorporated through a course of dealing, there must be consistency and actual knowledge of the terms. In this case, McCutcheon’s dealings were not consistent enough to imply the term. Lord Reid rejected the idea that previous dealings alone could incorporate terms, highlighting the necessity of reasonable notice or a signature.

• Lord Devlin: Agreed that prior dealings alone were insufficient to incorporate terms. He stressed that actual knowledge of the terms was necessary for incorporation. The mere fact of previous contracts did not automatically imply terms into a new contract unless the party had actual knowledge and agreed to those terms.

💡 Leveluplaw: Highlights that for terms to be incorporated into a contract by course of dealing, there must be a consistent pattern of dealings and actual knowledge of the terms. The case underscores the need for reasonable notice or explicit agreement to terms and reinforces the importance of clarity and fairness in contractual relationships.