Incorporation of standard terms

When seeking to understand the UK's complex legislation governing unfair terms, the need to incorporate standard trading terms and conditions into a contract is often overlooked.  The recent case of C R Smith Glaziers (Dunfermline) Limited v Toolcom Supplies Limited and Fit-Lock Systems Ltd  [2010] CSOH 7 reminds us of the importance of this step in the legal analysis.

Lady Clark's discussion of this point confirms that, where a party seeks to argue that his standard terms govern the contract, the onus lies on him or her to establish that the terms have been properly incorporated.  In this case, several documents sent by one of the parties to the other referred to the existence of standard terms overleaf.  All such documents were, however, faxed.  No separate copy of the conditions was ever sent to the contractual counterparty.  Noting that cases such as these are often highly fact-sensitive, and difficult to use as precedents, Lady Clark held that the standard terms had not been incorporated.  Simply bringing the existence of standard terms to the attention of one's contractual counterparty does not amount to incorporation.  For the terms to be incorporated, a copy would have to have been provided. 

The case contains discussion of the following passage from the judgment of Mr Justice Coulson in the case of J Murphy & Sons Ltd v Johnston Precast Ltd (2008) EWHC 3024 (TCC) at paragraph 99:

"I acknowledge at once that this means that I am effectively putting to one side the words at the bottom of the Murphy order (paragraphs 62 and 63 above). However, I have concluded that it is appropriate to do so. There are a number of reasons for this. First, there is no evidence that anybody on either side paid any attention to whether or not the terms were actually attached to the order when it was faxed on 21st April. Secondly, of course, no terms were in fact faxed, so the words were meaningless. Thirdly, I do not believe that these words amount to an effective incorporation of the Murphy terms in any event. They merely draw the reader's attention to the conditions; they do not say expressly that those conditions wholesale will be incorporated into any proposed contract. They do not say that the Order is 'subject to' those conditions, or even that the order 'incorporates the conditions overleaf'. Fourthly, I am confirmed that this is the right approach by the decision in Sterling in which a similar (in fact, rather stronger) attempt to incorporate non-existent terms and conditions was rejected by the learned judge".es Turner Southern Ltd [1996] 2 Lloyds Rep. 388

Poseidon Freight Forwarding Co. Ltd. v Davies Turner Southern Ltd [1996] 2 Lloyds Rep. 388 also formed the basis of oral submissions of the parties. 

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