Incorporation of terms and agency law in the sheriff court

Copland v Brogan 1916 SC 27 was the subject of a (not entirely serious) blog entry in this blog recently, see  The case concerned the standard of care to be expected of a mandatory or agent holding goods under the gratuitous contract of mandate.  This case has not been completely forgotten, it seems, having been cited in Kilmarnock Sheriff Court on 20 July this year, in Trigon Tools Ltd v Andrew Wright (PVC) Ltd A 268/09, available here:

The pursuers had, at the request of the defenders, hired to the defenders a small excavator for use at a house in Irvine where the defenders were involved in the erection of a small conservatory.  The contract was oral, having been made in the course of telephone conversations between the parties.  The defenders, as well as using their own labour force, used sub-contractors to carry out certain elements of the construction work.  The pursuers delivered the excavator to the site, along with a copy of an "advice hire note."  On arrival at the site, the advice hire note was signed by an unknown workman and a copy was given to him. Crucially, the pursuers' standard trading terms and conditions, which had not been mentioned in the telephone conversation between the parties, were printed on the back of this advice hire note. 

Two weeks later, the defenders telephoned the pursuers to tell them that the work involving the excavator had been completed and that it could now be uplifted.  Before it could be uplifted, it was stolen by an unknown party. 

The case is useful for a number of reasons.  What were the terms of the contract?  Were the terms those which had been discussed during the telephone conversations?  Or, by signing the advice hire note, had the unknown workman acted as an agent in order to bind the defenders to a contract incorporating the pursuers' standard trading terms and conditions, printed on the back of the advice hire note?  A key issue is, of course, the point at which the contract was concluded.  Was the moment of conclusion of the contract the date of the final telephone conversation between the parties?  If so, the standard trading terms and conditions on the back of the advice hire note came too late to be incorporated into the contract. 

Significantly, a course of dealing existed between the parties.  In previous transactions, the advice hire notes had also been signed by unknown persons present at the defenders' constructions site.  It was possible, therefore, that the pursuers' terms and conditions had been incorporated through their use during this course of dealing.   

Sheriff Murphy made no decision on the issue of whether the terms were incorporated into the contract.  This question could, he indicated, only be resolved following further inquiry into the facts. 

Did the unknown workman have either actual or ostensible/apparent authority to sign the advice hire note, thus concluding a contract on behalf of the defenders, incorporating the pursuers' standard terms?  The Sheriff indicated that there was certainly no actual authority, but ostensible authority was a possibility.  This issue would be analysed by reference to what the reasonable third party would consider the position to be.  Was the workman held out as a representative of the defenders, and therefore able to "bind" the defenders in the exercise of ostensible authority?  Although this point was not explored by Sheriff Murphy, it should be remembered that ostensible authority does not "create" or "cure" contracts where there is a lack of authority.  It operates as a type of personal bar, preventing the principal from denying that the agent was authorised in the context of a case raised by the third party against the principal.  A decision on the issue of ostensible authority depended upon the way in which the site operated, the Sheriff reasoned, and again could only be decided following proof.  This decision on this point seems slightly questionnable – the important issue is the impression a reasonable third party would have of the way the site was run.  Internal arrangements on the site are irrelevant for the purposes of establishing apparent authority.  The external impression is key.  In their averments on ostensible authority, the pursuers cited Armagas v Mundogas (1986) AC 717; First Energy (UK) Ltd v Hungarian International Bank (1993) 2 Lloyds Reps 194; Dornier v Cannon 1991 SC 310 in addition to the most recent edition of Gloag and Henderson's Law of Scotland (the agency section of which was written by Lord Coulsfield).

Coming back to Copland v Brogan, who (on this set of facts) was to be liable for the loss of the excavator?  What are the duties of a person hiring goods or equipment under a hire contract? The Sheriff noted that this person was subject to a common law duty of care which could not be terminated simply by telephoning the pursuers to say that the goods were no longer required.  The defenders referred to Gloag & Henderson Law of Scotland, para 13-07, which suggested that the hirer's duty of care was culpa levis, which counsel  for the defenders' indicated was not a high standard.  The Sheriff relied on Copland v Brogan, Bell's Principles, Wilson v Orr (1879) 7 R 266 and McLean v Warnock (1883) 10 R 1052, concluding that these cases confirmed that such a duty of care existed, and that the burden of proof lay on the hirer (i.e. the defenders in this case) to show the cause of loss and prove a prima facie case that he was not responsible for the same.  In Wilson v Orr the Lord Justice Clerk Moncrieff stated (at 268):

"The hirer of an article under the contract of location is under an obligation to restore the commodity in like good condition as that in which he received it.  If the subject of the contract perished without fault on the part of the hirer, it perishes to the owner and the hirer is sufficiently discharged of his obligation if he had taken reasonable care of it.  But if the subjects of the contract be not restored in the like condition as that in which it was received, there is a certain burden of proof laid on the hirer.  He must show the cause of injury or death, and at least produce prima facie proof that the cause was one for which he was not repsonsible."  

Like Copland v Brogan, again, the person having limited custody of goods which are then lost or stolen bears the burden of providing a reasonable explanation as to what happened to the goods.  This may be no easy task.  

The Sheriff allowed the parties a proof before answer. 

So if you saw someone surreptitiously transporting an excavator through the streets of Kilmarnock in early 2008, you'll know who it really belongs to….