Posted on November 02, 2023
Many businesses engage clients through contracts and negotiations. Often the contract intended to govern the commercial dealings between the parties will fail to effectively include the business’ existing terms and conditions.
Many businesses are not well informed as to what is required to effectively incorporate their existing terms and conditions into a new contract with a client. If the terms and conditions are not incorporated effectively, the business may risk the trouble and expense of litigation and may even be prevented from trading on their preferred terms.
How can terms and conditions be effectively incorporated?
For a party to effectively incorporate their terms and conditions, they must take reasonable steps to bring such terms and conditions to the other party’s attention. The other party must have been objectively aware of the terms, had sufficient opportunity to analyse the terms and had subsequently agreed to the contract on that basis.
The client must have knowledge of the terms
In Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 the High Court held that Toll had successfully discharged its duty to provide notice of its terms to Alphapharm by expressly stipulating in the primary contract that the terms therein were subject to further terms and conditions.
The court gave particular emphasis to the fact that this clause was:
1. proximate to where the consumer was intended to sign;
2. in sufficiently legible fonts; and
3. it requested the terms and conditions be read prior to signage.
Although these factors provide a clear indication of what the court considers when determining whether the party was sufficiently put on notice, what constitutes sufficient notice will vary depending on the circumstances of the case.
If the term is particularly onerous, in that the business is attempting to exclude liability in a way inconsistent with common business practice, the threshold will be higher as to what a business must do to successfully discharge their duty (Brennan J in Oceanic Sun Line Special Shipping Company Inc v Fay (1998) 165 CLR 197).
The terms must be readily accessible to the party
Further, it is not enough that the client be aware of the terms, they must also be readily accessible to the client prior to the formation of the contract.
In Oceanic Sun Line Special Shipping Company Inc v Fay (1998) 165 CLR 197, Oceanic, a cruise company, had included a clause in their carrier’s brochure that indicated passengers were contracted on the company’s terms and conditions which were to be found on the ticket itself. The court held this alone was not sufficient to put the party on notice as the terms and conditions were not readily available for the party to inspect prior to formation of the contract. The ticket with the accompanying terms and conditions had not been available at the travel agent where the cruise had been booked.
In light of this decision, it is fundamental that businesses not only ensure that their clients are aware of the terms and conditions but take further steps to make such terms readily accessible.
If you require assistance in reviewing your terms and conditions and ensuring that they are effectively incorporated into your contracts, please do not hesitate to contact our office.
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