Grayston Plant Ltd v Plean Precast Ltd

Factual and Procedural Background

On 2nd December 1971, a verbal contract was made by telephone between the pursuers and defenders for the hire of a crane. The crane was delivered the same day, but shortly after delivery it was damaged in an accident. The pursuers sought indemnification from the defenders for the loss and damage to the crane, relying on standard General Conditions for the Hiring of Plant issued by the Contractors Plant Association, particularly Clause 13, which required the hirer to indemnify the owner for loss or damage during the hire period. The defenders accepted liability if these conditions applied but disputed whether the General Conditions were incorporated into the contract, which was verbal and did not reference the conditions at the time of agreement.

The pursuers' usual practice was to send an Acknowledgment of Order Form after verbal contracts, which included a statement that the order was subject to the General Conditions and that acceptance of the plant implied acceptance of those terms. The defenders received such a form on 6th December 1971, after the accident. The pursuers argued that a course of dealing over about 12 similar hires in the previous four years, all involving verbal contracts followed by similar acknowledgments, established incorporation of the General Conditions into the contract. The defenders denied awareness of the conditions and asserted no sufficient notice was given.

The Lord Ordinary found that the pursuers had not established that Clause 13 of the General Conditions was incorporated into the verbal contract and dismissed the pursuers' claim. The pursuers reclaimed, contesting the legal conclusion on incorporation but accepted the facts as found by the Lord Ordinary. The defenders conceded that a course of dealing existed, narrowing the dispute to whether reasonable and sufficient notice of Clause 13 was given to incorporate it into the contract.

Legal Issues Presented

1. Whether the General Conditions for the Hiring of Plant, specifically Clause 13, were incorporated into the verbal contract between the parties by virtue of a prior course of dealing.
2. Whether the pursuers took reasonable and sufficient steps to bring the terms of Clause 13 to the defenders' notice so as to incorporate it into the contract.

Arguments of the Parties

Pursuers' Arguments

• The prior course of dealing involving about 12 similar verbal contracts followed by written Acknowledgment of Order Forms containing reference to the General Conditions was sufficient to incorporate those conditions into the verbal contract of 2nd December 1971.
• A reference in the Acknowledgment of Order Forms to the General Conditions and the availability of copies on request constituted reasonable and sufficient notice to the defenders.
• Although no case law directly supported incorporation of terms by mere reference without stating the terms, the principle should apply on the facts here.
• Support was sought from "ticket cases" where terms printed on tickets or notices were incorporated by reasonable notice, but this was acknowledged as a limited and special category.
• The legal test from Hardwick Game Farm v. Suffolk Agricultural Poultry Producers Association was relied upon to argue that incorporation depends on whether each party reasonably led the other to believe the terms formed part of the contract.

Defenders' Arguments

• The mere reference in the Acknowledgment of Order Forms to the General Conditions without specifying the terms or their purport, particularly Clause 13, did not amount to reasonable and sufficient notice.
• The defenders had never received or requested copies of the General Conditions prior to the accident and were not members of the Contractors Plant Association nor experienced plant hirers.
• The pursuers failed to take reasonable steps to bring the indemnity clause to the defenders’ attention, especially given the serious nature of the liabilities imposed.
• The case should not be treated as a "ticket case," and the principles applicable to such cases do not extend to this situation.

Table of Precedents Cited

Court's Reasoning and Analysis

The court analysed whether the General Conditions, specifically Clause 13 imposing indemnity obligations on the hirer, were incorporated into the verbal contract by virtue of a prior course of dealing. It accepted the defenders' concession that a course of dealing existed but focused on whether reasonable and sufficient notice had been given to incorporate the conditions.

The court noted the pursuers' usual practice of sending an Acknowledgment of Order Form after verbal contracts, which referred generally to the General Conditions and offered to forward copies on request. However, the court found that no copies were ever sent before the accident, the defenders never requested them, and the Acknowledgment did not specify the terms or purport of the conditions, particularly Clause 13.

Applying established precedents, the court emphasised that incorporation of onerous terms such as indemnity clauses requires clear and reasonable notice. Mere reference to conditions, without specifying their nature or contents, is insufficient to incorporate them into a contract. The court rejected the pursuers' reliance on "ticket cases" as inapplicable due to the different factual context and the absence of clear notice.

The court found that the pursuers did not take all reasonable steps to bring Clause 13 to the defenders' attention and that the repeated references in the Acknowledgment forms, without more, did not satisfy the test of reasonable notice. Consequently, Clause 13 was not incorporated into the verbal contract.

The court further clarified that the legal test from Hardwick Game Farm concerning reasonable belief of parties about contract terms relates to legal interpretation and presupposes reasonable notice has been established. Since reasonable notice was not proven, the condition could not be incorporated.

Thus, the court upheld the Lord Ordinary's decision to dismiss the pursuers' claim on the merits.

Holding and Implications

The court REFUSED THE RECLAIMING MOTION and upheld the interlocutor of the Lord Ordinary dated 28th August 1975, which found that Clause 13 of the General Conditions was not incorporated into the verbal contract between the pursuers and defenders.

The direct effect is that the defenders are not liable to indemnify the pursuers for the loss and damage to the crane under Clause 13, as it was not part of the contract. No broader legal precedent was established beyond reaffirming the principle that onerous contractual terms require clear and reasonable notice to be incorporated, especially in the context of verbal contracts followed by written acknowledgments merely referring to general conditions without specifying terms.