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Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd (1987) CA
This case concerns the incorporation of terms into a contract, specifically focusing on whether a particularly onerous clause was validly incorporated.
I. Facts:
This case concerns the incorporation of terms into a contract, specifically focusing on whether a particularly onerous clause was validly incorporated.
I. Facts:
- March 5, 1984: Stiletto (defendants, advertising agency) requested pictures from Interfoto (plaintiffs, picture library).
- Interfoto sent 47 transparencies with a delivery note containing nine conditions.
- Condition 2: Crucially, this stated a £5 per transparency, per day holding fee after a 14-day return period.
- Stiletto received the transparencies, did not read the conditions, and initially indicated potential use.
- Transparencies returned late (April 2nd), prompting Interfoto's claim for £3,783.50 based on Condition 2.
- Incorporation of Terms: Was Condition 2 (the holding fee clause) validly incorporated into the contract? Did Stiletto have sufficient notice of the terms contained within the delivery note?
- Unreasonable Terms: Was Condition 2 an "unreasonable and extortionate" clause, requiring special steps by Interfoto to ensure its incorporation?
- Penalty Clause (Obiter): The court considered (but didn't decide) whether Condition 2 could be considered a penalty clause (a clause designed to punish breach rather than compensate).
- Contract Formation: The contract was formed when Stiletto accepted the transparencies and indicated they would review them. The court recognized that Stiletto knew there was writing (the delivery note) likely containing terms, even if they didn't read it.
- Incorporation of Condition 2: The court held that Condition 2 was not incorporated. While "common form" or "usual" terms are easily incorporated, this clause was deemed "unreasonable and extortionate." This unreasonableness meant Interfoto needed to take extra steps to bring it to Stiletto's attention (e.g., highlighting it, drawing attention to its significance). They failed to do so.
- Quantum Meruit: Instead of the claimed £3,783.50, Interfoto was awarded a reasonable holding charge calculated on a quantum meruit basis: £3.50 per transparency per week (£378.35 total).
- Penalty Clause (Obiter): The court suggested Condition 2 might have been void as a penalty clause, but this wasn't argued by the parties so remained undecided.
- Incorporation of Terms: The more onerous or unusual a clause, the greater the steps required to bring it to the other party's notice to ensure its incorporation. Simply including the term in a document isn't enough if it's unusually harsh.
- Reasonable Notice: Parties must have reasonable notice of contractual terms. Mere awareness of a document containing terms is not enough for incorporation of especially onerous clauses.
- Unreasonable Terms: Courts can refuse to enforce terms that are considered unreasonable or extortionate. This is particularly true when the party seeking to enforce them haven't taken steps to highlight their unusual nature.
- Penalty Clauses: Clauses designed to punish rather than compensate for breach may be struck down as void.
- What are the different ways contractual terms can be incorporated? How does this case illustrate the limitations of simply including a term in a document?
- What makes a contractual term "unreasonable" or "extortionate"? How does a court determine this?
- Why was the quantum meruit award made instead of enforcing Condition 2? What is the purpose of a quantum meruit award?
- Discuss the difference between a compensatory clause and a penalty clause. How might the principles discussed in this case apply to the interpretation of penalty clauses?
- Explain how the decision in Interfoto might influence business practices concerning the inclusion of potentially problematic terms in standard form contracts.
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