## Facts

- David MacBrayne Ltd operated ferry services between Islay and the Scottish mainland.
- McCutcheon’s car was shipped on the company’s ferry, the *MV Lochiel*, arranged and paid for by McCutcheon’s brother-in-law, McSporran.
- The ferry struck rocks and sank, and the car was lost due to the carrier’s employees’ negligent navigation.
- The carrier’s usual practice was to require consignors to sign a “risk note” containing conditions excluding liability, including for negligence.
- On the shipment in question, no risk note was presented or signed; a receipt was issued after payment.
- On prior occasions, McCutcheon had signed risk notes several times, and McSporran had sometimes signed and sometimes not; neither had read or knew the specific terms.
- McCutcheon sued for the agreed value of the car; the carrier relied on its standard exclusion conditions and office-displayed notices.
- The trial court found for McCutcheon; the appellate court reversed; the House of Lords granted McCutcheon’s appeal.

## Issues

1. Whether an exclusion clause in a standard “risk note” was incorporated into an oral contract of carriage when no risk note was issued or signed on the relevant occasion.
2. Whether a prior course of dealing can incorporate exclusion terms when prior transactions were not shown to be regular and consistent and the customer lacked knowledge of the specific terms.
3. Whether conditions displayed at the carrier’s office, without proof they were read or otherwise brought home to the consignor, formed part of the contract.

## Decision

- The House of Lords unanimously allowed the appeal and restored judgment for McCutcheon.
- The exclusion clause was not incorporated because the contract was oral and no contractual document containing the clause was used at the time of contracting.
- The receipt issued after the oral agreement was treated as non-contractual and could not introduce exclusion terms.
- The carrier failed to prove a sufficiently regular and consistent course of dealing to imply the exclusion conditions into the contract.
- Office notices were immaterial on the facts because there was no proof McCutcheon or McSporran read them or otherwise had the required knowledge.

## Legal Principles

- Exclusion terms are not incorporated into an oral contract merely because the proponent typically uses a standard form containing those terms; incorporation requires proper communication and assent.
- A course of dealing can imply standard terms into a later contract only where prior dealings are regular, consistent, and sufficiently uniform to justify treating the terms as part of the parties’ common basis of contracting.
- General awareness that a party “has conditions” is insufficient; incorporation by prior dealings requires actual or constructive knowledge of the specific terms sought to be enforced.
- A party cannot rely on conditions contained in a document that it did not present or have accepted in the transaction at issue; a “would-have-signed” argument does not establish incorporation.
- Documents issued after contract formation, when not intended as contractual instruments, are evidence of the transaction but do not add contractual terms.

## Conclusion

Because the carriage contract was made orally without any risk note or comparable contractual document and the prior transactions did not show a consistent practice of contracting on the exclusion terms with knowledge of their content, the carrier could not exclude liability for the loss caused by its negligence.


McCutcheon v. David MacBrayne Ltd., [1964] 1 W.L.R. 125 (H.L.) (Scot.)