McCutcheon v David MacBrayne Ltd [1964]

McCutcheon v David MacBrayne Ltd [1964] 1 WLR 125 is a notable Scottish contract law case that revolves around the issue of incorporating a contractual term through a course of dealings. The central matter involved the sinking of the MV Lochiel, a ferry operated by David MacBrayne Ltd, resulting in the loss of McCutcheon's car.

The MV Lochiel, a ferry operated by David MacBrayne Ltd, sank, leading to the loss of McCutcheon's car. Ordinarily, David MacBrayne Ltd would require customers to sign a risk note exempting the company from liability. However, McCutcheon's brother-in-law, responsible for shipping arrangements, did not sign, and McCutcheon himself, despite signing risk notes on previous occasions, was unaware of the specific conditions within them.

The House of Lords, in their judgment, held that there was no regular course of dealing with McCutcheon, thus the term shifting the risk had not been incorporated into the contract. Lord Reid emphasised the importance of reasonable notice or a signature for term incorporation. He asserted that while a consistent course of dealing might imply terms into a contract, in this instance, there was no such consistency with McCutcheon.

Lord Devlin, concurring with the decision, suggested that actual knowledge would be necessary to incorporate terms, emphasising the conclusive nature of a signature in contractual matters. He noted that previous dealings are relevant only if they prove knowledge and agreement to a term, reiterating the significance of actual knowledge.

Lord Reid rejected the argument that the mere fact of previous dealings in a similar form would automatically affect the terms of a subsequent contract. He emphasised that knowledge and agreement to terms are crucial, rejecting the idea that a consistent course of dealing alone could imply terms.

The case reaffirms the importance of reasonable notice, signature, or a consistent course of dealing in incorporating terms into a contract. It underscores the necessity of knowledge and agreement to terms in establishing a course of dealing. Furthermore, it highlights the need for clarity, fairness, and reasonableness in contractual terms, particularly in situations where there is no room for free negotiation. The judgment also emphasises the critical role of signatures in contractual agreements, aligning with established legal principles.
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