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2.2.3The Standard Form Contract (Contract of Adhesion)

One of the most important developments for the law of contract has been the appearance of the standard form contract, or ‘contract of adhesion’, where one party merely adheres to the conditions already set by the other party.17

In Suisse Atlantique Société d’Armement Maritime S.A. v N.V. Rotterdamsche Kolen Centrale (1967, England), Lord Reid said:

Exemption clauses differ greatly in many respects. Probably the most objectionable are found in complex standard conditions which are now so common. In the ordinary way the customer has no time to read them, and if he did read them he would probably not understand them. And if he did understand and object to any of them, he would generally be told he could take it or leave it. And if he then went to another supplier the result would be the same. Freedom to contract must surely imply some choice or room for bargaining.18

In Schroeder v Macaulay (1974, England), Lord Diplock distinguished between two kinds of standard form document:

The first consists of contracts which set out the terms on which mercantile transactions have traditionally been performed. ..... Because these contracts have evolved over the centuries and have stood the test of time, these contracts are not generally to be treated with suspicion.19 If fairness and reasonableness were relevant to their enforceability, the fact that they are widely used by parties whose bargaining power is fairly matched would raise a strong presumption that their terms are fair and reasonable.20

The same presumption, however, does not apply to the other kind of standard form contract.21 In contrast, the second type of standard form contract is not generally the result of negotiation but is the result of business activities being concentrated into a few hands. Contract terms are imposed by the party with stronger bargaining power.22

There has been a tendency, particularly in recent years, to treat contracts of adhesion or standard form contracts differently from
other contracts. This is particularly true with respect to the duty to read.23 Perhaps the most significant case is Weaver v American Oil Co. (1971) which considered a lease by an oil company to an individual. The lessee signed without reading the lease under which he agreed, inter alia, to indemnify the lessor as a result of damages caused by the lessor’s negligence. The majority opinion first stated that the duty to read rule had no application to the case because ‘the clause was in fine print and contained no title heading….' 24

The court further added :

The party seeking to enforce such a contract has a burden of showing that the provisions were explained to the other party and came to his knowledge and there was in fact a real and voluntary meeting of minds and not merely an objective meeting.25

The court’s ultimate approach appears to be that the contract is unconscionable because an objective assent which flows from a duty to read is not sufficient (despite the objective theory of contracts) to bind a party to clauses which are unusual or unfair unless the clauses are at least brought to his attention AND explained. The theory is that since such clauses impose a great hardship or risk on the weaker party, who is otherwise unable to protect himself, an informed and voluntary consent should be required.26

The Weaver opinion also proceeded upon a ‘warranty’ analogy (as did the decision of the Court of Appeal in Esso Petroleum v Mardon, related in Section 2.2.1) when it stated: ‘The principle should be the same as that applicable to implied warranties, namely, that a package of goods sold to a purchaser is fit for the purpose intended and contains no harmful materials other than that represented.27

Such unequivocal comments reflect a perpetual striving towards fairness by the judiciary and give due manifestation to the famous obiter dictum (judge’s expression of opinion uttered in court or giving judgement) by Lord Justice Denning when, in J. Spurling Ltd. v Bradshaw (1956, England), he stated:

‘Some clauses which I have seen would need to be printed in red ink on the face of the document with a RED HAND pointing to it before the notice could be held to be sufficient’ 28

However, it is the decision of the Court of Appeal in Interfoto Picture Library Ltd. v Stiletto Visual Programmes Ltd.(1988, England) that promises to be seen as a landmark decision on the issue of incorporation of contractual terms, when not specifically drawn to the attention of the other party.

The defendant, an advertising agency, obtained photographs from the plaintiff, a company that operated a photographic library. The photographs were to be used in preparing an advertising campaign, but the photographs were not actually used in the campaign. The parties had not dealt with each other before and the photographs were supplied on the foot of a delivery note which set out conditions of contract in some detail. These terms were probably not read. One of the terms provided that if not returned after 14 days a fee of £5.00 per day per photograph would be charged. By oversight the defendant held onto the transparencies for a further 14 days and was sent an invoice for the charges calculated under this condition: some £3,783.50. The defendant disputed the charge.

The Court of Appeal held that the condition was not part of the contract because its existence had not been drawn to the attention of the defendant.

Dillon L.J. said:

It is in my judgement a logical development of the common law into modern conditions that it should be held, as it was in Thornton v Shoe Lane Parking Ltd. (see Section 2.2.2), that, if one condition in a set of printed conditions is particularly onerous or unusual, the party seeking to enforce it must show that that particular condition was fairly brought to the attention of the other party.30

Again, as was the case with The Exemption Clause, where a person suffers a loss as a result of an unusual or unfair condition being imposed on him, that had not been brought to his attention and explained prior to or at the time of contract, he can seek redress through the Court for the loss suffered.


The fairness of the RED HAND rule and its extended application is often most clearly upheld by judgements based on its direct application.

In O’Connor v First National Building Society (1991, Ireland), the plaintiff’s signature on a house loan application form, which excluded the defendant from liability should the property be defective, was held to bind the plaintiff. It was significant, in Lynch J.’s view, that the exemption clause was prominently displayed just above the place of signature.31

Note! There is a logically inferred confrontation to the signature rule in this judgement, in that if the exemption clause had not been so prominently brought to the attention of the plaintiff it is likely that it would not have been given effect, notwithstanding the plaintiff’s signing the contract; i.e. the RED HAND Rule would override the Signature Rule.


The main thrust of this website-book is directed towards the pervasive abuse of the 'consumer' by Financial Services Institutions, and it is therefore the term, 'consumer', that will generally be used in the Chapters that follow.

However, it will be clearly evident from this Chapter (the chapter on Law), that it is the term, 'person', with the an equivalent use of the term, 'party', that is generally used in both Common Law and Statute Law.

For example, you will note that, in the above case of Interfoto Picture Library Ltd. v Stiletto Visual Programmes Ltd., neither of the parties held the status of 'consumer', and the judgement given was that 'where one condition in a set of printed conditions is particularly onerous or unusual, the party seeking to enforce it must show that that particular condition was fairly brought to the attention of the other party'.

The term, 'person', has a clearly defined meaning in the legal context.

The term, 'person', as well as meaning an individual, can include a body corporate, such as a Company or an Institution,
and can also include an unincorporated body.

So, notwithstanding that there are specific Statutes whose provisions relate solely to the 'consumer', and notwithstanding the use of the limiting term, 'consumer', throughout this book, ————  be mindful of the broader significance of the term, 'person', and also of the terms, 'client', and 'customer', when used within the wording of a particular Judgement or Statute.


17 Beatson, Burrows and Cartwright, Anson’s Law of Contract, (29 th ed.), p. 171 and 172.

18 Clark and Clarke, Contract Cases and Materials, (4th ed.), p. 441.

19, 22 Clark, Contract Law in Ireland, (6th ed.), p. 218.

20, 21 Clark and Clarke, Contract Cases and Materials, (4th ed.), p. 388.

23 Clark and Clarke, Contract Cases and Materials, (4th ed.), p. 393, citing Calamari ‘Duty to Read – A Changing Concept’, who references Kessler ‘Contracts of Adhesion Some –– Thoughts About Freedom of Contracts’ and Ehrenzweig ‘Adhesion Contracts in the Conflict of Laws’.

24, 25, 26, 27 Clark and Clarke, Contract Cases and Materials, (4th ed.), p. 393 to 395, citing Calamari ‘Duty to Read – A Changing Concept’.

28 Clark and Clarke, Contract Cases and Materials, (4th ed.), p. 404.

29 Clark, Contract Law in Ireland, (6th ed.), p. 191.

30, 31 Clark, Contract Law in Ireland, (6th ed.), p. 192 and 193.


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