Terms and conditions may not apply

Summary

A More Detailed Explanation

Many businesses have adopted a practice of not including their trading terms and conditions in their proposals, quotations or estimates and rather referring to them in those documents using variations of "Terms and Conditions annexed" or "Subject to our standard T&C's" somewhere at the bottom of those documents. Their hope is that these terms and conditions will apply to their transaction with their customers and will protect them if something goes wrong.

Typically these terms and conditions should include important provisions dealing with descriptions of their products and services; fees due; payment terms; liability limitation provisions and so on. If these terms and conditions don't, for some reason, apply to the transaction with the customer, these important provisions won't apply and the provider will not have their benefit if a dispute arises between the provider and the customer. It could be disastrous.

The Supreme Court of Appeal dealt with this issue in the Cape Group Construction (Proprietary) Limited trading as Forbes Waterproofing vs Government of the United Kingdom case in 2003. I that case the appellant, Cape Group Construction (I'll refer to them as "CGC" in this post) submitted a quote which referred to additional terms and conditions by stating "SEE TERMS AND CONDITIONS OVERLEAF" without actually faxing the "overleaf" terms and conditions. The judge in that case found that by not sending the terms and conditions, CGC did not intend for them to apply, and they weren't applied. The basis for this part of the ruling was a rule of construction applied in contract interpretation disputes:

The argument for the Government is a simple one. The injunction ‘See Terms and Conditions Overleaf’ does not convey that there are standard terms, which would be available for inspection if the addressee wished to see them. The natural meaning, so the argument proceeds, is that if no additional terms or conditions are transmitted, there are none applicable to this particular contract. I agree with the argument. The meaning contended for is the natural interpretation, a more probable one than that there were standard terms hovering in the background, and that it was for the Government to obtain them if it wished to ascertain their content.

As a backup, the court pointed out a principle known as the contra proferentum rule which holds the party drafting the contract's terms liable for instances where the party isn't clear. Grotius, an influential legal scholar from the 17th century stated the principle as follows:

for he has himself to blame for not speaking more plainly

A line of cases known as the "ticket" cases came under consideration too. These cases have their origin in a line of cases dealing with terms and conditions applicable to train tickets. The principle is pretty much the same. The tickets referred to terms and conditions governing related services and which were not printed on the tickets themselves (sound familiar?). The courts developed a body of law which was summarised in the 1998 Supreme Court of Appeal case of Durban's Water Wonderworld (Proprietary) Limited vs Ingrid Botha in which the court summed up the principles as follows (this is a fairly lengthy extract so I have bolded the key points):

The principles applicable to so-called 'ticket cases' apply mutatis mutandis to cases such as the present where reliance is placed on the display of a notice containing terms relating to a contract. (See Joubert The Law of South Africa vol 5, part 1 (first reissue) par 186.) Had Mrs Botha read and accepted the terms of the notices in question there would have been actual consensus and both she and Mariska's guardian, on whose behalf she also contracted, would have been bound by those terms. Had she seen one of the notices, realised that it contained conditions relating to the use of the amenities but not bothered to read it, there would similarly have been actual consensus on the basis that she would have agreed to be bound by those terms, whatever they may have been. (Central South African Railways v James 1908 TS 221 at 226.) The evidence, however, did not go that far.

Mrs Botha conceded that she was aware that there were notices of the kind in question at amusement parks but did not admit to having actually seen any of the notices at the appellant's park on the evening concerned, or for that matter at any other time. In these circumstances, the appellant was obliged to establish that the respondents were bound by the terms of the disclaimer on the basis of quasi-mutual assent. This involves an inquiry whether the appellant was reasonably entitled to assume from Mrs Botha's conduct in going ahead and purchasing a ticket that she had assented to the terms of the disclaimer or was prepared to be bound by them without reading them. … The answer depends upon whether in all the circumstances the appellant did what was 'reasonably sufficient' to give patrons notice of the terms of the disclaimer. … In substance they were all intended to convey the same thing, viz an objective test based on the reasonableness of the steps taken by the proferens to bring the terms in question to the attention of the customer or patron.

I have previously described the notices containing the disclaimer and their location. From that description it is apparent that they were prominently displayed at a place where one would ordinarily expect to find any notice containing terms governing the contract entered into by the purchase of a ticket, viz at the ticket office. Any reasonable person approaching the office in order to purchase a ticket could hardly have failed to observe the notices with their bold white-painted border on either side of the cashier's window. Having regard to the nature of the contract and the circumstances in which it would ordinarily be entered into, the existence of a notice containing terms relating thereto would not be unexpected by a reasonable patron. This much is apparent from the evidence of Mrs Botha herself; she knew there were such notices at amusement parks. In all the circumstances I am satisfied that the steps taken by the appellant to bring the disclaimer to the attention of patrons were reasonable and that, accordingly, the contract concluded by Mrs Botha was subject to its terms.

These cases highlight the importance of –

• clearly and prominently stating that additional terms and conditions apply to the transaction;
• ensuring that this notice appears in a place a customer would expect to find them (this applies to websites too) or, in the case of a document, in a location on the document where the customer can't help but see the notice;
• ensuring that the terms and conditions contain provisions which a customer would expect to find given the nature of the products and services.

In the CGC case, the court reaffirmed the Durban Water Wonderworld case and also addressed overly broad liability limitation clauses. This is now addressed by the Consumer Protection Act in section 49:

49. (1) Any notice to consumers or provision of a consumer agreement that purports to—

(a) limit in any way the risk or liability of the supplier or any other person;
(b) constitute an assumption of risk or liability by the consumer;
(c) impose an obligation on the consumer to indemnify the supplier or any other person for any cause; or
(d) be an acknowledgement of any fact by the consumer,

must be drawn to the attention of the consumer in a manner and form that satisfies the formal requirements of subsections (3) to (5).

Section 49(3) states that the terms and conditions referred to in section 49(1) must be in plain and intelligible language. Section 49(5) states that "the consumer must be given an adequate opportunity in the circumstances to receive and comprehend the provision or notice". In other words, the party must be able to obtain the terms and conditions and be able to understand them.

What Does This Mean?

While the basic contractual model of referring to terms and conditions in a document where those terms and conditions are located elsewhere remains a valid model, not taking care to clearly and prominently notify the other party that those terms and conditions exist and including provisions which the party wouldn't expect to find given the nature of the products or services they govern could be disastrous in the event of a dispute. A court could simply disregard the terms and conditions and where these terms and conditions are the only thing standing between your business and a substantial claim for damages, well, you can appreciate the risk.

If you are using this model, have your lawyer check your wording, positioning, prominence and the content of the terms and conditions to ensure they are still within acceptable parameters. Don't risk your business on a relatively fundamental legal framework.