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INCORPORATION OF STANDARD TRADING CONDITIONS
Photolibrary Group Ltd & Others -v- Burda Senator Verlag Gmbh
In a recent decision by Mr Justice Jack in the Queen's Bench Division the issue of incorporation of standard trading conditions was reviewed. The case serves as a useful reminder of how standard trading conditions may be incorporated into a trading relationship even without a signed contract.
The case concerned photographic transparencies supplied by the various claimants to the defendants. The defendants requested and received the transparencies from the claimants for consideration for use in various publications in Germany. The defendants would often retain the photographic transparencies for some considerable time while they considered whether or not to use them. The transparencies would invariably be sent to Burda Media in London and would be accompanied by a delivery note. This listed the transparencies sent and made reference to the terms of business. In each case, these were based upon the terms of business recommended by the British Association of Picture Libraries and Agencies ("BAPLA").
The delivery notes would also make reference to holding fees (being fees charged where the transparencies were retained by the defendants over a certain period) and loss and damage fees (being the fees charged if the transparencies were lost or damaged after they had been delivered to Burda Media in London). The loss and damage fee varied between £450 and £750 per transparency, the majority being in the region of £500.
In November 2004 a parcel of 1,865 transparencies belonging to the various claimants was lost whilst in the custody of an air carrier during transit between Germany and London. The claimants presented a claim against the defendants for the loss of the transparencies in accordance with the sums set out in the delivery notes. They also claimed the holding fees in respect of other transparencies.
The judge reviewed the history of the BAPLA conditions and noted that they are extensively used throughout the industry. He also noted the fact that the BAPLA conditions closely reflect similar conditions in Europe and the USA. However, even outside the use of the BAPLA conditions, there was evidence that clients would typically be contractually obliged to pay liquidated damages if they lost or damaged transparencies and such provisions were standard for the industry around the world. Moreover, there was evidence that the fees claimed by the claimants were also of a usual level.
The standard form delivery note stated that the images were loaned subject to the BAPLA standard trading conditions. The form then went on to say that, if the conditions were not accepted by the client, the client should return the transparencies immediately. If these were not returned within five days the client was deemed to have accepted the conditions.
The Court reviewed the trading history between the various claimants and the defendants. In some cases there were several thousand previous transactions that had been conducted. Furthermore, the defendants had previously negotiated reductions in the loss fees. During these negotiations it had become clear that they were fully aware of the standard trading conditions upon which the claimants relied. They were also clearly aware of the operation of the loss fees.
With regard to the holding fees, there had been a number of previous attempts to enforce these by various claimants against the defendants. However, it had been made clear by the defendants that the trading relationship would not continue if these were enforced and the claimants had previously agreed to withdraw such claims. Some of the claimants had not even bothered to present claims for holding fees in the first place in order to protect their trading relationship!
It does not appear to have been suggested that the trading conditions were so universally used as to have been incorporated by way of trade usage. Whilst the conditions were in a standard form, that remains a long way short of the test set out in British Crane Hire Corp -v- Ipswich Plant Hire [1975] QB 303. However, the conditions were so widely used that the judge considered the defendants should have been reasonably familiar with both their general form and the fact that parties would typically rely upon them. The judge considered that the reference to the conditions throughout the extensive course of trading was sufficient to advise the defendants of the claimants' intention to trade subject to these conditions. The judge referred to the judgment of Lord Justice Taylor in Circle Freight International Limited -v- Medeast Gulf Exports Limited [1988] 2 Lloyd's Rep 427 and drew analogies between the two cases. For example, the parties were both commercial parties, there had been a course of dealings, standard trading conditions were frequently imposed and the conditions upon which the claimants sought to rely were not unduly onerous.
The defendants referred to the Inter Photo Picture Library -v- Stiletto Visual Programs Limited [1989] 1QB 433 decision which had a number of similarities to this one. Again, the case dealt with photographic transparencies and the provision of these by lending libraries. However, the argument for incorporation in the Interphoto case failed because the Court found that the term relied upon was particularly onerous and insufficient steps had been taken to bring it to the defendants' notice.
This argument was not available to the defendants in the Photo Library Group case since the judge found (a) the loss fee was not onerous but was reasonably standard in the business; and (b) the defendants had received adequate notice of the conditions concerned to the extent that they had even negotiated loss fees with the claimants on previous occasions.
The judge provided an interesting analysis of the contractual situation which suggests that a less extensive course of dealing may have been sufficient to prove incorporation (at least insofar as one is concerned with terms which are not onerous). He was of the opinion that delivery of transparencies, accompanied by a delivery note, was to be treated as an offer. This offer was accepted by the acceptance of the transparencies and their onward transmission to Germany. (The judge considered that the fax sent by the defendants requesting the transparencies was no more than an enquiry.) He therefore considered that the standard trading conditions were incorporated by reference before the contract was concluded.
Mr Justice Jack put forward an alternative analysis. He proposed that it was possible that the faxed requests were offers to submit the transparencies on the usual terms, namely the terms expressed on the delivery notes. Again, on the basis of the Circle Freight decision, the standard trading conditions would be incorporated by reason of a course of dealings.
The judge therefore considered that the loss fees could be relied upon by the claimants and this element of the contracts could be enforced.
However, the judge gave a different indication on the issue of the holding fees. He pointed out that the parties had previously agreed that these would not be applied. Although this was clearly in the interests of promoting the commercial relationship, the claimants had not enforced any rights to holding fees previously. Those claimants which had sought to charge holding fees had withdrawn these upon discussion with the defendants. In view of such previous conduct, Mr Justice Jack considered that the claimants would have a much more difficult time persuading him that they could now seek to rely on the contractual right to holding fees.
The case serves as a useful reminder of the methods by which trading conditions may be incorporated. Where two parties, trading within the same area of business, ought to appreciate that standard trading conditions are incorporated, the Courts have demonstrated a general willingness to find that standard trading conditions (particularly those which are well known to the parties and do not contain onerous terms) have been incorporated. The result seems an entirely reasonable one where such a course of trading had been established. The fact that a copy of the standard trading conditions is not signed by the parties is immaterial.
However, the case also highlights the consequences of the conduct of the parties. Incorporation can be undone by commercial considerations!
If you require further details concerning the case, please do not hesitate to contact Christopher Chatfield.
November 2008
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