British Crane Hire v Ipswich Plant Hire [1973] EWCA Civ 6 (13 November 1973)

Facts

The defendants, Ipswich Plant Hire (IPH), urgently required a dragline crane for work on marshy ground. They contacted the plaintiffs, British Crane Hire (BCH), by telephone to arrange the hire. Both parties were established businesses engaged in the hiring of heavy earth-moving equipment. Following the telephoned agreement, BCH delivered the crane. They subsequently sent a printed form setting out their standard conditions of hire, which IPH had not yet received or signed when the incident occurred. The crane, while being moved on the marshy ground under the direction of IPH, became stuck in the mud. Significant costs were incurred in its recovery. BCH’s conditions, which were based on a model form widely used in the trade and drafted by the Contractors’ Plant Association, stipulated that the hirer (IPH) was responsible for the recovery of the crane from soft ground. IPH argued that these terms were not part of the contract, which they contended was formed entirely during the oral telephone conversation.

Issues

The central legal issue before the Court of Appeal was whether BCH’s standard printed conditions of hire were incorporated into the oral contract agreed over the telephone. The court had to determine if terms could be incorporated by reference to a common understanding and practice within a particular trade, especially when both parties were commercial entities of equal bargaining power familiar with such practices, even without a consistent and long course of dealing between them specifically.

Judgment

The Court of Appeal unanimously dismissed the appeal, affirming the trial judge’s decision that BCH’s conditions were incorporated into the contract. The judgment established that the common understanding and norms of the trade could be sufficient to incorporate standard terms.

Lord Denning M.R.

Lord Denning drew a crucial distinction between this case, involving two commercial parties in the same trade, and cases involving a private consumer. He noted that both BCH and IPH were aware that it was standard industry practice for cranes to be hired out subject to conditions placing the risk of recovery on the hirer. Indeed, IPH used similar terms when they themselves hired out equipment. The urgency of the hire meant that the usual paperwork formalities were bypassed, but the underlying assumptions of the trade remained.

Lord Denning reasoned that the incorporation of the terms did not depend on a long and consistent course of dealing between these specific parties, but rather on the shared context of their trade. He stated:

The question is whether these conditions were incorporated in the oral contract made by telephone on the 18th June. It is clear that both parties knew quite well that conditions were habitually imposed by the owner of a crane let out on hire… From the evidence it is clear that the defendants had sent out their “Conditions for Hire” to the plaintiffs on previous occasions… In the circumstances, it seems to me that the conditions on the form should be regarded as incorporated into the contract.

He further clarified the principle that where parties share a common background in a trade, they are presumed to contract on the basis of the customary terms of that trade:

In this case the defendants relied on the common understanding between the parties – who were both in the trade – that the hiring would be on the plaintiffs’ usual conditions. In my opinion, the plaintiffs, by the conduct of their director in ordering the crane, must be taken to have accepted the crane on the terms of the defendants’ conditions… I think the judge was right in his conclusion, and I would dismiss the appeal.

Sir Eric Sachs

Sir Eric Sachs concurred, emphasising the equal bargaining power of the parties. He argued that in a commercial setting where both parties know the general nature of the conditions prevalent in their trade, the party seeking to impose those conditions will succeed if the terms themselves are reasonable. The key factor was the common knowledge that contracts of this type were not made in a vacuum but against a backdrop of established industry practice. Since IPH knew that some conditions would apply and had themselves used similar terms, they could not claim to be unaware of the general nature of the obligations they were undertaking.

Implications

This case is a significant authority in contract law regarding the incorporation of terms, particularly by reference to a ‘common understanding’ or trade custom. It establishes that where two commercial parties of equal bargaining power operate within the same trade, the court may infer that they intended to contract on the basis of one party’s standard terms, provided those terms are habitual and well-known within that industry. The decision tempers the stricter requirements of a long and consistent ‘course of dealing’ that might be necessary in other contexts. It underscores the court’s pragmatic approach in commercial disputes, giving weight to the background assumptions and practices of a particular industry. The case serves as a warning to commercial parties that they may be bound by industry-standard terms even if those terms are not explicitly discussed or provided before the contract is concluded, especially in situations of urgency.

Verdict: Appeal dismissed.

Source: British Crane Hire v Ipswich Plant Hire [1973] EWCA Civ 6 (13 November 1973)