In Alphapharm the Court was faced with a complex factual scenario, appearing to challenge a longstanding principle of contract law from the authority L’Estrange v F Graucob. The following case analysis will discuss the prominent decisions of the Court emphasising its bearing in legal and commercial contexts.
The facts regard flu inoculations, which were damaged while being transported by Toll between its warehouse and Alphapharm’s customers. The dispute which arose concerned which party would be held liable for the damage. It is important to note Alphapharm dealt indirectly with Toll through a third party, Richard Thomson, who signed an acceptance to Freight Rates and an “Application for Credit” on Alphapharm’s behalf. The reverse side of the application contained 15 “Conditions of Contract”, excluding and indemnifying Toll for any damages caused to the goods. Richard Thomson neglected to read these conditions.
The High Court focused primarily on whether the exclusion clauses formed part of the contract between Toll and Alphapharm, known as the ‘terms of contract issue’.
In appeal decisions rationes can come only from those legal issues that were in contention. The following rationes were the reason for deciding this case. Firstly ‘where there is no suggestion of vitiation, and no claim for equitable or statutory relief, a person who signs a document known to contain contractual terms, and affect legal relations, is bound by those terms, and it is immaterial that the person has not read the document’. Secondly, the Court decided that the meaning of contractual terms should be judged by ‘what a reasonable person would have understood them to mean’ by considering the text but also the surrounding circumstances.
The Court stated that the point at issue on this appeal concerned not the creation of legal relations but the nature of the legal relations created....