Court: Court of Appeal (Civil Division)
Judgment Date: 12 November 1987
Where Reported: [1989] Q.B. 433; [1988] 2 W.L.R. 615; [1988] 1 All E.R. 348
Legal Issues in Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd
The central legal issue in Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd was based on the incorporation of onerous or unusual terms in a contract.
Specifically, Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd examined whether a particularly onerous condition in a contract, not explicitly brought to the attention of the other party, could be enforced.
This raised questions about the fairness and reasonable notice of contract terms, especially in standard form contracts.
Material Facts in Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd
Interfoto Picture Library Ltd provided Stiletto Visual Programmes Ltd with 47 transparencies, assuming Stiletto was aware of its standard terms and conditions.
These terms, which were not specifically pointed out to Stiletto, included a high daily holding fee for any transparencies not returned within 14 days.
Stiletto, unaware of this term, returned the transparencies after this period, resulting in a substantial charge. Interfoto then sought to enforce this fee.
Stiletto argued they were not aware of this onerous term, highlighting the issue of whether such terms were effectively incorporated into the contract.
Judgment in Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd
The Court of Appeal held in favour of Stiletto, finding that the onerous term was not enforceable.
The court notably relied on the principles that for a term to be part of a contract, it must be duly communicated before or at the time of contract formation. The court opined that particularly onerous or unusual terms require a higher degree of notice.
Lord Justice Bingham, in his judgment, emphasised that the more onerous or unusual the term, the greater the notice which must be given. The term in question was deemed both onerous and unusual.
It was not sufficient that the term was included in a document that could have been read by Stiletto; rather, Interfoto had a duty to specifically draw attention to such a burdensome term.
The Reason for the Decision in Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd
The court’s decision hinged on the principle that in contract law, particularly stringent or unusual terms must be clearly and expressly brought to the attention of the party to whom they apply.
This principle protects parties from being bound by terms that are unexpectedly onerous, which they may have not reasonably foreseen or noticed.
The court took into account the nature of the transaction, recognising that the term in question was not something Stiletto could have reasonably anticipated – see Brogden v Metropolitan Railway Co (1877).
Given the industry practice and the fact that Stiletto was a regular customer, the court found it unfair to enforce such a term without explicit notice. This perspective aligns with the doctrine of good faith and fair dealing in contractual relationships.
Another pivotal aspect in Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd was the consideration of the standard form contracts.
These contracts are typically not negotiated and often contain terms heavily favouring the party who drafted them.
The judgment underscored the need for fairness in these contracts, particularly when they contain surprising or particularly burdensome clauses.
In essence, the court balanced the principle of freedom of contract with the need to protect parties from unfair surprise.
It upheld the notion that while parties are generally bound by the terms of the contract, there is a threshold of fairness and awareness that cannot be overlooked, especially in commercial dealings.
Conclusion
The decision in Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd represents a fundamental stance in English contract law, particularly concerning the enforceability of onerous terms in standard form contracts – see Felthouse v Bindley (1862).
Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd underscores the principle that such terms must be explicitly brought to the attention of the affected party, reinforcing the balance between contractual freedom and fairness.
This case serves as a cautionary tale for businesses to ensure transparency and clarity in their contractual dealings, especially when dealing with terms that might be deemed unexpected or excessive.
It has influenced subsequent case law and remains a significant reference point in disputes involving standard form contracts and unfair terms.
