Which case won?

The case for the transport company
  • As the pharmaceutical company authorised an agent to act on its behalf in terms of rates of freight and payment agreements, it is bound by the exemption clauses of the contract.
  • We clearly stated in the original contract that it is imperative to read the “Conditions of Contract” on the other side of the page.
  • It is not our fault the pharmaceutical company’s agent did not bother to read them.
  • We did not rush the agent or trick him into signing the contract.
  • Although the agent failed to read these conditions, he nonetheless signed the contract – and a signature is an act of being bound to a contract.
The case for the pharmaceutical company
  • We are technically not a party to the contract, as we had an agent sign it on our behalf.
  • Our agent did not read the terms and conditions overleaf and thus had no knowledge of the exemption clauses. Hence, the transport company cannot rely on these clauses and is indeed liable.
  • Even though our agent failed to read the exemption clauses, the transport company made no mention of them in conversation between the parties.
  • Our agent (the retailer of medical supplies) sent a fax to the transport company expressing the significance of the transportation. The fax specified: "These are highly perishable vaccines for flu inoculation in humans. It is therefore vital that you can assure us of being able to maintain and evidence your part of the cold chain from pick up to drop off…”
  • Even though our agent signed the contract, the transport company did not do everything reasonably sufficient to ensure that all parties had read and understood the terms and conditions.

So, which case won?

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Case A Case B

Case A won. You were right!

How people voted
case a53%
case b47%

Expert commentary on the court's decision

“The court highlighted the weight a signature plays on one’s intention to enter into legal relations. Although the pharmaceutical company’s agent failed to read and was unaware of certain clauses in the contract, a signature nonetheless indicates a contractual obligation.”
High Court rules in favour of vaccine transport company

In Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; 219 CLR 165; 79 ALJR 129; 211 ALR 342, the High Court found in favour of Toll – unanimously overturning the two prior decisions.

Initially, judgment was entered for Alphapharm in the form of damages for negligence ($683,061.86).

The District Court of NSW and the NSW Court of Appeal determined that Toll had not provided Richard Thomson (Alphapharm’s agent) with adequate notice of the existence of the conditions on the reverse page of the contract.

As Toll was unable to rely on the exemption clauses in the contract, it was held liable for the damage to the vaccine shipment that occurred during delivery.

High Court rejects legal rationale used by District Court and Court of Appeal

However, on appeal to the High Court of Australia, this legal principle was rejected. An objective test was applied to determine whether a “reasonable” person in the position of each party would assume an intention to create legal relations.

The High Court concluded that the language and conduct of the parties would have led a reasonable person to believe there was a goal to manifest a contractual relationship.

A party which doesn’t physically sign a contract can still be bound by it

It was also found that as Alphapharm would benefit from Toll’s delivery duties and had provided Richard Thomson with the delivery information and instructions to pass on to Toll, Alphapharm was indeed a party to the contract.

A signature is an intent to be contractually bound

Chief Justice Gleeson, as well as Justices Gummow, Hayne, Callinan and Heydon, unanimously held that as Richard Thomson had signed the contract, with no vitiating factors present (such as duress, fraud or misrepresentation), the agreement between the parties was valid and Toll could ultimately rely on the exemption clauses. The court stated:

The general rule, which applies in the present case, is that where there is no suggested vitiating element… a person who signs a document which is known by that person to contain contractual terms, and to affect legal relations, is bound by those terms, and it is immaterial that the person has not read the document.

Significance in the world of commercial transactions

The High Court’s decision will undoubtedly hold commercial corporations accountable for their legal conduct.

Large companies which are quite “capable of looking after [their] own interests” are no longer entitled to assume that they are not bound by the contracts they have signed, just because their agent or representative did not comprehensively read the terms and conditions.

Alphapharm ordered to repay Toll money awarded for damages

At the conclusion of the hearing, Alphapharm agreed to repay Toll the full amount it was originally awarded for damages, $683,061.86.

Alphapharm similarly complied with the court’s request to cover the costs of the appeal.

NOTICE: This article is accurate as at the time of publication and does not constitute legal advice. Please see our legal notices page for more information. Information related to coronavirus can be outdated very quickly.

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