Fine print in a document may often be skimmed over and not given too much thought. The phrase “fine print” comes from the fact that it is often in a smaller font size. The fine print may also make reference to more terms and conditions in a separate document all together. The importance of reading the fine print was highlighted in the recent Court of Appeal decision of Open Country Dairy Limited v Able Food Sdn. Bhd.  MLJU 2382.
- The Plaintiff, Able Food Sdn Bhd (“Able Food”) filed an action against Open Country Diary Limited (“Open Country”), a New Zealand company, for supplying whole milk powder which was allegedly of unmerchantable quality.
- Open Country challenged the jurisdiction of the Malaysian courts on the basis that their Terms of Trade (“TOT”), which was incorporated by reference to the contract between parties, provides that the courts in New Zealand has exclusive jurisdiction.
- Open Country contended that each sales contract between the parties states that the TOT as set out in their website (http://opencountry.co.nz/termsoftrade) will form part of the contract.
- Able Food argued that the TOT was not incorporated into their contract. Among other things, the website did not contain the updated TOT, and it was not clear where the updated TOT could be found.
Decision of the Courts
The High Court decided in favour of Able Food. The High Court held that there was no consensus on the TOT, as the TOT was not attached to the sales contract. The High Court held that the courts in Malaysia had jurisdiction and was in any event the most appropriate forum to hear the dispute given, amongst others, that (i) the contract was made in Malaysia and the breach occurred in Malaysia; and (ii) all or most of the relevant witnesses and the evidence were within the jurisdiction of Malaysia.
On appeal, the Court of Appeal reversed the decision of the High Court. The Court of Appeal held:
- In all the sales contracts, it was clearly stated that the TOT formed part of the contract and that parties agreed to comply with the TOT. The link containing the TOT was endorsed in all the sales contracts. Although Able Food claimed ignorance and had not clicked on the link, this did not mean that the TOT contained in the link did not apply. The burden is on Able Food to look up the TOT and its failure to do so is akin to a contracting party not bothering to avail themselves of the terms.
- If parties had agreed to be bound by a contract which also included a reference to another document, these documents and their terms will be binding on the parties. This is even if the parties did not take the trouble to read the documents.
- There was no evidence that Able Food had accessed the TOT or had attempted to do so. There was no suggestion that it experienced any sort of difficulty in terms of trying to access the link.
- There was therefore an exclusive jurisdiction clause and this was incorporated in the contracts between parties. Able Food must be held to their bargain and a Malaysian court is obliged to give effect to the exclusive jurisdiction clause, unless exceptional circumstances can be established.
The fine print can have a not-so-fine impact on your commercial transactions. In this case, Able Food, as a Malaysian company, would have to litigate this dispute in New Zealand. This would be significantly more expensive for Able Food than if it were allowed to commence the claim in Malaysia.
In entering any contracts, it is the duty of each party to be fully aware of not just the terms of the contract document but any terms which may be incorporated by reference in the contract. The age-old law of “you are bound by what you sign” will not assist the careless or ignorant.
Before signing any contract, you should check:
- Are there any other documents are referred to in the terms? If so, you should ask for a copy of that document.
- Is there a website or link included which supposedly contains further terms? If so, you should access the link and review the terms on that site.
- Where external documents or links are included, perform a comparison between the terms of your contract and the terms in those external documents. Consider how inconsistencies will be addressed or if they will have a material impact on your commercial transaction.
- Alternatively, it may be appropriate for you to request that all references to external documents be removed from the contract so that the contract itself forms the entire agreement between the parties.
Fine print and boilerplate clauses shouldn’t be ignored, and getting qualified professionals to review contractual terms can save costs for a business in the long run.
This article was written by Th’ng Yan Nie with assistance from Manveer (Intern). Yan Nie is a Senior Associate in the dispute resolution practice group at Donovan & Ho. She has a wide range of experience in litigation matters including contractual and commercial disputes, compulsory land acquisition, debt recovery and strata and property management issues.
Donovan & Ho is a law firm in Kuala Lumpur, Malaysia. Our practice areas include employment law, dispute resolution (litigation and arbitration), corporate and tax advisory, and real estate/conveyancing. Have a query? Contact us