Onerous Clause Doctrine (Collatory Case)

In MS Amlin Marine NV v King Trader Ltd [2025] EWCA Civ 1387 ('MS Amlin Marine'), Sir Geoffrey Vos MR (with whom Singh LJ and Males LJ agreed):

(1) reviewed the caselaw on what has been known as the 'red hand doctrine'. He considered 6 cases (the 'six cases'), namely:

(a) J Spurling Ltd v. Bradshaw [1956] 1 WLR 461 ('Spurling');

(b) Thornton v. Shoe Lane Parking Ltd [1972] 2 QB 163 ('Thornton');

(d) Goodlife Foods Ltd v. Hall Fire Protection Ltd [2018] EWCA Civ 1371, [2018] BLR 491 ('Goodlife');

(e) Bates v. Post Office Ltd (No 3: Common Issues) [2019] EWHC 606 (QB) ('Bates'); and

(f) Blu-Sky Solutions Ltd v. Be Caring Ltd [2021] EWHC 2619 (Comm) ('Blu-Sky').

This review of the 6 cases be found in a footnote[1]. From this review, he concluded that the six cases do indeed establish the existence of the doctrine (paragraph 83)

(2) renamed the doctrine, from 'red hand doctrine' to the 'onerous clause doctrine'. He said that he preferred to '...call it the "onerous clause doctrine"' (paragraph 65), later stating 'I think the name "red hand doctrine" adopted by the parties is unfortunate and should not be perpetuated. It derives from Spurling and Thornton, which were two cases in which Lord Denning adumbrated a principle that never really found its way into the common law – at least in the way he expressed it. The principle is better described as the onerous clause doctrine.' (paragraph 83)

(3) said of the doctrine, at paragraph 69:

'Essential elements of the doctrine include (i) that the party burdened by it was not actually aware of the clause in question, and (ii) that the party relying upon it had not done all that was fairly and reasonably sufficient to bring the clause to the attention of the other party (see Chitty on Contracts 35th edition 2023 at [16-010 to 16-012])' [bold in original]

(4) observed, in respect to the 'onerous clause doctrine', at paragraphs 84 to 88:

'The onerous clause doctrine can be applied to both consumer and commercial contracts, though it is to be noted that Interfoto and Blu-Sky are actually the only recent examples we were shown of it having been applied by the court in commercial situations. The other authorities emphasise the high threshold needed to establish that a clause is onerous or unusual, and the fact that the doctrine is unlikely to have any application in commercial contracts where the parties are of broadly equal bargaining power, and where the challenged clauses in question are common form or usual terms regularly encountered in the business.

It is, perhaps, worth restating what the onerous clause doctrine actually amounts to, since Dillon and Bingham LJJ disagreed as to its precise terms. In my judgment, the cases establish, despite Bingham LJ's persuasive conclusion that the effect of the doctrine is to relieve the party from liability under the onerous condition, that where the doctrine applies, the onerous clause in question is not to be regarded as incorporated into the contract, or, perhaps more accurately, as having effect.

The onerous clause doctrine provides, therefore, that where a particularly onerous or unusual term of a contract (an onerous clause) is contained in one party's standard terms, and where the other contracting party does not actually know of that term, it will not bind the other contracting party unless the party seeking to rely upon it shows that the clause in question (whether individually or as part of the standard terms) was fairly and reasonably brought to the other contracting party's attention.

It is right to point out that some of the authorities have suggested that a sliding scale applies so that the more onerous a clause, the more notice is required to be given to make it effective (see, for example, Gross LJ at [101] in Goodlife). For my part, I would not formalise that as part of the onerous clause doctrine. It is sufficient to say that both the question of how onerous or unusual the clause needs to be and the question of what amounts to fair and reasonable notice are questions of fact and degree that the court needs to decide taking into account all the circumstances of the case in question. It is always unwise to lay down strict conditions for the application of simple principles, since one cannot predict the facts and circumstances of future cases.

I would emphasise once again the high threshold that is required to show that a clause is onerous or unusual in the first place, particularly in a commercial context.'

As will be apparent:

(a) the doctrine is, in essence, that 'where a particularly onerous or unusual term of a contract (an onerous clause) is contained in one party's standard terms, and where the other contracting party does not actually know of that term, it will not bind the other contracting party unless the party seeking to rely upon it shows that the clause in question (whether individually or as part of the standard terms) was fairly and reasonably brought to the other contracting party's attention.' (paragraph 86)

(b) there is a high threshold, for establishing that a clause is onerous or unusual, particularly in a commercial context (paragraph 88);

(i) the level of onerousness or unusualness required; and

(ii) the level of notice required to have been given by the party later seeking to rely upon the onerous clause;

'both the question of how onerous or unusual the clause needs to be and the question of what amounts to fair and reasonable notice are questions of fact and degree that the court needs to decide taking into account all the circumstances of the case in question.' (paragraph 87)

He preferred this approach, to formalising, as part of the onerous clause doctrine, that there was 'a... sliding scale applies so that the more onerous a clause, the more notice is required to be given to make it effective (see, for example, Gross LJ at [101] in Goodlife)' (paragraph 87)

(d) where a clause is an 'onerous clause', it does not have effect (paragraph 85);

(e) the doctrine is unlikely to have any application in commercial contracts where the parties are of broadly equal bargaining power, and where the challenged clauses in question are common form or usual terms regularly encountered in the business (paragraph 84).

Similarly, earlier, Vos MR had said

''The red hand or onerous clause doctrine is all about notice and it is not likely, in my judgment, to have any application to purely commercial transactions in financial markets such as insurance, where the party relying on the doctrine is represented by professional agents, whose duties will presumably include explaining the meaning and effect of the contracts it concludes for its principal, the insured.' (paragraph 69)

While in MS Amlin Marine, Singh LJ simply agreed with Vos MR, Males LJ, after agreeing with Vos MR), added 3 comments of this own (paragraphs 101-103). The first of which was:

'...the rationale for the red hand doctrine or, as we must now call it, the onerous clause doctrine, is that the party seeking to escape from the effect of the clause was not aware of it and should not reasonably have been aware of it because it was not fairly and reasonably brought to his attention. It is therefore concerned with the kind of contract which a reasonable party would not be expected to read carefully from beginning to end. It is difficult to see how this doctrine could ever apply to a contract of marine insurance in which the insured was represented, as will usually be the case, by specialist brokers who can be expected to familiarise themselves with the terms available in the market. If the proposed policy contains a clause which can genuinely be regarded as unusual or unreasonable, it would be the brokers' duty to draw that clause to the insured's attention.'

On the facts

On the facts in MS Amlin Marine, the impugned clause, a 'pay first' clause (a condition precedent to the insuring being required to pay the insured, was that the insured had paid out to the injured party, for the loss and damages the injured party had suffered) was not an 'onerous clause' for the purposes of the 'onerous clause doctrine' (paragraphs 89 to 92)

Conclusion

Under the heading 'Conclusion', Vos MR in MS Amlin Marine stated, at paragraph 98:

'In my view, the onerous clause doctrine (as I would prefer to call it) provides (as I have said at [86] above) that:

Where a particularly onerous or unusual term of a contract (an onerous clause) is contained in one party's standard terms, and where the other contracting party does not actually know of that term, it will not bind the other contracting party unless the party seeking to rely upon it shows that the clause in question (whether individually or as part of the standard terms) was fairly and reasonably brought to the other contracting party's attention.

This onerous clause doctrine is subject to the qualifications I have mentioned at [84]-[88] above.'[2]

Collatory Case Series

The Collatory Case Series, is an series of bulletins, designed to report that one case (or two cases, here) which collates the essential principles/propositions of law, for a particular doctrine/area of law. It is not designed as a deep and comprehensive review of an area of law, but to provide that quick 'go to' case.

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[1] In MS Amlin Marine NV v King Trader Ltd [2025] EWCA Civ 1387:

(a) under the heading 'Spurling', Vos MR said, at paragraph 71:

'In Spurling ¸ the Court of Appeal (Denning, Morris and Parker LJJ) dismissed an appeal by a bailor of barrels of orange juice from Judge Block, who had held that adequate notice of an exclusion clause contained in printed conditions had been given to that bailor. The bailee had successfully relied on the exclusion as a defence to a claim for damage to the barrels. Denning LJ said this obiter at page 466:

The clause therefore avails to exempt the warehousemen, provided always that it was part of the contract. This brings me to the question whether this clause was part of the contract.

Mr. Sofer urged us to hold that the warehousemen did not do what was reasonably sufficient to give notice of the conditions within Parker v. South Eastern Railway Co [(1877) 2 CPD 416] [Parker] . I quite agree that the more unreasonable a clause is, the greater the notice which must be given of it. Some clauses which I have seen would need to be printed in red ink on the face of the document with a red hand pointing to it before the notice could be held to be sufficient. The clause in this case, however, in my judgment, does not call for such exceptional treatment, especially when it is construed, as it should be, subject to the proviso that it only applies when the warehouseman is carrying out his contract, and not when he is deviating from it or breaking it in a radical respect. So construed, the judge was, I think, entitled to find that sufficient notice was given. [Emphasis added].' [bold in Vos MR's judgment]

(b) under the heading 'Thorton', Vos MR said, at paragraphs 72 and 73:

'In Thornton, the Court of Appeal (Lord Denning MR, Megaw LJ and Sir Gordon Wilmer) held that an exemption clause was not incorporated into a car park's contract, when it was referred to on the printed ticket as being "displayed on the premises" and was written up on a post opposite the ticket machine itself. Lord Denning held at page 170 that (i) the defendant had not proved that the claimant knew of the clause, and (ii) it had been properly admitted by the car park's counsel that it had not done what was reasonably sufficient to bring it to his attention. Lord Denning continued by saying that:

I do not pause to inquire whether the exempting condition is void for unreasonableness. All I say is that it is so wide and so destructive of rights that the court should not hold any man bound by it unless it is drawn to his attention in the most explicit way. It is an instance of what I had in mind in [ Spurling ]. In order to give sufficient notice, it would need to be printed in red ink with a red hand pointing to it – or something equally startling.

Again, this was an obiter dictum , since the point about the non-incorporation of the exemption clause had been admitted.'

In Interfoto, the Court of Appeal (Dillon and Bingham LJJ) applied a version of the red hand or onerous clause doctrine. They held that an onerous clause requiring a huge and disproportionate payment to be made for delay in returning transparency photographs to a picture library had not been sufficiently drawn to the borrower's attention, when contained in small print on a delivery note included with the bag of 47 photographs delivered. Bingham LJ's judgment repays reading in its entirety, as it contains an insightful summary of the decision in Parker . Unfortunately, however, Dillon and Bingham LJJ did not agree on the jurisprudential basis for the principle they were applying.

In short, Dillon LJ held at page 439A-B that: "if one condition in a set of printed conditions was particularly onerous or unusual, the party seeking to enforce it must show that that particular condition was fairly brought to the attention of the other party". Dillon LJ held that the onerous condition never, as a result, became part of the contract between the parties.

Conversely, Bingham LJ held at page 445 that the borrower was to be relieved of liability under the onerous condition because the lender had not done "what was necessary to draw this unreasonable and extortionate clause fairly to [borrower's] attention". Bingham LJ explained that:

The tendency of the English authorities has, I think, been to look at the nature of the transaction in question and the character of the parties to it; to consider what notice the party alleged to be bound was given of the particular condition said to bind him; and to resolve whether in all the circumstances it is fair to hold him bound by the condition in question. This may yield a result not very different from the civil law principle of good faith, at any rate so far as the formation of the contract is concerned.

Bingham LJ also remarked, significantly for our case, at page 445E that "[t]o the extent that the conditions so displayed were common form or usual terms regularly encountered in this business, I do not think the defendants could successfully contend that they were not incorporated into the contract".'

(d) under the heading 'Goodlife', Vos MR said, at paragraph 78:

'In Goodlife, the Court of Appeal (Gross, Moylan and Coulson LJJ) held that an exclusion clause in a commercial contract for the installation of a factory fire prevention system was not onerous or unusual and had been fairly and reasonably brought to the purchaser's attention. Accordingly, the exclusion clause was incorporated into the contract and the purchaser was not to be relieved of its effect under the Unfair Contract Terms Act 1977 . Coulson LJ stated the "well-established principle of common-law" at [29] as follows: "… even if A knows that there are standard conditions provided as part of B's tender, a condition which is "particularly onerous or unusual" will not be incorporated into the contract, unless it has been fairly and reasonably brought to A's attention". Coulson LJ then helpfully reviewed the law, some of which I have already covered, at [30]-[38]. He emphasised at [35] that not every exclusion or limitation clause is onerous or unusual. At [34], Coulson LJ approved Judge Waksman's dictum in Allen Fabrications Ltd v. ASD Ltd [2012] EWHC 2213 (TCC) (Allen) to the effect that: "Much will depend on the context. It might be said that if in very common use it is less likely properly to be regarded as onerous especially between two commercial parties since that is the business in which they knowingly operate". Gross LJ, in a powerful concurring judgment, emphasised that, between parties of equal bargaining power, party autonomy was an important pillar of English common and commercial law. Parties are free to contract on terms they choose, to allocate risks as they see fit, and the court will enforce their bargains. Gross LJ concluded by saying that "[o]verall, this was a commercial contract between parties of broadly equal bargaining power. … fully cognisant of the requirement of reasonableness, I think the court should be slow to intervene in such a case, all the more so on an appeal".'

(e) under the heading 'Bates', Vos MR said, at paragraph 79:

'In Bates, Fraser J summarised some of the six cases at [978] concluding that: "the more onerous and unusual a clause, the greater notice must be given to the other party". He noted at [979] that the "principle [is] available to contracting parties who are not consumers, but context and the respective bargaining positions of the parties are relevant. … I also consider that it is a high hurdle that must be passed for a term to be held to be onerous and unusual".'

(f) under the heading 'Blu-Sky', Vos MR said, at paragraphs 80 to 82:

In Blu-Sky, Judge Stephen Davies applied the principles I have described from Goodlife , Interfoto and Bates which he summarised (along with other cases) at [93]-[99]. He dealt in some detail with the question of the hierarchy of printed conditions at [98]ff, before deciding at [108]-[111] that clause 4.6 of a mobile phone provider's standard terms (which provided for a cancellation charge totalling £180,000 in the circumstances of that case) was onerous and had not been fairly and reasonably brought to the attention of the social care provider, which was the other contracting party.

The details of Blu-Sky may not matter, but I should say that I cannot agree with the general statement that Judge Davies made at [102] to the effect that "the fact that such clauses are not unusual does not of itself mean that they are not onerous". This is not entirely consistent with at least three prior judicial statements: Bingham LJ at page 445E in Interfoto at page 445E, Coulson LJ at [34] in Goodlife , who himself approved Judge Waksman in Allen (see [77]-[78] above).

I accept, of course, that the usual nature of a clause does not automatically mean that it is not onerous (which is perhaps all that Judge Davies was saying), but it does mean that such a clause is less likely properly to be regarded as onerous especially between two commercial parties.' [bold in original]

[2] For convenience, paragraphs 84 to 88 of MS Amlin Marine NV v King Trader Ltd [2025] EWCA Civ 1387 read:

'84. The onerous clause doctrine can be applied to both consumer and commercial contracts, though it is to be noted that Interfoto and Blu-Sky are actually the only recent examples we were shown of it having been applied by the court in commercial situations. The other authorities emphasise the high threshold needed to establish that a clause is onerous or unusual, and the fact that the doctrine is unlikely to have any application in commercial contracts where the parties are of broadly equal bargaining power, and where the challenged clauses in question are common form or usual terms regularly encountered in the business.

85. It is, perhaps, worth restating what the onerous clause doctrine actually amounts to, since Dillon and Bingham LJJ disagreed as to its precise terms. In my judgment, the cases establish, despite Bingham LJ's persuasive conclusion that the effect of the doctrine is to relieve the party from liability under the onerous condition, that where the doctrine applies, the onerous clause in question is not to be regarded as incorporated into the contract, or, perhaps more accurately, as having effect.

86. The onerous clause doctrine provides, therefore, that where a particularly onerous or unusual term of a contract (an onerous clause) is contained in one party's standard terms, and where the other contracting party does not actually know of that term, it will not bind the other contracting party unless the party seeking to rely upon it shows that the clause in question (whether individually or as part of the standard terms) was fairly and reasonably brought to the other contracting party's attention.

87. It is right to point out that some of the authorities have suggested that a sliding scale applies so that the more onerous a clause, the more notice is required to be given to make it effective (see, for example, Gross LJ at [101] in Goodlife ). For my part, I would not formalise that as part of the onerous clause doctrine. It is sufficient to say that both the question of how onerous or unusual the clause needs to be and the question of what amounts to fair and reasonable notice are questions of fact and degree that the court needs to decide taking into account all the circumstances of the case in question. It is always unwise to lay down strict conditions for the application of simple principles, since one cannot predict the facts and circumstances of future cases.

88. I would emphasise once again the high threshold that is required to show that a clause is onerous or unusual in the first place, particularly in a commercial context.'