The red hand, or onerous clause, doctrine—which says that an onerous term will not be given effect unless the other party's attention has been specifically drawn to it—is not lightly to be invoked, according to the Court of Appeal.
Red hands and Denning LJ
In a 1950s case about barrels of orange juice (Spurling)—subsequently developed in a 1970s case about car parks (Thornton)—Lord Justice Denning (famously) said, “… 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”.
This Court of Appeal preferred to call it the “onerous clause doctrine” and stressed how rarely it helps a commercial party. The focus is on notice. If an onerous term sits in one side’s standard terms, it will not bind the other unless it was fairly and reasonably brought to their attention. The threshold is high in business‑to‑business deals. It can also only be applied where the other party does not actually know of the term.
Why “pay first” did not trigger special notice here
In this case, King Trader hired out its vessel to Bintan. The vessel grounded, and King Trader won an arbitration against Bintan. However, Bintan went into insolvency so could not pay. King Trader tried to claim under a marine insurance policy. The insurer pointed to a “pay first” clause. It provided that the insurer’s obligation to indemnify arose only after Bintan had first discharged its liability to King Trader. Bintan had not done so due to its insolvency. King Trader said the provision was so onerous it needed red‑hand‑level notice.
The court disagreed, finding:
- “pay first” wording is common in this market
- while the clause had a serious effect it did not reach the high threshold of an onerous clause
- the parties were represented by specialist brokers, so it is hard to say the clause was not fairly brought to the insured’s attention.
The doctrine therefore did not apply, and the term was incorporated and effective.
The court declined to formalise a sliding scale of notice. How onerous the clause is, and what counts as fair notice, are questions of fact and degree.
Judgment: MS Amlin Marine v King Trader
