The Court of Appeal held that the holding fee was ineffective. Dillon LJ said that a "particularly onerous or unusual" term must have special notice. However, Interfoto was entitled to a small restitutory charge of £3.50 per transparency per week for their holding.
Bingham LJ held that the clause was not valid. It was "a venial period of delay [for] an inordinate liability". The issue was, he said,
whether it would in all the circumstances be fair (or reasonable) to hold a party bound by any conditions ... of an unusual and stringent nature ... The defendants are not to be relieved of that liability because they did not read the condition, although doubtless they did not; but in my judgment they are to be relieved because the plaintiffs did not do what was necessary to draw this unreasonable and extortionate clause fairly to their attention.
He advocated embracing good faith - "showing up your cards", "fair dealing", and so on. On penalty clauses, Bingham LJ noted at the end of his decision,[1]
In reaching the conclusion I have expressed I would not wish to be taken as deciding that condition 2 was not challengeable as a disguised penalty clause. This point was not argued before the judge nor raised in the notice of appeal. It was accordingly not argued before us. I have accordingly felt bound to assume, somewhat reluctantly, that condition 2 would be enforceable if fully and fairly brought to the defendants' attention.
