Ritzy Rides Bhd runs a car rental business. Their cars are sent to Lotus Bhd who runs a chain of garages throughout the Klang Valley, for servicing. Last month Ritzy Rides Bhd sent one of their cars for routine service to Lotus Bhd's garage. Lotus Bhd gave Ritzy Rides Bhd's driver a receipt. The receipt confirmed that Lotus Bhd had accepted the car for servicing and had set out the date on which Ritzy Rides Bhd could get back their car.

The driver, without reading the receipt, put it into his pocket. The driver later handed the receipt over to his manager, who also without reading it, filed it away. The following words appeared on the back of the receipt: "Whilst we will take all care possible, we take no responsibility for any damage or loss incurred, howsoever caused, when the vehicle is in our custody." At the exit to Lotus Bhd's garage there is a small notice stating, "All vehicles are accepted only on the terms as set out on the receipt given." Ritzy Rides Bhd's driver did not see this notice.

The following day, John who was the Lotus Bhd's mechanic who had serviced the car, test drove it around the block. As John was speeding, he did not notice a pothole in the road and drove the car into it, causing significant damage to it.