Legal Principles and Key Points
- In the case of L’Estrange v F Graucob Ltd  2 K.B. 394, it was held that the clauses of a written contract are binding on those who sign it, even if they are unaware of the full contents or neglect to read them. Exceptions to this rule include where the signer is induced to sign it by misrepresentation, where fraud occurs or where it is signed by mistake without knowledge of the contract’s actual meaning (due to a fundamental misunderstanding or disability).
Facts of the Case
- On 7th February 1933, D’s representatives called upon C, a cafe owner, and asked her to buy a cigarette machine.
- At a meeting between them, D’s representative produced a brown paper form detailing a sales agreement.
- The agreement contained an express clause in small print excluding D from ‘any express or implied condition, statement or warranty, statutory or otherwise.’
- 2 days later, D sent C an order confirmation and an 18-month guarantee for free fixing, maintenance, and insurance of the machine.
- On 28th March 1933, the machine was delivered to C, and installed the next day by D’s mechanic. After a few days the machine became jammed and unworkable.
- On 7th April, C wrote a complaint to D and a mechanic was sent to fix it. On 27th April, C again wrote, and a mechanic was sent again.
- On 8th May, C wrote that had decided to forfeit her deposit and requested D remove the machine. C stopped using the machine from 11th May onwards. D refused to terminate the transaction.
- C brought an action alleging that the machine breached the Sale of Goods Act 1893 by not being of merchantable quality.
- D argued that the statute was made irrelevant by the express clause. C responded that she was unaware of the clause as she had not properly read the agreement, believing it was an order form, and it ought not to apply.
- Did C failing to read the contract’s full contents invalidate her signing of the contract?
Held by the King’s Bench Division
- Finding for D, that by signing the contract C was bound to the express clause, even if her attention was not drawn to it and it was ‘regrettably’ not immediately readable. As such, C could not rely on the 1893 Act.
- “In cases in which the contract is contained in a railway ticket or some other unsigned document, it is necessary to prove that an alleged party was aware, or ought to have been aware, of its terms and conditions. These cases have no application when the document has been signed. When a document containing contractual terms is signed, then, in the absence of fraud, or, I will add, misrepresentation, the party signing it is bound, and it is wholly immaterial whether he has read the document or not” .
- C argued that she was induced by misrepresentation to sign the contract without knowing its terms, and that on that ground they are not binding upon her. Fraud is not mentioned in the pleadings, and there is no evidence of such.
- Whether C was or was not told that the document was an order form, it actually was an order form, which is a contractual document. It may be either an acceptance or a proposal which may be accepted, but it always contains some contractual terms.
- C signed a document headed ‘Sales Agreement,’ which she admits had to do with her intended purchase, and which contained a clause excluding all conditions and warranties. That being so, C, having put her signature to the document and not having been induced to do so by fraud or misrepresentation, is bound by those terms. C failing to read them makes no difference.