Common Law and the Binding Nature of Contracts
Common Law Emphasis on Written Terms of Contracts
The common law system prioritizes the written terms within a contract, adhering to the objective theory of contract formation.
This emphasis ensures commercial certainty, as parties can rely on the written document as the definitive record of their agreement.
Objective Theory: The courts generally look at outward manifestations (the signature) rather than the subjective intent or internal state of mind of the parties.
The Signatory Rule
Key Principle: A person who signs a contractual document is generally bound by its contents.
The legal effect of a signature is to signify to the other party that the signer agrees to the terms, regardless of whether they have read them.
This applies even if the contents differ significantly from the signer's personal expectations or prior verbal discussions.
L'Estrange v F Graucob Ltd [1934]
Case Facts:
Harriet L'Estrange, a cafe owner in Wales, purchased an automatic cigarette vending machine from F Graucob Ltd.
She signed a "Sales Agreement" form provided by the salesmen.
The form contained an exclusion clause in very small print which stated: "Any express or implied condition, statement, or warranty, statutory or otherwise not stated herein is hereby excluded."
The machine was defective and did not work.
Legal Issue:
L'Estrange sued for breach of an implied warranty that the machine was fit for purpose. The defendant relied on the signed exclusion clause.
Judgment:
The Court of Appeal held that since L'Estrange had signed the document, she was bound by the exclusion clause.
In the absence of fraud or misrepresentation, it was irrelevant that she had not read the terms.
This case established the "signature rule," reinforcing that a signature is a powerful indicator of consent in common law.
Exceptions to the Binding Nature of Signatures
While the rule in L'Estrange is strict, the law recognizes specific circumstances where a signature is not binding:
Misrepresentation:
If the party seeking to enforce the contract misrepresented the meaning or effect of a clause to the signer.
Curtis v Chemical Cleaning and Dyeing Co [1951]:
The plaintiff signed a document after being told it only excluded liability for damage to "beads and sequins" on her dress. In reality, the clause excluded all liability. The court held the cleaners could not rely on the clause because of the misrepresentation.
Non Est Factum ("It is not my deed"):
A narrow defense where a person signs a document that is fundamentally different from what they thought it was (e.g., due to blindness, illiteracy, or trickery).
Fraud:
Where the signature was obtained through active deception.
Modern Consequences and Consumer Protection
The strictness of this rule originally led to harsh results for consumers, who often sign standard-form contracts (contracts of adhesion).
In modern law, legislation such as the Unfair Contract Terms Act or Australian Consumer Law has been introduced to limit the use of unfair or hidden terms that might otherwise be binding under the common law signature rule.