Read first, then sign

THE recent High Court decision of Toll (FGCT) Pty Ltd v Alphapharm illustrates the importance a party carefully reviewing the terms of a contract prior to signing. 

The case involved a transport contract a party signed, without first reading, that included a credit application containing a number of terms limiting liability.

The credit application clearly warned that the conditions, which included a number of exclusion clauses, should be read before the document was signed. 

The Court of Appeal held that the party signing the contract was not bound by the conditions.

The High Court overturned that decision, distinguishing this case from the 'ticket cases' which deal with situations in which a party tries to incorporate into a contract terms and conditions appearing in a notice or an unsigned document, such as on the back of a carpark ticket. 

In this case, the court said the act of signing a contractual document signified an intention to be bound by the terms and conditions appearing in it, whether or not the signing party has actually read the document. 

In the absence of vitiating circumstances (for instance misrepresentation or duress) the parties are bound by the terms of the contract. 

The court also held that in directing in clear words above the space for signature any party contemplating signing the credit application to read the terms on the back of the document, the party providing the credit application had done as much as it could to ensure that the other party was aware of the terms and conditions in question.

Asha Stewart, associate, 9288 6910

Dean Hely, partner, 9288 6772

Phillips Fox