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You signed it, so you are liable

The High Court recently had occasion to reconsider a 1934 English decision that holds that if you sign a written contract, then you are bound by what has been signed whether or not you have read or understood all of the terms, unless you can show there has been some fraud or misrepresentation or other basis for setting the contract aside. In Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd, a dispute arose about whether an exclusion clause on a credit application could be relied upon by a carrier who was transporting valuable flu inoculations, and who stored them at too low a temperature so that they were destroyed. When the matter first went to trial in the Supreme Court of NSW, the trial judge gave weight to evidence of the subjective understanding of the individual participants to the contractual dealings. The High Court was very critical of this approach, and stressed that in contractual interpretation, the courts should construe the terms of the contract objectively, and that on that question, actual intentions are completely irrelevant. The court noted that a signature conveys a representation to a reasonable reader that the person has read and agreed to the contents, or is nevertheless willing to be bound. In recent years, the remedies available to people who want to avoid obligations arising under signed contracts have probably expanded. Under the Trade Practices Act, and the WA Fair Trading Act, people who sign contracts in reliance upon misrepresentations may be entitled to orders setting aside the contract altogether. Similarly, if there is some fundamental mistake about the subject matter of the contract, or there is duress or unconscionable conduct, a court may be prepared to set aside the contract. In the absence of proof of any of these circumstances, once you sign a contract you will be liable under all of its terms, including the fine print, even if you did not read or understand the document. For more information contact Tim Coyle, Special Counsel, Phillips Fox Ph: 9288 6761

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