Contract Law

Terms of Contract Cases

L’Estrange v F Graucob Ltd [1934] 2 KB 394

Key Point

• This case laid down the eponymous rule in L’Estange v Graucob, which states that the party signing a contractual document is bound whether he has read the document and is aware of its contents or not

Facts

• E bought an automatic cigarette vending machine from G which stopped working after a few days
• E had signed an order form which excluded liability for all express and implied terms and statements, even though she had known nothing of the contents of the form
• The exemption clause was in ‘regrettably small print’, printed on brown paper, and in an unexpected place

Issue

• Was E bound by the exemption clause?

Held (Court of Appeal)

• E was bound by her signature
• None of the exceptions applied

Maugham LJ

• The party signing a contractual document is bound whether he has read the document and is aware of its contents or not
• However, there are two exceptions:
  • Non est factum: Where the signature was made by the plaintiff but made in circumstances that it was not her act
  • Misrepresentation: Where the plaintiff can prove that she was induced to sign by misrepresentation

Commentary

• John Spencer criticises the rule, arguing that the doctrine of unilateral mistake should apply when one is not aware and is hence mistaken about the terms of the contract
• If the case arose today, section 6(1A) Unfair Contract Terms Act 1977 would apply:
  • A seller can exclude liability for implied undertakings as to the goods’ quality and fitness for a particular purpose only if the exclusion satisfies the test of reasonableness
  • On the facts the G would not have been able to satisfy the test