L’Estrange v F Graucob Ltd 20 Feb 1934 [1934] 2 KB 394, DC

The claimant purchased a faulty cigarette machine, signing an agreement without reading it. The contract contained a clause in small print excluding all warranties. The court held that by signing the document, she was bound by its terms, establishing the principle of incorporation by signature.

Facts

The claimant, Miss L’Estrange, a proprietor of a café in Llandudno, purchased an automatic slot machine for cigarettes from the defendants, F Graucob Ltd. She signed a ‘Sales Agreement’ printed on brown paper which was filled in by the defendants’ agent. The agreement contained, in small print, a clause stating: ‘This agreement contains all the terms and conditions under which I agree to purchase the machine specified above, and any express or implied condition, statement, or warranty, statutory or otherwise not stated herein is hereby excluded.’ The claimant signed the form without reading this clause. Upon delivery, the machine proved to be unsatisfactory and did not work correctly. The claimant brought an action alleging breach of an implied warranty that the machine was fit for the purpose for which it was sold.

Issues

The central legal issue was whether the claimant was bound by the exclusion clause contained within the sales agreement, despite the fact she had not read it. The court had to determine if the clause was effectively incorporated into the contract, thereby negating any implied warranties under the Sale of Goods Act 1893.

Judgment

The Divisional Court, allowing the appeal from the county court, held that the claimant was bound by the terms of the contract she had signed. The judges’ reasoning established a critical principle of English contract law.

Reasoning of Scrutton L.J.

Scrutton L.J. distinguished the case from ‘ticket cases’ (such as Parker v South Eastern Ry. Co.), where the question is whether reasonable notice of the terms has been given. He asserted that a different rule applies when a party has signed a document. He stated the principle in clear terms:

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.

He found that the Sales Agreement was a contractual document containing the terms of the arrangement. Since Miss L’Estrange had signed it, and there was no evidence of fraud or misrepresentation as to the effect of the document, she was bound by all the terms within it, including the exclusion clause. The fact that the clause was in ‘regrettably small print’ was irrelevant to the binding nature of her signature.

Reasoning of Maugham L.J.

Maugham L.J. concurred, reinforcing the position. He agreed that the document in question was a contractual document, not merely an order form. He emphasised that once a party signs a written contract, they are deemed to have assented to its contents, unless they can plead non est factum (it is not my deed) or prove misrepresentation. He noted:

In my view, the contract was a contract in writing, and the lady signed it. It is, in my opinion, an irrelevant circumstance that the plaintiff did not read the agreement… If the document signed was a part of a contract, it is impossible to pick out certain clauses from it and say that they are not part of the contract.

He concluded that the express exclusion clause in the signed agreement overrode the implied warranty that would otherwise have been applicable under the Sale of Goods Act 1893.

Implications

The decision in L’Estrange v Graucob is a landmark case that solidifies the ‘signature rule’ in contract law. It establishes a strong, objective principle that a signature on a contractual document signifies assent to the terms contained within it, promoting commercial certainty. This rule, often expressed by the maxim ‘caveat subscriptor’ (let the signer beware), places the onus on the signing party to read and understand a contract before signing it. The case clearly distinguishes between signed written contracts and unsigned documents (like tickets), where the test for incorporation of terms is based on reasonable notice. While the principle remains fundamental, its harshness has since been mitigated by legislation such as the Unfair Contract Terms Act 1977 and subsequent consumer protection laws, which can render certain exclusion clauses void or subject them to a reasonableness test.

Verdict: Appeal allowed. Judgment for the defendants.

Source: L’Estrange v F Graucob Ltd 20 Feb 1934 [1934] 2 KB 394, DC