L’Estrange v F Graucob Ltd is a seminal case in English contract law that firmly establishes the principle of incorporation of contractual terms by signature. The Court of Appeal in this case held that a party who signs a contractual document is bound by its terms, regardless of whether they have read or understood those terms, save for specific exceptions such as fraud, misrepresentation, or non est factum. The case is often cited to underscore the sanctity of contract and the binding effect of a signature on a written agreement.
Facts of L’Estrange v F Graucob Ltd Case
In L’Estrange v F Graucob Ltd, the claimant, Miss Harriet Mary L’Estrange, was the owner of a café in Great Ormes Road, Llandudno. Two travelling salesmen representing the defendant company, Mr Graucob’s slot machine business based in London, visited her premises. They persuaded Miss L’Estrange to purchase a cigarette slot machine. To formalise the purchase, she signed a document titled ‘Sales Agreement’.
The agreement included an initial statement whereby Miss L’Estrange agreed to purchase a machine described as “One Six Column Junior Ilam Automatic Machine.” Further into the document, printed in small type, was an exclusion 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. H. M. L’Estrange.”
Miss L’Estrange did not read this document before signing. The machine was delivered but soon proved to be faulty and would jam repeatedly, despite attempts by mechanics to repair it. Consequently, Miss L’Estrange refused to continue paying the instalments for the machine. She brought an action in the Carnarvonshire County Court at Llandudno, seeking to recover the sums already paid. Her case was that the machine was not fit for purpose, thereby breaching implied terms under the Sale of Goods Act.
The defendant company, however, relied on the signed contract, particularly the exclusion clause, to argue that any warranties or implied conditions, including fitness for purpose, were expressly excluded by the terms to which Miss L’Estrange had agreed.
Legal Issue
The principal legal question in L’Estrange v F Graucob Ltd was whether the exclusion clause, printed in small type and contained in the signed contract, was effective and binding upon Miss L’Estrange despite her failure to read or understand it. In other words, the court had to determine if a party who signs a contractual document is bound by all its terms regardless of actual knowledge or notice of those terms.
L’Estrange v F Graucob Ltd Judgment
The Court of Appeal unanimously held in favour of the defendant, confirming that the exclusion clause was valid and formed part of the contract. The court ruled that it was immaterial that Miss L’Estrange had not read the contract or the exclusion clause. By signing the agreement, she was bound by all its terms.
Scrutton LJ’s Reasoning
Scrutton LJ emphasised that the case was not comparable to the “ticket cases” such as Parker v South Eastern Railway Co, where contracts were contained in unsigned documents like tickets or receipts. In such cases, it is necessary to prove that the party had actual or constructive notice of the contractual terms.
However, in L’Estrange v F Graucob Ltd, the contract was signed by Miss L’Estrange, which, in the absence of fraud or misrepresentation, was sufficient to bind her to its terms. Scrutton LJ cited the statement of Mellish LJ in Parker v South Eastern Railway Co:
“In an ordinary case, where an action is brought on a written agreement which is signed by the defendant, the agreement is proved by proving his signature, and, in the absence of fraud, it is wholly immaterial that he has not read the agreement and does not know its contents.”
Accordingly, the signature on the written contract amounted to acceptance of all terms, including the exclusion clause.
Maugham LJ’s Concurrence
Maugham LJ agreed with the judgment but expressed some regret about the result, noting that the outcome was harsh for the claimant. He pointed out that the only circumstances in which a party might avoid liability under a signed document are if the document was signed under misrepresentation, or was a non est factum – that is, radically different from what the signer believed it to be.
He also commented on the unfortunate presentation of the exclusion clause in very small print, noting:
“I may add, however, that I could wish that the contract had been in a simpler and more usual form. It is unfortunate that the important clause excluding conditions and warranties is in such small print.”
Nevertheless, Maugham LJ held that the terms of the contract must be enforced as written.
Conclusion
The case of L’Estrange v F Graucob Ltd [1934] 2 KB 394 is a landmark authority affirming that a signature on a contractual document binds the signatory to the entire contract, including exclusion clauses, regardless of whether the document was read. The Court of Appeal made clear that exceptions such as fraud, misrepresentation, or non est factum must be proven for a party to avoid liability under a signed agreement.
This case underscores the importance of reading and understanding contractual documents before signing and remains a vital precedent in the incorporation of contractual terms by signature in UK law.
