L'Estrange v Graucob [1934] 2 KB 394

Facts

• Mrs. L’Estrange purchased an automatic cigarette vending machine from F. Graucob Ltd.
• She signed a sales agreement form that contained an exclusion clause, of which she was unaware.
• The exclusion clause sought to exempt Graucob from liability for any express or implied conditions or warranties not specified in the contract.
• The machine malfunctioned shortly after purchase, leading Mrs. L’Estrange to sue for breach of contract, alleging the machine was not of merchantable quality.
• Graucob relied on the exclusion clause, which was printed in small font and in an inconspicuous part of the agreement, as a defence.
• The Court of Appeal found in favour of Graucob, holding that the signed exclusion clause was valid despite its inconspicuous presentation.

Issues

1. Whether a party is bound by all terms in a signed contractual document, regardless of whether those terms were read or understood.
2. Whether factors such as the clause’s inconspicuous location, small print, or lack of knowledge of its contents affect its enforceability.
3. Whether there are exceptions to the binding effect of a signature on a contract—specifically misrepresentation or the defence of non est factum.
4. How later statutory developments and consumer protection laws impact the principle established in this case.

Decision

• The Court held that a party who signs a written contract is generally bound by its terms, even if they have not read or are unaware of those terms.
• Exceptions exist for cases involving misrepresentation or where the signature was procured through a fundamental mistake as to the nature of the document (non est factum).
• The objective act of signing was deemed sufficient evidence of intent to be legally bound by the contract's contents.
• The Court rejected arguments based on the exclusion clause’s presentation, emphasizing formality and contractual certainty.

Legal Principles

• Signing a contractual document constitutes acceptance and incorporation of its terms, regardless of subjective knowledge or reading of those terms.
• Exceptions to this rule include misrepresentation (as later illustrated in Curtis v Chemical Cleaning Co [1951] 1 KB 805) and, in limited cases, the doctrine of non est factum.
• Modern statutory interventions such as the Unfair Contract Terms Act 1977 require some exclusion clauses, especially those addressing liability for implied undertakings, to satisfy a test of reasonableness.
• The objective approach to contract law favours external acts over internal intentions, thereby providing clarity and reliability in commercial transactions.

Conclusion

L’Estrange v Graucob confirms that a signature on a written contract usually binds the signer to its terms, regardless of actual knowledge, subject to narrow exceptions like misrepresentation or non est factum and modern statutory controls that require certain clauses to be reasonable, particularly in the context of unfair or exclusionary terms.