L’ Estrange v Graucob [1934] 2 KB 394

KEY POINTS

• In contract concerning the sale of an Automatic Slot Machine, bearing signatures of the parties involved, a crucial clause excludes "any express or implied conditions or warranties." Despite no evidence of misrepresentation, the machine malfunctioned, leading to the buyer suing for a breach of the implied warranty of fitness.

• The validity of the buyer's claim is given in the clause excluding implied warranties. The contract law intricacies bring the balance between contractual obligations and legal rights, prompting scrutiny of the buyer's legal action.

FACTS

• The buyer ordered an automatic slot machine from the sellers using an order form that contained essential contract terms in standard print and certain special terms in small print, one of which excluded any implied warranties. The sellers confirmed the order and delivered the machine after the buyer made an initial payment.

• The machine did not function properly, prompting the buyer to sue the sellers for various claims, including breach of an implied warranty of fitness for purpose. The sellers argued that the contract explicitly excluded all implied warranties, citing the clause in the order form.

• The buyer claimed she had not read the order form's contents when signing and was unaware of the exclusion clause due to the small print size. Importantly, there was no evidence of any seller misrepresentation regarding the contract terms.

JUDGEMENT

• In this matter the court, presided over by the esteemed Justices Scrutton and Maugham, a pivotal decision was reached, thereby overturning the initial ruling of the lower court judge. The essence of this judgment lay in the voluntary acceptance by the buyer of the written contract, a document unmarred by any misrepresentation or undue influence. The court underscored that this voluntary acceptance unequivocally binds the buyer to the terms and provisions outlined in the contract, establishing a clear and binding legal obligation.

• The court took into significant account the buyer's failure to thoroughly peruse the contract or possess awareness of its detailed contents. This lack of scrutiny, as ruled by the court, did not diminish the buyer's legal obligations in any way. The buyer's legal pursuit, despite its earnestness, concluded in disappointment. 

• The judgment decisively favored the sellers, emphasizing the enduring legal principle that contracts, once voluntarily entered, carry substantial legal weight. The legal doctrine governing contracts and their enforceability serves as a robust reminder of the paramount significance of diligence and comprehension when engaging in binding agreements. The court affirmed the fundamental tenet that the voluntary act of entering into a contract, regardless of the depth of one's understanding, establishes binding legal obligations.

COMMENTARY

• The significance of contract terms and their enforceability came to the forefront in a case involving an automatic slot machine. Within the contract, there was a clause tucked away in small print that effectively excluded any implied warranties. When the machine failed to meet the buyer's expectations, they took legal action. However, the court upheld the exclusion clause, emphasizing a fundamental principle: signing a contract legally binds individuals to its terms, regardless of whether they read or fully comprehended them. 

• This case underscores the importance of carefully reviewing contracts, the weight carried by exclusion clauses, and the courts' general inclination to uphold freedom of contract unless there is compelling evidence of misrepresentation or unfair dealings. It serves as a reminder that contract terms, even in small print, can have significant legal consequences.

ORIGINAL ANALYSIS

• Plaintiff bought a machine off Defendant and signed a sales agreement, which maintained that payment was still required even if the machine was faulty.

• The machine stopped working and Defendant refused to pay, claiming that the sales agreement was misrepresented to her as an order form, so that she was misled as to the purpose of the form and couldn’t be bound by the terms therein.

• CA found no misrepresentation and held that although Plaintiff had failed to read the small print, she was still bound by the agreement.

• This case demonstrates the general rule that a signature is taken to mean that the signer has agreed to the terms. 

Maugham LJ

• There are two ways of escaping contractual obligations where the party has signed:

  1. Where there is a “non est factum” i.e. where through no fault of the signer (usually fraud) the contents are fundamentally different from those he assumed to be present;

  2. Misrepresentation induced her to sign.

• Neither applied here.