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Signing a contract without reading it

If you sign a contract without reading it, you will – in almost all circumstances – be bound by it, even if you later claim that you thought that the contract meant something different from what it plainly says.

Although a contract is often said to be based on the agreement of the parties – in other words, on consensus, also called a “meeting of the minds” – modern contract law places little emphasis on whether there was in fact agreement, and great emphasis on whether the individual in question conducted himself in such a way that a reasonable person would believe that he was agreeing.

In other words, modern contract law places greater store on the outward manifestation of an apparent agreement, than on whether there was actual consensus. Signing a contract will, almost always, give the reasonable appearance of assenting to its terms, with the result that you will be bound by it, irrespective of what misapprehension you were under when you signed it.

Nonetheless, in a case recently decided in the Cape High Court, a person who signed a suretyship without first reading the document, was held not to be bound by it.

An unexpected decision by the Cape High Court In Davids en Andere v Absa Bank Bpk 2005 (3) SA 361 (C) a bank required a close corporation to provide a personal suretyship to secure its overdraft facility. Davids, a member of the CC, allowed one of his managers, a certain Bailey, to negotiate the terms of the suretyship with the bank and Bailey negotiated with the bank that the suretyship would be for a maximum amount of R50 000. When Davids later went to the bank to sign the suretyship, he assumed that the document reflected a maximum liability of R50 000 and he signed the document without reading it. In fact, the document reflected that the suretyship was for an unlimited amount and when the business ran into financial trouble, the bank sued Davids for some R360 000 under the suretyship.

In what many lawyers will think was a surprising decision (and which may, perhaps, be reversed on appeal) the court held that Davids was not liable under the suretyship. The court accepted that, in the circumstances, he had signed the unlimited suretyship by virtue of a “mistake” on his part. The deed of suretyship was such a complicated document that the bank official, in front of whom he signed, ought to have explained the document to him, but did not. Consequently – so the court held – the bank could not reasonably have been misled into thinking that the document reflected the real terms of the suretyship.

The legal niceties of the judgment will be debated by lawyers countrywide, however, business people and others should not be lulled into thinking that this rather startling judgment creates a loophole that will allow them to escape liability under a contract simply by pleading that they “made a mistake” when they signed it.

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