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Sweet & Maxwell Ltd
100 Avenue Road
London NW3 3PF
278 pages
£99.00 hardback
ISBN 0-421-83860-4
Finance executives who believe that an exclusion clause in a contract will
exclude or, if not exclude, then limit, their company's liability, whilst
forcing the other party signing the contract to accept the exclusion clause and
be bound by the contract, are in for a rude awakening according to the latest
edition of Exclusion Clauses and Unfair Contract Terms.
While the effect of signing a written document was first indicated by Mellish LJ
in Parker v South Eastern Railway when he said: "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." The Court of
Appeal in L’Estrange v Graucob, went further when Scrutton LJ said: "When a
document containing contractural 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."
Therefore despite signature, if one party was misled in some way it would go
towards negativing his consent to one or more terms of the document. As both
Mellish and Scrutton observed, a party can escape the full consequences of his
signature if he can show that the contract was tainted with fraud or
misrepresentation. In such cases, the innocent party is entitled to rescind the
contract and claim damages. Where the misrepresentation is otherwise than
fraudulent, the court, acting under s2(2) of the Misrepresentation Act 1967 may
declare the contract subsisting and award damages in lieu of rescission.
In addition, s3 of the Misrepresentation Act 1967 provides that if a contract
contains a term excluding or restricting: "any liability to which a party to a
contract may be subject by reason of any misrepresentation made by him before
the contract was made", then the burden of proof is on the party seeking to
uphold the clause.
With contract law remaining very much the cornerstone of commercial law,
commercial lawyers continue to be fascinated by its details and its difficulties
throughout their careers. Contract law has also shown itself to be remarkably
resilient to the onward march of the new economy; the general approach of the
courts has been to recognize that however a contract comes into being,
traditional contract law still provides good answers.
All senior finance professionals would do well to read this book and familiarise
themselves more fully with the elements of contract law. They could well find
that their customer or client is not as shackled to their contract as they
think.
Source:
Credit Control Journal
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