THE RULE IN L’ESTRANGE V F. GRAUCOB LTD.

INTRODUCTION

Contract Law establishes principles and rules for the formation of agreements and contracts, their
enforcement and provides for remedies in case of breach of obligations under such contracts. The
terms created under such agreements may become obligatory by providing assent thereto. This
may be done verbally or in writing, by signing the agreement.

It is a generally accepted principle that a party to a contract who has signed the contract cannot,
later, dispute the terms and obligations created thereunder unless such signature was made by
misrepresentation, fraud or non-est factum. The signature on the contract is sufficient to deduce
that the terms and conditions set in it are consented to.

This principle was established by the decision in the English case, L'Estrange v F Graucob Ltd.1
(L’estrange). The case is a landmark in contract law. It settled the principle that signed
contractual documents will be accompanied by the presumption that the document and all terms
and conditions therein were duly read and obliged to, thereby unclouding the dubiety around the
same.

FACTS OF THE CASE

The plaintiff, Miss Harriet Mary L’Estrange, was the owner of a café in Great Ormes Road,
Llandudno. The defendants, Messrs. F. Graucob, Ltd., were manufacturers and sellers of
automatic slot machines.

On February 7, 1933, two of Graucob Ltd.’s salespeople visited the plaintiff and persuaded her to
buy an automatic slot machine for cigarettes. At a meeting at her house, the plaintiff decided to
purchase the machine. The representatives of the defendant then produced a form printed on
brown paper headed “Sales Agreement.” It contained a mass of clauses, including one which
said, “Any express or implied condition, statement or warranty, statutory or otherwise, not stated
herein, is hereby excluded.” It also contained blanks that were duly filled by the particulars of the

1
[1934] 2 KB 394
plaintiff’s purchase. The form was then signed by the plaintiff without her having read it properly
or knowing all its contents. On February 9, 1933 the defendants sent an ‘order confirmation’
signed by them, a ‘guarantee’ for eighteen months for the free fixing, maintenance, and insurance
of the machine and an invoice.

The machine was delivered on March 28, 1933 but did not work satisfactorily. After a few days,
it became jammed and unworkable. Several times, the plaintiff wrote to the defendants that it had
failed and needed repairing and a mechanic thus attended to it. The plaintiff’s patience being
exhausted, she requested the removal of the machine and return of her deposit. The defendants,
however, declined the same, resulting in the suit.

On May 25, 1933, the plaintiff initiated a claim for 9 /. 1 s., and for breach of an implied
warranty on the sale of the machine that it was reasonably fit for the purpose for which it was
sold.

LEGAL ISSUES

The honorable court dealt with the following legal issues in this case:-

1. Whether there was a contract in writing between the plaintiff and the defendants in the terms
contained in the brown paper document?
2. Whether the exclusion clause formed part of the contract?
3. Whether signing the document without knowing the content amounted to consent?

BACKGROUND: THE COUNTY COURT TRIAL

The plaintiff initially claimed 9 /. 1 s. in the Carnarvonshire County Court, but before the trial
started, she amended her claim by adding a count for breach of an implied warranty that the
machine was reasonably fit for the purpose for which it was sold. The plaintiff put her claim
before the county court judge in three different ways: total failure of consideration, breach of
implied conditions going to the root of the contract, and breach of warranty. The defendants
pleaded that there was no total failure of consideration, no implied conditions existed, no action
would lie for breach of an implied warranty as the agreement expressly for the exclusion of all
implied warranties.
The plaintiff contended that she was induced to sign the contract by misrepresentation that it was
an order form and that she knew nothing of the content and the exclusion clause being used as
defence. She further added that the defendants did not make any effort to bring the exclusion
clause and other vital clauses to her notice.

The plaintiff further added that the crucial terms printed in small type, containing inter alia the
aforementioned exclusion clause, were not brought to her notice by the defendants. These terms
were printed in an unusually small type and therefore, the plaintiff did not read them. Thus, she
signed the form intentionally but “had no clear idea” of what she was signing and thought that
the brown paper document was merely an order form confirming her consent to purchase the
machine.

The defendants, however, claimed that they had duly read to the plaintiff whole of the brown
paper document, including the small print and that the plaintiff asked no question about the small
print.

On August 17, 1933, the county court judge gave judgment and found it a fact that the plaintiff
had no knowledge of the contents of the document which she had signed except the amount of
purchase price and monthly installment.

The court also found that there was a breach of an implied warranty that the machine should be
reasonably fit for the purpose for which it was purchased, notwithstanding the ‘exclusion clause’
being relied upon by the defendants as it was subject to certain conditions. The court evaluated
the facts of this case according to directions laid down in Richardson, Spence & Co. v. Rowntree 2
and concluded that since, the terms of exclusion of warranties were not printed in a reasonable
size in this case, the defendants were held not entitled to rely on the exclusion clause.

The county court gave judgment for the plaintiff on the claim for 70 l., and for the defendants on
the counterclaim for 71 l. 18 s. 6 d. , the balance of the price.

THE L’ESTRANGE RULE: OBSERVATIONS OF THE DIVISIONAL COURT

The bench consisting of SCRUTTON L.J. and MAUGHAM L.J. criticized the judgment of the
county court and read the facts in a completely different light. The court observed that the “sales
2
2 C. P. D. 416, 421
agreement” being treated as a contract in this case indeed constituted a contract in writing as both
parties signed it, contained terms and conditions regarding the sale, including the ‘exclusion
clause’ being relied upon by the defendants. As to the question of ‘small print’ of the important
exclusion clause in the contract, the court expressed discontent and “wished that the contract had
been in a simpler and more usual form.”

The court also observed that there was no evidence to prove that the plaintiff was induced to sign
the contract by misrepresentation, neither was there any fraud or coercion, while also ruling out
any possibility of the applicability of the doctrine of non-est-factum because the plaintiff had
been told that the document was an order form, which it indeed was. Furthermore, the court
added that “it was wholly immaterial” whether or not the plaintiff read the small contents of the
contract before signing the document.

The court cited the judgments in Wallis v Pratt3 and Andrews Brothers (Bournemouth), Ld. v.
Singer & Co.4 (Andrews) while referring to the exclusion clause relied upon by the defendants as
their defence.

The court observed that Wallis v Pratt5 was one of the first cases where the courts dealt with the
question of exclusion clause. In this case, the exclusion clause mentioned only “warranty” and it
was held that it did not exclude conditions. In Andrews6 the contract of sale contained a clause
which excluded only implied conditions, warranties and liabilities. It was held that the clause did
not apply to an express term describing the article and did not exempt the seller from liability
where he delivered an article of a different description.

However, while citing these cases, Scrutton J. acknowledged the fact that the exclusion clause in
question in the present case has a much broader scope than the ones dealt with in the previous
cases.

The observation, “When a document containing contractual terms is signed, then, in the absence
of fraud, or, I will add, misrepresentation, the party signing it is bound, and it is wholly

3
[1911] A. C. 394
4
[1934] 1 K. B. 17.
5
Ibid
6
Ibid
immaterial whether he has read the document or not,” 7 by Scrutton J. laid the foundation of what
we know today as the L’estrange rule.

Hence, the honorable court allowed the appeal. It was held that the action failed and the sellers
were entitled to the amount.

ANALYSIS AND CONCLUSION

The judgment in L’Estrange v. F. Graucob is a landmark in the law of contracts in general and
standard-form contracts in particular. This judgment established the crucial rule that signature on
documents relating to a contract signifies unequivocally that the signatory has read and agrees to
the terms of the contract.

The rule imposes a responsibility on the signatory, that of reading, knowing and being aware of
the contents of the documents they sign. In case a signatory claims that they did not know the
contents of such document, it is considered completely their fault and the other party cannot be
held liable for loss arising from such indifference.

However, the principle in L’Estrange has been applied variously in different cases based on facts
and circumstances. In Hill (DJ) and Co Pty Ltd v Walter H Wright Pty Ltd 8, signed delivery
dockets which were known to contain contractual terms were held not to form part of the
contract of carriage, as they were handed over, and signed, after the contracts had been
concluded. In Le Mans Grand Prix Circuits Pty Ltd v Illiadis 9, the court observed that the
document in question should be proved to be a part of the contract.

Therefore, a person who has signed a document that is part of the contract at the time of signing
it, cannot later claim that the terms of such document do not apply to them because they had not
read them. This decision continues to act as a guiding light in matters related to exclusion clause
and the protection of rights of the individuals who are party to standard form contracts.

7
[1934] 2 KB 394.
8
[1971] VR 749 (Winneke CJ, Starke and Anderson JJ)
9
[1998] 4 VR 661 (Winneke P and Tadgell JA, Batt JA dissenting).