Principles

·  Contract—Written contract—Party signing written contract is bound by all the terms therein whether he has read them or not

·  Sale of Goods—implied terms—Fitness for particular purpose—Exemption clause excluding warranty of fitness—Refrigerator which would not refrigerate— Defendant not protected by exemption clause where in fundamental breach of contract containing clause

·  Sale of Goods—Examination of goods by buyer—Binding effect on buyer of such examination—Buyer entitled to sue for defects which ordinary examination could not have revealed

Plaintiff bought a new refrigerator from defendant, and signed a document called “Contract of Purchase” without reading it.
Clause 6 of this document stated that the buyer had examined the refrigerator before signing and had been satisfied with its condition, and that no guarantee as to the merchantability, fitness for any purpose or otherwise was to be implied. The refrigerator was completely defective, since it would not refrigerate at all.
Plaintiff sued defendant for the return of the price paid. Defendant relied in his defence on clause 6 of the “Contract of Purchase.”
Held:
A. A party signing a written contract is bound by all the terms contained therein, whether he has read them or not, unless there was some fraud or misrepresentation which induced him to sign without reading a document which he would not have signed had he been aware of all the terms.
B. A seller of goods who is sued by the buyer for breach of an implied warranty of fitness for the buyer’s purpose cannot rely on an exemption clause in a written contract signed by the buyer which excludes such terms from being implied into the contract, where;
1. the buyer’s purpose for the goods was the ordinary purpose to which such goods are put, which was obvious from the nature of the goods bought, and

2. the breach of the implied warranty of fitness is so great as to amount to a fundamental breach of the seller’s whole contract to supply the goods asked for.
3. A sale of a refrigerator is, in the absence of express agreement to the contrary, a sale of a normally functioning refrigerator. A seller who supplies a refrigerator which will not refrigerate is therefore in fundamental breach of his whole contract of sale.
4. An undertaking by a buyer that he has examined the goods prior to purchase and found them satisfactory only means that the buyer has performed the ordinary examination usually performed by laymen-buyers of that kind of goods, and that no defect which such an examination could reveal was then revealed. It does not mean that the buyer is satisfied that no defect exists of a kind which could only be detected by a detailed technical examination by experts in that kind of goods.
 

Judgment

 Mubarak Imam El Hag D. J.,1962. May I be excused for writing the judgment in this case in English, because the question in issue is wholly a legal question involving so many technicalities difficult to express in Arabic?

 The plaintiff in this case is suing to recover from the defendant the sum of £S.100 paid by him for the purchase of a refrigerator according to the contract. The plaintiff alleges that he has found the refrigerator completely useless and he had adduced evidence to that effect. The defendants, on the other hand, pleaded that even if the refrigerator is as bad as the plaintiff alleges, they are wholly protected by the exemption clause contained in clause 6 of the written “Contract of Purchase by Hire.” It is, therefore, clear that the question in issue is that of the exemption clause because the plaintiff admits that he had signed the document without reading it, although he could have read it before signing it.

   The English law, which is persuasive authority to this court, is clearly stated in Cheshire and Fifoot, 107-112 (5th ed., 1960). Two categories of cases can be distinguished.

First: Cases where there is an exemption clause in an unsigned contract.  Secondly: Cases where there is an exemption clause in a signed contract.

We are here concerned only with the second category. It seems that the English law in this kind of case lays a strict rule of absolute liability on the plaintiff.

   “If the document is signed it will normally be impossible . . . to deny its contractual character, and evidence of notice, actual or constructive, is irrelevant. In the absence of fraud or misrepresentation a person is bound by a writing to which he has put his signature, whether he has read its contents or has chosen to leave them unread”: Cheshire and Fifoot, Contract 110 (5th ed., 1960).

The rule was upheld in so many cases, an illustration of which is L’Estrange v. Graucob [1934] 2 K.B. 394, in which the plaintiff signed without reading a contract containing an exemption clause negativing all liability from the defendants. His plea that he did not read the contract failed. The rule was, once more, emphasized by Scrutton L.J. in the following words: “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; it is wholly immaterial whether he has read the document or not.”

In this case no fraud has been alleged on the part of the defendants. Although the plaintiff pleaded that there was misrepresentation he failed to prove it. He alleged that one of the defendant’s clerks verbally told him that the refrigerator is guaranteed for two years, but no evidence to prove this has been brought before the court.

 Therefore, according to English law the plaintiff is bound to fail and the defendants are absolutely protected from liability by the exemption clause.

 This strict approach of the English law, however, did not escape challenge by recent revolutionary judges like Denning L.J., who took a more liberal view on less legal but more equitable grounds. The problem raised by this new approach is that the courts must strike a balance between the freedom of contract, on the one hand, and the weak contractual position of an individual dealing with a monopoly or company, on the other. The Individual dealing with a company or monopoly has usually no bargaining power and he must accept the terms imposed upon him, however unconscionable they are, or abandon the transaction altogether. Failure to help such an individual in such circumstances defeats justice in its wild sense. In the words of Denning L.J., it is a serious question whether a contract In such wide terms would be enforced by the courts,”  and added “the vigilance of the common law which, while allowing freedom of the contract, watches to see that it is not abused.”

 So many attempts had been made by the English judges to reduce the absolute rigidity of the English law as regards similar signed contracts when made by individuals with companies. The learned writers Cheshire and Fifoot discuss this under the heading of “Unreasonable Terms”: Cheshire and Fifoot, Contract 112—113 ( 5th ed. 1960).

   Thus the position in English law can be summarized as follows:

 In so far as signed documents are concerned, exception clauses were upheld and strictly adhered to by the courts up to the close of the nineteenth century. This state of affairs could be explained on economic basis. The English society, then, was a harshly capitalist society and, therefore and by virtue of that, the freedom of contract had to be respected even if it went to the extent of injuring the individual’s interest, because, after all, that is the essence of capitalism—exploitation in its highest degree. Conditions began to take a new trend at the beginning of the present century. More revolutionary economic factors came on the stage and absolute capitalism started to lose ground in the face of the advancing socialism, the essence of which is to protect the helpless individual from the crushing exploitation of the capitalists running and dominating big companies, organisations and monopolies. Hence the courts, following the natural development of the society, started to approach the question of the exemption clauses more logically and practically. Many tactics were used to avoid the strict rule which gave strict validity to the exemption clause when contained in a signed document. One of these tactics was to hold the defendant liable when the breach of the contract complained is so fundamental that it goes to the root of the contract itself, i.e., the defendant cannot plead an exemption clause if the breach is so serious that it underlies the whole contract, or, in the words of Cheshire and Fifoot,

             “The loss or damage takes place outside the ambit of the contract altogether in circumstances which he need not be taken to have contemplated. The term after all is a fraction of a larger undertaking, and the defendant, if he is in fundamental breach of the contract, cannot rely on one of its conditions.

   “Two cases can be referred to illustrate this approach: Davies v. Collins [1945] I All E.R. 247 and Woolmer v. Delmar Price Ltd. [1955] I Q.B. 291. In both cases the plea of the exemption clause was rejected. Denning L.J. in Bonsor v. Musicians’ Union [1954] Ch. 479, 485, even went further and said that ‘Any rule found to be contrary to natural justice, or, what comes to the same thing, to what is fair and reasonable will be held to be invalid.”

   In the case now before me the clause pleaded by the defendants (Cl. 6)  states that the purchaser admits that he had examined the refrigerator before signature and has been convinced of its condition and, therefore, there is no implied guarantee of the merchantability, fitness for any purpose or otherwise of the refrigerator, etc. Following the recent approach of the English courts I hold that the plea of defendants must fail for the following reasons:

First: The clause is so wide that it can hardly be described as reason able or fair and it certainly is contrary to natural justice.

Secondly: The defect in the refrigerator complained of by the plaintiff, as it has been satisfactorily proved to me, is so grave that it can safely be said to be out of the ambit of the contract altogether, because the refrigerator proved to be nothing more than an unsatisfactory ice-box. Such defect underlies the whole contract; if the defendant failed to perform his main obligation of the contract, i.e., providing the plaintiff with a refrigerator, he cannot be heard to plead one of the clauses of the contract.

  Thirdly: The opening words of clause 6 of the contract read that the purchaser admits that he had examined the refrigerator. This the plaintiff does not deny, but in the circumstances, and having in consideration that the plaintiff is a layman as far as the mechanism of a refrigerator is concerned, it can only be taken to mean that examination which can be made by a layman to reveal obvious defects.

Fourthly: Was the defect contemplated or could it be said that the plaintiff was taken to have contemplated it when signing the contract? No reasonable man in the place of the plaintiff could have contemplated such a thing even if he read the clause pleaded by the defendant and learnt it by heart.

 Therefore I refuse the plea made by the defendants and hold that their defence must fail. I give judgment to the plaintiff for the sum claimed and fees.

   The counterclaim is hereby dismissed.