By: William J. O’Sullivan
Here’s a good way to create work for your favorite lawyer: sign legal documents without reading them first. One of our partners was reminded of this when he went to the hospital for some minor surgery on his knee.
At the check-in desk, a helpful young lady asked him some questions, keyed in his responses, and then printed out a form for him to sign. At the bottom of the page were two signature blanks. “Sign here,” she commanded him. “This lets us get paid by your insurance company.”
He quickly reviewed the form. As it turned out, she was only half right. One signature blank was indeed an insurance authorization. But the second one was something else. It was his personal guaranty to pay the hospital bill just in case the insurance company didn’t.
Well now, that’s different, isn’t it?
The same kind of scenario plays out every day. Bob sits down with a legal document that may have enormous legal consequences – a lease, a guaranty, a distribution agreement, a non-compete. Sitting across the table is Janet, the person on the other side of the transaction. Bob has never seen the document before, but Janet has. In fact, Janet’s lawyers drafted it.
Janet pushes the document across the table toward Bob. Bob doesn’t want to read it because (a) he doesn’t want to waste Janet’s time, (b) he doesn’t want to look untrusting, (c) he doesn’t want to look like a worrywart, or (d) he’s in a hurry. So instead of carefully reviewing it, he asks, “What’s this?”
“Just a standard form,” Janet replies. “Everybody signs one. Sign right there.” So Bob immediately signs.
Bad idea. Under Connecticut law, the general rule is that when an adult signs a legal document, he is assumed to have read it, and is fully responsible for its contents. This is true whether he actually read it or not, and even if the whole document is preprinted “boilerplate.” So if Bob signed onto a bad deal, it will take some fancy legal footwork to get him out. And of course there’s no guarantee that his lawyer will succeed.
He might have avoided the whole mess right at the front end, by taking 10 minutes to read the document. If it was lengthy or complicated, he could have insisted on taking it home, and perhaps discussed it with his attorney. You can bet that that conversation would have been a lot shorter – and cheaper – than meeting his attorney six months later to hammer out an exit strategy.
Here’s something else. Let’s go back to Bob and Janet. Suppose Bob does take the time to read the contract, sees a couple of items he doesn’t like, and mentions his concerns to Janet. Janet reassures him, “Don’t worry. We would never enforce that. Just sign here.”
Bob’s little side agreement with Janet is unlikely to help him if the need arises. The general rule is that, when two parties sign a contract, an oral side agreement will be completely ineffective if it is contradicted by the written language. So Bob should have called Janet’s bluff, handed her the pen, and told her, “Fine. Cross it out and put your initials right there.”
Here’s the bottom line. If you sign onto a deal that turns out to be a loser, the old “but I didn’t read it” defense is usually no defense at all. The same goes for, “But we had a side agreement.” Don’t get railroaded into signing anything. Take as much time as you need. And make sure the writing spells out the whole deal. If the people on the other side object, you probably shouldn’t be doing business with them in the first place.