Is a Contract Enforceable When One Party Claims to Have Misunderstood It?
It sometimes happens that a party to a contract discovers that he has agreed to something that is not is his personal or financial best interests. He might try to claim that he didn’t read or didn’t understand the contract so the contract isn’t enforceable against him.
This article is an examination of Alabama caselaw on the question of whether a contract is binding and enforceable when a party claims to have misunderstood it.
Can you be bound to a contract you didn’t understand?
Let’s start with the basic principle of why we put contracts in writing in the first place. We do that so everyone is quite literally on the same page and has same opportunity to review, comprehend, and concede to the terms of the agreement, and those terms cannot change. The written contract is the only document that purports to represent the parties’ intentions.
“The general rule of contract law is that when the parties reduce their agreements to writing, the writing is the sole expositor of the transaction and the intention of the parties, in the absence of mistake or fraud or ambiguity.” Jones v. Jones, 236 So.3d 119, 123 (Ala.Civ.App. 2017) (quoting Gunnels v. Jimmerson, 331 So.2d 247, 250 (Ala.1976)). “The purpose of a signature on a contract is to show mutual assent.” Bowen v. Security Pest Control, Inc., 879 So.2d 1139, 1142 (Ala.2003) (quoting Ex parte Rush, 730 So.2d 1175, 1177-78 (Ala.1999)).
So the question then is whether a contract can be enforced against a party (under normal circumstances, since there are always exceptions that can blow these things wide open) who claims not to have understood what he was signing. The short answer is – yes, it can. In general, an executed agreement between parties that is complete in and of itself and free of ambiguity is an enforceable contract, even though one party claims that he did not understand the agreement and that the agreement did not represent what he thought he was agreeing to. Allen v. Allen, 903 So.2d 835 (Ala.Civ.App. 2004).
“One who has executed a written contract in ignorance of its contents cannot set up his ignorance to avoid the obligation in the absence of fraud or misrepresentation.” Mays v. Johnson Prod., Inc., 530 So.2d 215, 217 (Ala. 1988) (quoting Gunnels v. Jimmerson, 331 So.2d 247, 250 (Ala.1976)). “[W]hen a competent adult, having the ability to read and understand an instrument, signs a contract, he will be held to be on notice of all the provisions contained in that contract and will be bound thereby. Power Equip. Co. v. First Alabama Bank, 585 So.2d 1291, 1296 (Ala. 1991); see also Wilcoxen v. Wilcoxen, 907 So.2d 447, 450 (Ala.Civ.App. 2005); Allen v. Allen, 903 So.2d 835, 841 (Ala.Civ.App. 2004). This is true even to the extent that a party to a contract “may be ‘bound’ by a contract in ways that he did not intend, foresee, or understand.” Lilley v. Gonzales, 417 So.2d 161, 163 (Ala. 1982).
Can you be bound to a contract you didn’t read?
If you’ve ever purchased a home or car or insurance or even signed up for a credit card, you’ve likely entered into a contract without having read the whole thing. It’s important then to know whether that contract can be enforced against you. Again, the answer is yes.
“Alabama law provides that a person who signs a contract is on notice of the terms of the contract and is bound by it even if he or she fails to read or understand the document.” See Locklear Dodge City, Inc. v. Kimbrell, 703 So.2d 303, 306 (Ala.1997); Power Equipment Co., 585 So.2d 1291. Parties to a contract must be allowed to rely on the terms of a signed agreement, because it would impose a punitive result upon a party for courts to determine that a party that chooses not to read a contract or claims not to have understood it is not obligated by that contact and can ignore any provision that does not suit that party. See Locklear Dodge City, Inc. v. Kimbrell, 703 So.2d 303, 306 (Ala.1997).
So be mindful of the contracts you enter into because regardless of whether you have actually read or understood them, they are likely enforceable against you.
Photo by Sean Hagen.