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Rajah Lehal

Read the fine print

October 26, 2016

Ensure understanding of all parts of a contract by reading the contract and asking for clarification.

The signer has the responsibility of knowing the terms of the contract(s) and carefully signing. The court will not support any carelessness.

For example, in Marvco Colour Research v Harris [1982 SCC], Harris signed a contract in favor of the lender, Marvco. He was assured by a third party that the contract was merely an amendment to an initial mortgage. Harris did not read the contract. Turns out that he signed a second mortgage. Harris tried to avoid liability on the basis of the defence of non est factum (he did not understand the nature of what he signed due to the misrepresentation by the third party). The court concluded that to invoke the doctrine of non est factum, there cannot have been any carelessness.

Non est factum is a defense in law that prevents liability for the signer of a contract if they did not fully understand and appreciate what they were. However, courts have distinguished this from carelessness. Some factors that could influence “carelessness” rather than non est factum are when:

  • The signer speaks the language of the contract;
  • The signer is literate;
  • The signer has signed the same contract before the signer should have knowledge of the terms of the contract); or
  • The signer if sophisticated and educated.

Commercial counterparties often cannot rely on this as a defense because they will have, or will be presumed to have, hired lawyers to negotiate the contract. In present times, some counterparties (usually a bank) will require that independent legal advice is sought by a mortgagor.

Approval of Terms
Case Law

Written by Rajah. Rajah Lehal is Founder and CEO of Clausehound.com. Rajah is a legal technologist and technology lawyer who is, together with the Clausehound team, capturing and sharing lawyer expertise, building deal negotiation libraries, teaching negotiation in classrooms, and automating negotiation with software.