Chapter 3 FAILURE TO READ AN AGREEMENT

JurisdictionNew York

Chapter Three

Failure to Read an Agreement

I. Failure to Read an Agreement: Imputation of Knowledge

In Mencher v. Weiss,1477 the Court of Appeals cited Judge Learned Hand's observation regarding the function of intent in an agreement:

A contract has, strictly speaking, nothing to do with the personal, or individual, intent of the parties. A contract is an obligation attached by the mere force of law to certain acts of the parties, usually words, which ordinarily accompany and represent a known intent. If, however, it were proved by twenty bishops that either party, when he used the words, intended something else than the usual meaning which the law imposes upon them, he would still be held, unless there were some mutual mistake, or something else of the sort.

Parties are ordinarily bound by agreements they sign since they are presumed to have read them.1478 In Pimpinello v. Swift & Co.,1479 the Court of Appeals held that a competent person is held responsible for his signature to a document which has not been fraudulently procured. He is bound to read and know what he signs; that his mind never gave assent to the terms expressed is not material. If the signer could read the instrument, not to have read it was gross negligence; if he could not read it, not to procure it to be read was equally negligent; in either case the writing binds him.1480 A party will not be excused from his failure to read and understand the contents of a document. A party who signs a document without any valid excuse for having failed to read it is conclusively bound by its terms.1481 Ordinarily, the signer of a deed or other instrument, expressive of a jural act, is conclusively bound thereby.1482

Professor Corbin explained the rationale behind the Duty-to-Read rule:1483

The basic rule applicable to the duty to read is based on the objective theory of contracts [where] a party is bound by the reasonable impression the party creates. . . . A party who signs an instrument manifests assent to it and may not later complain about not reading or not understanding the instrument. The thought is that no one could rely on the signed document if the other party could avoid the transaction by not reading or not understanding the writing.

An attorney's knowledge of a fact is chargeable to the client;1484 the principal is bound by notice to or knowledge of his agent in all matters within the scope of his agency, although in fact the information may never actually have been communicated to the principal.1485 Thus, a party may not rescind an agreement based on counsel's failure to inform him of any ongoings in the case, although it may serve as the basis of a professional liability claim against the attorney.

A layperson who signs a settlement agreement "is conclusively bound by the terms," even if he has not read the agreement, as long as it could have been read.1486 However, in Kabir v. Kabir,1487 the Appellate Division reversed a denial of the wife's motion to set aside the separation agreement and open the matter for further financial disclosure to be followed by a hearing to test the validity of the settlement agreement. The hearing was to determine the totality of the circumstances, including the extent of the assets, and the circumstances surrounding the execution of the agreement in order to determine whether equity should intervene to invalidate the agreement. The documentary evidence supported her allegations that the husband had concealed numerous assets of which she did not become aware until two years after the separation agreement was executed, creating an inference that the agreement was not valid. Moreover, the wife was not represented by counsel, and was neither fluent in English nor aided by a trained interpreter when she signed the separation agreement.

A party who chooses not to read a waiver and consent thus chooses to forgo any questions about the document and the consequences of his signature.1488 He who signs or accepts a written contract, in the absence of fraud or other wrongful act on the part of another contracting party,1489 is conclusively presumed to know its contents and to assent to them, and there can be no evidence for the fact finder as to his understanding of its terms.1490 He is bound by them whether he reads them or not,1491 and the other party should not suffer the consequences.1492 To hold that a contracting party who, through no deceit or overbearing inducement of the other party, fails to read the contract may establish and enforce the contract supposed by him would introduce into the law a dangerous doctrine; of course, the doctrine does not exist.1493 A failure to have read an agreement does not set forth grounds for rescission.1494 A party to an agreement is chargeable with knowledge of the terms of the agreement irrespective of claims not to have read it,1495 because the law does not relieve a person merely because he has failed to read a document which he has executed and is consequently barred from claiming reliance on representations which contradict its terms.1496 Legal awareness is thus imputed by the law.1497

Lorenc v. Lorenc1498 rejected the wife's claim that she did not understand the agreement's terms. By her own account, she was an able negotiator who possessed impressive business acumen and sophistication, taking credit for having transformed her husband's medical practice into a thriving success.

Where a written instrument contains terms different from those orally or otherwise represented, a person is presumed to have read the writing and may not claim that he or she relied on the representations.1499

A signer's duty to read and understand that which it signed is not diminished merely because the signer was provided with only a signature page.1500 Furthermore, a party's failure to read an agreement also precludes its fraud in the execution defense.1501

In Melvin v. Melvin,1502 the wife claimed that the husband only sent her the signature page of the tax returns, so that she was unaware of their contents. The Appellate Division noted that she had unfettered access to the complete returns from the parties' accountant. "In any event, by signing the tax returns, she is presumed to have read and understood their contents."

Rosenberger v. Rosenberger 1503 imputed knowledge of an issue that would be central to the litigation:

[A]lthough a retiree spouse is entitled to treat, as separate property, that portion of an accident disability pension which constitutes compensation for personal injury, where that issue is adjudicated pursuant to Domestic Relations Law § 236(B)(5)(b) . . . "[t]he proponent of the claim of separate property is required to demonstrate the portion of the disability pension which is to be considered separate.". . . Here, the plaintiff, a former New York City firefighter, suffered a line-of-duty injury and applied for an accident disability pension before entering into the subject stipulation. "Thus, he clearly was aware of or chargeable with knowledge of the prospect of his eventual disability retirement when he entered into the stipulation." . . . Although the plaintiff acknowledged in the stipulation of settlement that he had been advised of and understood his rights pursuant to the equitable distribution provisions of the Domestic Relations Law, the stipulation of settlement nevertheless provided for a division of his pension without reference to whether the pension was based on accident disability or referable to ordinary service retirement. Moreover, the QDRO authorizing the defendant to receive a share of the plaintiff's entire pension in accordance with the Majuaskas formula . . . was entered upon the plaintiff's consent after his application for an accident disability pension had been approved. Under these circumstances, the Supreme Court properly denied the plaintiff's motion, in effect, to amend the QDRO . . . and properly denied his motion for leave to renew, upon determining that the purported change in law he propounded as a ground for renewal would not change the outcome of his motion, in effect, to amend the QDRO (see CPLR 2221[e][2]).

In Owens v. Lombardi,1504 the Fourth Department noted that the husband had "examined the pencilled stipulation on his attorney's legal pad before entering the Judge's chambers to place it on the record. . . . By all his actions throughout the litigation, he gave evidence that he was not an unlettered submissive client requiring guidance on the meaning of the proceedings and specifications of settlement from his attorney. Mr. Owens went into the chambers and stood silently by and listened to his attorney dictate the stipulation into the record and consented to settlement of the case. He is bound by that consent." The court added that if the husband "did not read [the stipulation], or if he read it but did not question it, he must accept the responsibility for that failure."

II. Illiteracy in the English Language and Blindness Do Not Mandate Vacatur, the Disabled Party Bears the Burden to Have the Agreement Read to Him

A lack of understanding of English does not necessarily tend to show fraud or overreaching such as might warrant invalidating the stipulation.1505 Even if the party is illiterate in the English language, courts have imposed an obligation to secure interpretation:

Persons who are illiterate in the English language are not automatically excused from complying with the terms of a contract which they sign simply because they could not read it. Such persons must make a reasonable effort to have the contract read to them. 1506

As noted above, if the signer could read the instrument, not to have read it was gross negligence; if he could not read it, not to procure it to be read was equally negligent; in either case the writing binds him.1507

There are situations where an instrument will be deemed void because the signer was unaware of the nature of the instrument he or she was signing, such as where the...

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