It is a basic rule of contract law that if you sign a contract you are bound by the terms of the contract whether you have read them or not: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165, [2004] HCA 52 . In such circumstances, unless there is a statutory provision that would allow the contract to be set aside, to get out of the contract a party will need to prove the other party has engaged in some conduct that vitiated their consent to enter the contract. Such conduct could include taking steps to ensure they do not find out about a mistake they made, misrepresenting the terms of the contract or otherwise engaging in unconscionable conduct through knowingly taking advantage of a special disability the other party was under.
The recent case of the NSW Supreme Court in Gispac Pty Ltd v Michael Hill Jeweller (Australia) Pty Ltd [2024] NSWSC 18 is a timely reminder of this principle. The facts of the case were complex and raised many issues. However, the most important point concerned the rule governing the incorporation of terms into signed contracts.
What were the facts?
Gispac provided paper carry bags to Michael Hill. In 2014 an employee of Michael Hill signed a contract for the future supply of carry bags and placed a tick in a check box that expressly stated that Michael Hill was agreeing to certain terms and conditions that could be found in a web link provided. No attempt was made by the employee to open that link and read the terms.
Critically, these terms included an obligation for Michael Hill to purchase minimum quantities of bags and to make shortfall payments where these minimum quantities were not purchased. It also included a 24-month initial term, with an automatic renewal for another 24 months unless notice was given at least 6 months in advance of the expiry of the initial term.
Were the terms and conditions binding on Michael Hill?
An issue before the court was whether Michael Hill was bound by these terms. The court held that it was and ordered Michael Hill to pay $2.26 million in damages. It was held that the contract was a signed contract, dismissing an argument it should be treated as an oral contract where the rules for incorporation of terms are more onerous. By ticking the box and signing the contract, the terms were incorporated by a method known as incorporation by reference. The principle the judge applied was that the act of signing would lead a reasonable person in the position of the other party to believe that you were agreeing to the terms. As noted above, the decision emphasises and applies the long-established principle that if a person signs a contract or evidences their agreement to the terms then it does not matter that they have not accessed those terms or taken an opportunity to ask for a copy of them or sought to read them. The result emphasises the need for a party signing a contract to take steps to obtain and review all terms that are expressed to be incorporated into the contract.
It will be interesting to see whether Michael Hill appeals the decision and we will monitor any developments.
Authors: Andrew Hii and Professor Gregory Tolhurst
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