Have you ever ignored or refused to read T&Cs?  Some recent case law coming out of Australia should serve as a reminder of the importance of paying close attention to T&Cs that might affect you or your business.

The starting point under the law has historically been that: “When a document containing contractual terms is signed, then, in the absence of fraud… the party signing it is bound, and it is wholly immaterial whether he has read the material or not” - Scrutton LJ in L’Estrange v F Graucob Ltd [1934] 2 KB 394.If you think the position has changed since 1934, you'd be wrong.

The case of Gispac v Michael Hill Jeweller

In a January 2024 decision, Gispac Pty Ltd v Michael Hill Jeweller (Australia) Pty Ltd, the Supreme Court of New South Wales ordered Michael Hill (MH) to pay AUD$2,259,971.40 plus interest and costs to Gispac for breach of contract, after MH failed to fulfil T&Cs that had been agreed to (and not read).

Gispac was a long-term wholesale supplier for MH of branded bags and other packing material. In 2014, MH went to Gispac with a major rebranding proposal – with Gispac in response providing MH with three 'quotationstyled' sales contracts, one for each of MH NZ, MH AUS and Emma Rose (a MH subsidiary). Those sale contracts asked MH to 'tick-the-box' confirming it agreed with the Gispac T&Cs, which were to be found in the URL link to the Gispac's website. Gispac's covering email which attached these sales contracts read "if you wish to move forward with this, I would be grateful if you could sign and return, remembering to tick the terms and conditions box."

Gispac's T&Cs

MH's group distribution manager reviewed these contracts and signed them on behalf of MH, which included the manager ticking boxes that agreed to Gispac's T&Cs. Regrettably, the manager did this without having read Gispac's T&Cs - resulting in MH inadvertently agreeing to:

• use Gispac as MH's exclusive supplier;
• pay for any product that is ordered but not purchased;
• pay the difference between a "minimum quantity" and the number of bags MH actually ordered (known as a 'take or pay' provision); and
• give Gispac six months' notice if MH wanted to end the arrangements between the parties before the contracts' terms of 24 months expired, (together,the Contentious T&Cs).

The parties operated under these contracts for a few years, but issues arose in 2017 when Gispac sent MH invoices attempting to enforce some of these terms. MH refused to pay these invoices and ultimately discontinued its relationship with Gispac. Gispac then claimed against MH for liquidated damages for breach of the 'take or pay' provision under their T&Cs in the amount of AUD$2,259,971.40.

MH's attempted defences

MH relied on several defences to Gispac's claims, including:

• Conventional estoppel – the Contentious T&Cs in the sales agreements departed from the way the parties had been doing business for over a decade previously and these specific terms were not drawn to MH's attention;
• Misleading or deceptive conduct – Gispac engaged in misleading or deceptive conduct by silence, or otherwise by the failure to communicate that Gispac was aware that the sales contracts contained the Contentious T&Cs;
• Unconscionable conduct – Gispac engaged in unconscionable conduct by including the Contentious T&Cs in the sale contracts and that Gispac had not engaged in "what is right and acceptable commercial behaviour"; and
• Penalty doctrine – the take or pay provision is a penalty which is extravagant and unconscionable in comparison with the loss Gispac could suffer under the sale contracts.

The importance of reading the T&Cs before clicking "I accept"

The general rule, as reiterated in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52, is that "a person who signs a document which is known by that person to contain contractual terms, and to affect legal relations, is bound by those terms, and it is immaterial that the person has not read the document."

Ultimately, Justice Gleeson found Gispac's dealings to have been commercially justifiable and failed all of MH's defences, with the case turning on its facts.

The moral of this particular story clearly is: read the T&Cs!

If you wish to have T&Cs drafted, reviewed, amended and/or updated, please get in touch with any member of Anthony Harper's Corporate/Commercial team.

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