Doh! Read the contract before you sign it!

A recent decision in the High Court in Rotorua (Jardboranir HF Trading as Iceland Drilling v Summit Hydraulic Solutions Ltd [2016] NZCA 490 (PDF)) illustrates the importance of reading contractual documents prior to signing them. A drilling company was held bound by the terms of an exclusion clause in a contract with a supplier preventing it from recovering all of its losses alleged caused by the supplier negligently carrying out repair work to drilling equipment.

The exclusion clause was on page 2 of a two page contract between the part which also contained a credit application. The director did not initial page 2 of the contract but signed the first page which contained an acknowledgment that he had read the terms and conditions on both pages and agreed that the company would bound by them.

In those circumstances, in the face of arguments that the exclusion clause was not part of the contract, the Court was quick to find that the document was contractually binding between the parties, and the supplier’s liability was limited by the terms of the exclusion clause.