Lesson 61: Watch Out for the Small Print
From the Business of Business section of How You Can Avoid Legal Land Mines by Joseph S. Lyles (2003).
Samuel owned a small trucking company and was persuaded by a salesman to sign up for uniform rental services. These services included a regular pick-up of his employees’ dirty uniforms and a drop-off of laundered uniforms. Samuel’s wife, who functioned as his personal secretary, signed the paperwork. She indicated “Secretary” where the form contract called for a title, even though she was not the official Secretary of the corporation. The contract was typical in that it was almost completely skewed in the favor of the rental company, and it had a term of five years.
After a year or two, Samuel became dissatisfied with the quality of the uniforms that were being supplied to him, so he discussed the problem with the salesman. The salesman convinced Samuel to prepare a written letter that claimed he was satisfied with the service but simply wished to discontinue using it. Samuel simply wrote the letter as a favor to the salesman.
What he failed to realize was that the form contract contained a clause that required a dissatisfied customer to send a written letter that explained his complaints or the customer could not cancel the contract for the reason that the quality of the uniforms or the service was not acceptable.
Samuel later tried to cancel the contract on those very grounds. The uniform rental company insisted that the contract continue.
Samuel stopped making the monthly payment he had agreed to in the contract and was sued for the full amount of the remaining payments that the rental company was entitled to under the terms of the contract.
Samuel had a weak case because the uniform company could easily argue that the contract was validly signed by someone with apparent authority. Almost all corporations, and even many unincorporated companies, have an officer called “Secretary”. My client’s argument that the company Secretary didn’t have authority to sign the contract was weak, especially since the company had ratified the contract was weak, especially since the company had ratified the contract by accepting the uniforms and paying the contractual monthly payment for over a year.
The Lesson: Read a contract before you sign it and when you are considering cancelling it, and don’t expect to get out of a contract on a technicality.