July 21, 2005
Should have read it before you signed
You’re bound to the terms of the contract you sign, says the Texas Supreme Court in a recent decision, whether or not you’re aware of everything that’s in it. Thus, a customer who signed a brokerage contract with an arbitration clause in it was bound to go to arbitration, even though he thought he was only using a form to change the account name and set up a margin account.
Plaintiff Keith Rohlack had, while still a minor, received a substantial cash settlement out of the death of his father. The money was invested in a custodial account with broker Edward D. Jones & Co. When he turned eighteen, Rohlack transferred the account to his own name and opened a margin account so he could speculate in technology stocks. The form he signed contained an arbitration clause. When the technology bubble burst, his investment portfolio, which involved significant technology investments bought on margin, went down badly, and he sued Edward Jones.
"Absent fraud, misrepresentation, or deceit," said the court in a per curiam decision, "a party is bound by the terms of the contract he signed, regardless of whether he read it or thought it had different terms." It went on:
Therefore, Rohlack's contention that he did not understand his signature's significance does not negate his acceptance of the contract terms. Moreover, when parties enter into an agreement based on a writing that is not ambiguous, the court will give effect to the parties' intention as expressed in the writing. Here, the agreement that Rohlack signed recited: "THIS IS A BINDING CONTRACT. I HAVE READ IT CAREFULLY BEFORE SIGNING." It further alerted him on the signature page that it incorporated an agreement to arbitrate and explained elsewhere in the agreement what that meant. Considering these undisputed facts, the only decision that the trial court could have reasonably reached was that Rohlack, by signing the agreement, had consented to arbitrate future disputes. [Citations omitted.]
In re McKinney, 2005 Tex. LEXIS 511 (July 1, 2005).
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