But I Didn’t Read It Before I Signed It

Written By: Jay L. Hack

man signing contract

We’ve all heard that argument before. Once again, a New York Appellate Court rejected the argument in a commercial transaction. You can’t get a lot clearer than having a court say that people who sign a loan agreement are “presumed to know the contents of the instrument [they] signed and to have assented to such terms.” The court went on to say, “even if, as he testified, [the guarantor] failed to read the agreement before signing it, that does not excuse him from performing.”

We don’t recommend that banks hand loan documents to commercial borrowers at the last minute. We always give our commercial loan borrowers, or their attorneys, a complete set of loan documents in advance so that they have a chance to review them. We recommend that you do the same, and give the borrower and its representatives a chance to make a reasonable decision.

Today’s Takeaway? You should adopt a fair and reasonable approach to the closing process, giving everyone a chance to know what they are doing. However, when the borrower and the guarantor have, as my mother used to say, ants in their pants, and they insist on paying no attention because they are in a hurry to get it done, the courts are on your side. We suggest that you put a little memo in the file when the closing is finished as a record of the fact that you gave the parties a fair chance and it was their inattentiveness, not your unfairness, that may have contributed to their lack of knowledge.
about the authors