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Sign with care
17/04/2007 The Star ARTICLES OF LAW By BHAG SINGH
A person who puts his signature to a document is bound by its terms,
regardless of whether he understands its contents.
SIGNING a document, be it a letter, a standard form or an application, may
appear to be a simple thing. However, the consequences of having affixed
one’s signature can be far-reaching and serious when a dispute arises.
Of course, depending on the contents, the effect and implications would be
different. This is related to the capacity in which the signature is affixed
by the person concerned.
If a person is signing a document as a witness, he is only acknowledging
that he is witnessing the signature of the person who signs. His signature
does not imply any complete knowledge or admission of the contents of the
document. However, if he is a party to a transaction and places his
signature then he acknowledges the contents, in so far as the obligations
are concerned. In such a situation, he is deemed to have accepted the
obligations and responsibilities stated.
When parties agree to an arrangement and reduce it to writing, it records
the rights created and, most of the time, closes the door to any changes or
qualifications otherwise made. This well-known principle of law is stated in
Salmond and Winfield’s Principles of the Law of Contracts. Sections 91 and
92 of the Evidence Act 1950 similarly provide that where the terms of any
contract have been reduced to the form of a document, no evidence of any
oral agreement or statement shall be admitted as between the parties to any
such contract for the purpose of varying its terms.
It therefore behoves an individual when signing a document to be aware that
all that has been agreed to is incorporated into the written document. What
is said thus far is the general rule. There are exceptions. An example of
this is where what is agreed to but not set out in the contract is viewed as
a “collateral agreement”. Otherwise a person who has signed a document,
regardless of whether he has read or understood it, is bound by the
obligations set out in the document unless deceit or fraud is involved.
A different situation arises when the person is aware of the contents of the
document that is being signed. However, the person may in the process be
guided by a person who appears to be representing the opposite party.
An example is where a person is completing a proposal to get insurance
cover. He is required to disclose all material information that is relevant
for the insurer to assess the risk, including sicknesses and conditions he
may suffer from.
The prospective insured may be confronted with a situation where if he
discloses his condition to the insurer his proposal may not be accepted or a
high loading may be imposed. He turns to the agent for advice.
A less-than-honest agent who is obsessed with earning his commission may
advise the prospect to ignore such condition. However, if and when
discovered, this would be a serious material non-disclosure on which the
insurance company could repudiate liability.
Numerous examples exist of cases where a person lost his right to be
indemnified by the insurers because a dishonest statement was made or due to
non-disclosure of material facts though the insured had no intention of
being dishonest.
Thus, in China Insurance Co Ltd vs Ngau Ah Kau, the respondent who was the
insured was unsuccessful in seeking to be indemnified for the theft of his
car which he had insured for RM12,000. The grounds for refusing the claim
were that he had not disclosed claims made some years ago in his proposal
form. The insured had informed the agent who helped him to fill up the
proposal form. The agent had told him that it was not required of him to
disclose the claims as they were made more than three years earlier. The
insurers contended that the non-disclosure of this information entitled them
to repudiate the policy. Relying on an insurance agent to fill up a form can
turn out to be a big mistake if the information stated in the proposal is
incorrect.
The English case of Newsholme Bros v Road Transport and General Insurance Co
narrates the danger. A proposal form was handed by an agent of the insurance
company to a partner in the plaintiff firm. In answer to three of the
questions set out in the proposal form, the partner gave correct answers
orally to the agent but the agent wrote those answers in the form
incorrectly.
The court held that the agent was not authorised by the company to fill in
the proposal form and in doing so must be regarded as the agent of the
proposer, and knowledge of the agent that the answers to certain questions
in the form were not true, was not made known to the company. When signing a
document, ensure that it contains what the person signing it wants to set
out. Once the document is signed, the person signing it has to stand up
fully for what is said in the document. |
