Business Litigation Alert: "Read Before You Sign"

Simple but Frequently Over-Looked Advice!

We have all signed contracts we did not thoroughly review.  If we are being honest, we have probably all signed contracts we didn’t even read!  While this is never a smart practice, the recent Texas Supreme Court case, National Property Holdings, LP v. Westergren, highlights the severe consequences of not reading before you sign.

In this case, Westergren was involved in a multi-party lawsuit over the right to purchase a parcel of land.  He had an oral agreement with National Property Holdings (NPH) to receive $1 million plus a share of the profits upon the sale and development of the land. Once a portion of the land sold, Westergren expected to receive his $1 million plus profits; however, NPH could only pay him $500,000 at the time.  Along with the $500,000, Westergren was given a document to sign by NPH’s consultant and told that it was a “receipt” and that he “didn’t have to worry about it.”  In fact, the document was titled an “Agreement and Release” which released all of Westergren’s interest in the property and all claims against NPH in exchange for the payment of $500,000.  Westergren did not read the document before signing it because, he stated later, he had left his reading glasses “elsewhere” and was “in a hurry.”

Westergren filed suit, and the case ultimately made its way to the Texas Supreme Court.  Unfortunately for Westergren, the Court ruled, “A party to a written contract cannot justifiably rely on oral misrepresentations regarding the contract’s unambiguous terms….This is particularly true when the party had a reasonable opportunity to review the written agreement, but failed to exercise ordinary care to do so.”

So, how can you avoid the same fate as Westergren?

  1. Read It - Read any documents thoroughly before signing and make sure you completely understand every aspect of the document. 
  2. Review It - Have your attorney review any documents before signing, particularly any areas that are unclear.
  3. Mark It Up - Mark up the document if needed. Request changes if you are uncomfortable with any areas of the document. 

Westergren lost more than $500,000 and found himself in an expensive legal mess simply because he did not read what he was signing.  It’s a simple but crucial step that can save you from the same fate.

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