Merit Music Service, Inc. v. Sonneborn

Court of Appeals of Maryland
245 Md. 213, 225 A.2d 470 (1967)

ELI5:

Rule of Law:

A person who has the capacity to understand a written document and signs it without reading it is bound by its terms, unless they can prove fraud, duress, or mutual mistake.

Facts:

Sidney and Jennie Sonneborn, owners of a tavern trading as Jen's Park Inn, had a prior business relationship with Merit Music Service, Inc., and owed the company over $5,000.
In November 1962, the Sonneborns needed to purchase a new tavern and approached Merit Music for a $1,500 loan to complete the sale.
During the tavern purchase settlement on the evening of November 16, 1962, Morris Silverberg, president of Merit Music, arrived and agreed to provide the loan in exchange for security.
As security, the Sonneborns first assigned their liquor license to Merit Music.
Later that evening, after the Sonneborns' attorney had possibly left, Silverberg presented them with a form contract for leasing amusement machines.
The Sonneborns signed the form contract without reading it, later testifying that they believed it was merely a note for the $1,500 loan.
The contract contained handwritten clauses specifying a seven-year term, an exclusivity provision, and a minimum weekly guarantee of $42 to Merit Music from the machines.
Shortly after the machines were installed, a dispute arose when Merit Music attempted to enforce the minimum guarantee clause, which the Sonneborns claimed they knew nothing about.

Procedural Posture:

Merit Music Service, Inc. filed a bill of complaint against Sidney and Jennie Sonneborn in the Circuit Court for Baltimore City, a trial court.
Merit Music sought an injunction, an accounting, and damages for an alleged breach of an equipment leasing agreement.
The Sonneborns defended by arguing that no valid and enforceable contract existed.
The Chancellor (the trial court judge) found in favor of the Sonneborns and dismissed Merit Music's bill of complaint.
Merit Music Service, Inc., as the appellant, appealed the Chancellor's decision to the Court of Appeals of Maryland, the state's highest court.

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Issue:

Is a party who signs a written contract without reading it bound by its terms, even if those terms are harsh, in the absence of evidence of fraud, duress, or mutual mistake?

Opinions:

Majority - Finan, J.

Yes, a party who signs a contract without reading it is bound by its terms. In the absence of fraud, duress, or mutual mistake, a person having the capacity to understand a written document who signs it is bound by their signature. The Sonneborns, by their own admission, did not read the contract and therefore foreclosed themselves from providing trustworthy testimony as to whether the disputed clauses were present at the time of execution. The court found no evidence of fraud, and the testimony of Merit Music's president that the terms were filled in before signing was more credible. The law presumes a person knows the contents of a document they execute, and equity will not grant relief from a party's own negligence or carelessness in failing to read a contract. While the terms may seem harsh, they are not unprecedented in the industry, and the contract was supported by valid consideration, namely the $1,500 loan.

Analysis:

This case strongly reaffirms the 'duty to read' doctrine in contract law, emphasizing that courts will generally not protect a party from a bad bargain resulting from their own negligence. The decision reinforces the objective theory of contract formation, where the external manifestation of assent—the signature—is what matters, not a party's subjective, unexpressed intent. It sets a high bar for claims of fraud or material alteration, particularly when the claimant's credibility is undermined by their failure to take ordinary precautions like reading the document. This precedent makes it significantly more difficult for a literate party to escape contractual obligations by claiming ignorance of the contract's contents.

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