Parties are obligated to know the terms of the agreement they are signing, and cannot avoid their obligations under the agreement due to a failure to read it. However, where one employs misrepresentation to induce a party's obligation under a contract, one cannot bind the party to the terms of the agreement. It has many times been held, and is a well-settled rule of law, that a contract of guaranty cannot be enforced by the guarantee, where the guarantor has been induced to enter into the contract by fraudulent misrepresentations or concealment on the part of the guarantee.
In 1984, the appellant industrial complex entered into a lease agreement with the appellees. The appellees signed a personal guaranty of lease in the honest belief that what they were signing is the lease agreement. Years later, the industrial complex sent the appellees a Tenant Agreement that included an estoppel certificate; it was only during this time that the latter learned of the personal guaranty of lease that they had signed. They immediately disavowed the guaranty and refused to affirm that portion of the Tenant Agreement. Eventually, the appellees sold to another company, which subsequently failed to make rent payments. Appellant then brought suit to collect the unpaid rent from the appellee under the personal guaranty. In its decision, the trial court ruled in favor of appellees concluding that they were not liable for unpaid rent under a personal guaranty of lease because their signatures were obtained through fraudulent means. On appeal, the court affirmed.
Where a lessor employed fraudulent means to procure the signatures of the lessees on the guaranty of lease, was the guarantee enforceable?
In this case, the Court maintained that the elements of actual fraud are present - the plaintiff has misrepresented a material fact when it made the defendants believe that the personal guaranty was the lease agreement; it has also knowingly made false misrepresentations because it has prior knowledge that the document presented to the defendants is the personal guaranty of lease and not the lease agreement. Furthermore, the defendants, through the use of ordinary care and diligence, believed that the document they were signing was a lease, and reasonably relied upon the plaintiff’s statements to their detriment. Since fraud is employed in obtaining the signature of the defendants, the plaintiff cannot bind the defendants to the terms of the guaranty contract.