A recent decision by the Third Circuit Court of Appeals highlights the well-established legal maxim that “when a party enters into a signed, written contract, that party is presumed to understand and assent to its terms.”
In ADP v. Lynch and Halpin, No. 16-3617 (3rd Cir. Feb. 7, 2017), Defendants Lynch and Halpin worked in sales at ADP before they resigned and went to work for one of ADP’s direct competitors. Five terms during their employment with ADP, Defendants were offered incentive stock awards based on their performance. The awards were contained on an ADP webpage that required employees to electronically check a box indicating that they have read all the documents on the webpage associated with the stock awards. These documents included the award plan, the award agreement, and a non-compete agreement. The award agreement expressly stated that acceptance of the stock award was conditioned on agreeing to the non-compete, which, for 12 months after the end of their ADP employment, prevented Defendants from working for an ADP competitor and from soliciting business from any ADP client.
ADP sued Defendants for breach of the non-compete after they began soliciting ADP clients for their new employer. The District Court entered a preliminary injunction against Defendants, enjoining them from these solicitation activities. On appeal, Defendants argued that the box they checked when they accepted the stock award indicated only that they read the accompanying documents and they “were never required to check a box that said ‘I read and agreed to or accept or acknowledge the terms set forth thereunder.’”
The Court of Appeals rejected this argument out of hand. Defendants admitted that they checked the box stating they had read the documents. The documents clearly stated that in order to obtain the stock award, Defendants had to agree to the non-compete. It was irrelevant that Defendants later claimed they did not recall reading the documents. By checking the box, Defendants sealed the deal and were presumed to understand all of its terms.
The moral of the story is to always read the contract before you sign, whether by signature or by checking the box.