In the sixth episode of Welcome to the Chippendales, we learn that Chippendales founder Steve Banerjee granted Nick De Noia the Chippendales' "touring rights" when Nick wrote some words on a cocktail napkin and then they both signed it. To my dismay as business disputes lawyer, the camera does not linger long on the napkin, but we can see that the rights are granted "in perpetuity." We are later led to believe that Steve (for whom English was not a first language) did not know the meaning of "in perpetuity" when he signed (It means, in a word, "forever"). He was too insecure to admit that he did not know and too cheap to have his lawyers look over the napkin contract before he signed it. Steve also had a habit of hiding his business dealings from his wife, Irene, who is portrayed as far savvier than him.
Besides being a cautionary tale against entering into significant business deals without sound legal advice or at least the advice of your wiser spouse, the story raises the following question: In the eyes of the law, if you don't fully understand an agreement, can you be held to it? The short answer is: Yes, you can.
You can imagine how the question might come up in the story. After signing the napkin, Steve sues Nick, seeking a court order directing Nick to stop using the Chippendales name on the tour (These types of court orders are called injunctions because they enjoin parties from taking certain actions or direct parties to take certain actions). Nick argues that he shouldn't be enjoined because their napkin contract gives him the right to use the Chippendales name on the tour. Steve responds that he cannot be held to that contract because he didn't know what it meant.
Steve will face an uphill climb with this theory. Courts generally presume that, where parties reduce their agreements to writing, they meant what they said and are therefore bound by the contract. That a party did not read or understand the contract usually will not excuse that individual from the obligations under the contract, unless she or he lacked "legal capacity" to incur contractual obligations.
On the question of legal capacity, most jurisdictions (including Virginia, where I do much of my work), are guided by the Restatement (Second) of Contracts. Under the Restatement, a person lacks legal capacity if he or she is: under guardianship, a minor, mentally ill, or (with exceptions) intoxicated. As our story is told, Steve would not fit any of these categories. Even the last category would not help him; he appeared to be sipping coffee during the napkin contract negotiations and was lucid.
Steve may also try to argue that he should be excused from his contractual obligations because the napkin contract was "unconscionable." But once again, this would be a square peg for a round hole. The doctrine of unconscionability generally only applies where a contract is so extremely unjust and overwhelmingly one-sided in favor of one party that the court finds it would be inequitable to enforce the contract.
When I watch the scene where Steve and Nick do the napkin deal it is easy for me to imagine the evidence Nick would present to defeat an incapacity or unconscionability defense. He would testify that he proposed getting their lawyers to draw up their agreement, but Steve refused. Nick would also testify that he asked Steve whether he understood the agreement before they signed it. To which Steve replied: "perfectly." Oops.
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