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Connelly v. PNC Bank, N.A.

A-2007-06T1 (N.J. Super. App. Div. 2008) (Unpublished)

CONTRACTS; FRAUD — Unless fraud is found to have prevented a party from reading an agreement, that party is bound by the terms of the agreement even if the party didn’t read it.

An investor signed an investment agreement for a $400,000 long-term investment. The investor later incurred significant penalties when she withdrew her money. Subsequently, she brought an action against the investment firm, as well as against the banks and insurance companies that were involved in the investment agreement. She alleged fraud, consumer fraud, and unjust enrichment and requested recision. The investment company had the matter removed to an arbitration hearing in accordance with the terms of the agreement. The matter was dismissed during the arbitration proceedings.

On appeal, the Appellate Division noted that arbitration is favored by the courts as a matter of public policy. It pointed out that the investor was bound by the terms of the agreement even if she didn’t read it, unless fraud was found to have prevented her from reading the agreement. The Court also pointed out that her claims were based on the terms of the agreement and not the arbitration provisions, which it found to be enforceable. The Court added that even if certain terms of the contract were found to be fraudulent, they could have been severed from the contract, and the other terms still would have applied. It found that her failure to read the agreement was the reason that she was not aware that of a ten-day rescission period or the arbitration clause, both of which were set forth in the agreement. The Court found that the lower court properly removed the matter for arbitration.

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