Contracts, what you should know before you sign.
Insurance Policies are Contracts
Contracts can be safety lines
A contract is a great way to ensure that you and the seller (buyer, provider of a service, etc.) will have a legal agreement to follow through on certain items. However, not all contracts are the same and not all business people are the same. Fine print items along with paragraph after paragraph of random explanations of each wording can cause an innocent trusting client to give up reading and just take the word of the contractor that everything is as he says. They sign without reading everything. Bad move!
For that very reason, a complete discussion on contracts could take pages and pages of explanations, but we don’t have that kind of space, so I will limit it to a few of the basics. The first thing that goes without saying (but I'll say it anyway) is read everything before signing!
What is a contract?
A contract is a written agreement between 2 people, a person(s) and a company, or 2 companies. This agreement is binding on both parties and can be legally enforced. It is against the law in most countries to “break a contract” or fail to do as agreed. Contracts contain many legal words and phrases. It is important for you to familiarize yourself with these phrases or have a lawyer present to help explain any part you may not understand.
Once a contract is signed, you have 10 BUSINESS days to change your mind (in the USA, it may be different in your country so be sure to check). If you change your mind, you must notify the person/company in writing before the 10 days are up. If you fail to do that, the contract becomes legal and binding. In other words, if you fail to send them something that says you have changed your mind and wish to cancel the contract, then you will be liable for anything that you agreed to in the contract.
READ everything on or in the contract including the fine print and any notes, addendums, etc. If you do not agree with any part of the contract, you need to discuss possible changes with the other party. If a change is agreed upon and is written on the original contract, both parties should initial the change to show that they both agreed to the change. This will protect you later on if the other party fails to adhere to the change.
Be sure to get copies
Get a copy of the contract with all changes, initials and signatures at the time you sign! This way the other party (and you) cannot make changes to the contract and then claim they were done at the time of signing. Also, many contracts contain more than one page. Be sure to initial (and have the other parties initial) each page and that each page contains the names of both parties involved and the date and name of the contract (all of which should be on the first page of the contract). If the change is given on a separate page, like the example to the right, be sure that each party has initialed it, that the information is correct, that it is dated, and that both parties are listed. Also be sure that the original contract is listed on the change somewhere.
Don’t let the other party add “fees” to something that you owe by using a fine print clause that is confusing and/or hard to read. Be sure you read everything or have a lawyer go over it before you sign. Clauses like “if the loan is paid before agreed upon date you agree to pay a penalty of not more than 27% of the total amount of the contract ” or “late payments will be penalized at a rate of 5% daily for each day that the payment is late ”.Other examples: if there was a statement saying you would owe a fee if you paid the payment before the due date (mailed payments are usually mailed so that they arrive a day or two before the payment is due); or if there was a statement that said if you were even so much as 1 day late, the finance charge would be raised to 3x the going rate. Statements like this are usually at the bottom of the contract in really small print with several paragraphs of information that is difficult to read and follow. Done legally, but also seemingly done purposely to confuse. Don’t sign if you don’t understand it!
Verbal contracts can be just as binding in some states and some countries. Be careful when agreeing to something. Get it in writing and make sure you know what it is you are agreeing to as well as what the other party is agreeing to. Verbal contracts are difficult to prove in court without several witnesses and perhaps a draft of the agreement that is signed or initialed by each party. Personal agreements are even more difficult to prove. Don't get into a verbal agreement and then have it backfire because there was nothing written down.
WARNING! RED FLAG!
WARNING! RED FLAG!
WARNING! RED FLAG!
Understanding your contract
If there is a part of the contract that you do not understand, ask questions. Ask lots of them and make sure you understand the answers. If the answers don’t make sense to you or seem to be more double talk than answer, ask to take a copy of the contract to your lawyer for approval. Never let anyone talk you into signing a contract you do not understand by using such tactics as “well, this offer won’t be open anymore when you come back” or “sorry, the contract can’t leave the premises, you don’t want to pass this offer up but if you leave and come back I can’t guarantee it will still be available”. If they try to get you to sign anyway, they are probably not legit in their offer. This is usually a huge red flag that says get out while you can!
What would you do?
Making a payment as agreed
When making payments on something (a loan, car payment, mortgage payment, rent, etc.), make sure you get a receipt for the payment, especially if the payment is in cash! Checks serve as great receipts, especially if they have all of the pertinent data on them like account numbers, what the payment is for, etc.; however, only the actually check that has cleared the bank is acceptable as proof and the bank will charge you for the copy. By getting a receipt (with all information such as date paid, amount paid, what the payment is for, account number, whether cash or check, and whether paid in full or in part), you have positive proof that the payment was made. Be sure to keep the receipt in a safe place for at least 7 years, preferably 10, in case the company later on decides to sue for non-payment. Be sure to check the receipt for completion and accuracy BEFORE you leave the area!
If you did not sign an agreement for something, don’t pay for it! Some people will try to sell you something (for instance over the phone) and use the answers you give against you claiming you now owe them money. An example of this would be: A telemarketer calls you and asks you if you are Jane Doe. If you say “yes, I am”, they can later change the recording to say “did you want to receive this offer?” and your answer would be “yes”. Telemarketing calls are almost always recorded.
Another example of this would be if a company sent you something in the mail that you didn’t order or ask for. The company will then begin billing you for the item. The law states (at least in the USA) that “if a company sends you an item that you neither asked for, signed for, or sent for, you are legally allowed to keep the item without paying the company". However, be sure to read all information that comes with the free item and send back the form that tells them you are not interested in their offer. If you don’t, they will send you more items and claim that you agreed by default, at that time, you may have to pay for the items even though you did not want them.
Don't listen to them, its all a trick! I mean, don't let them fool you! I mean, oh, don't let them scare you into signing something you aren't sure about or didn't do!
Don't fall for their tricks
Companies have trained their personnel in ways to discuss things with potential clients and present clients. They know how to manipulate words and threaten in such a way as to coerce you into paying for something you didn’t want, didn’t get, and/or didn’t ask for. Don’t fall for their tricks. I have seen a company send an envelope to someone saying they may be a winner of millions of dollars but they have to send the form back at once. The people threw the form away and later on began receiving subscriptions for magazines that they didn’t want and didn’t order. Then they received bills for all of these magazines. When they called to find out why, they were told that by not returning the form they agreed to the subscriptions. No way!!!!! They did not agree to the subscriptions because they didn’t sign an agreement for them. They won their case in small claims court and did not have to pay for them. However, that is an exception to the rule .Be sure to read and follow through with these things.
Have you ever gotten an extended warranty? Did you read it first?See results without voting
Think long and hard before you sign a contract or agree to something. Make sure you understand the entire contract. Make sure you know what the consequences are. Make sure you get a copy of the contract before you leave the premises. Make sure you get a receipt for all payments with all of the information included. Make sure you don’t fall for company’s or salesman’s tricks. Make sure you stick up for your rights. If you have a problem, you should research the law pertaining to that problem and then fight back! Contact a lawyer if you have questions BEFORE you sign for something. And remember that you only have 10 business days to cancel if you change your mind (this may be different in different states so be sure to check).
Just a quick note added on for informational purposes, most companies and stores will ask you if you would like to get an extended warranty for the item you are purchasing at a “nominal” cost to you. These warranties rarely cover much of anything and are very expensive to pay for. For instance, an extended warranty for a computer might only cover items that have ‘failed to live up to promised operations’. What that means is:“If one of the drivers or connections fails to last beyond the default length of operable time the warranty will pay.” Still not sure, basically it means that if something on the item doesn’t last as long as the paperwork promises it will last, the extended warranty will pay to replace that item. Bottom line, the warranty that comes with the item will only cover the item for the ‘promised’ peak operation time. So why pay more for the exact same warranty that you already are getting for free?
© 2012 Cheryl Simonds
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