| PRACTICAL CONTRACTS
Q. Are form contracts worth reading?
A. Believe it or not, it pays to read them. Failure to read a
contract is virtually never a valid
legal defense. In most states the courts have held that people are bound
by all the terms in a
contract, even if they didn't read the contract before signing it (unless
the other party engaged
in fraud or unconscionable conduct). Don't trust the other party to tell
you what it means; even
if his intentions are good, he could be mistaken himself. Also, be suspicious
if the salesperson
urges you to "never mind, it's not important." (Ask the salesperson,
"If it's not important, is it
okay to cross out the whole paragraph?") Where a substantial amount
of money is at stake,
take the time to sit down with the form, and underline parts you do not
understand. Then find
out what they mean from someone you trust.
At the same time, you have to be realistic about exercising your right
to read a form
contract. At the car rental counter at the airport, you probably don't
have time to read the
contract and get an explanation of the terms you don't understand. Even
if you did take the
time, with whom would you negotiate? The sales clerk almost certainly
doesn't have the
authority to change the contract (but see the discussion on contracts
of adhesion).
Similarly, while you should know "what your getting into" when
agreeing to the license terms
of a commercially sold software program, no negotiation is possible. If
you want the program,
you have to agree.
Getting Out of a Contract
A contract may be set aside if competent parties have not made it
voluntarily. It also may be
set aside if there was grossly insufficient consideration. In addition,
certain contracts must be
in writing, or they are also unenforceable. Here is a list of other
contract defenses:
• illegality;
• duress;
• undue influence;
• fraud;
• mistake.
• unconscionability;
• impossibility of performance;
• frustration of purpose.
If you can prove any of these, the contract will probably be deemed
void or voidable. In
either case it is practically as if there never were a contract. If
either party paid money, it
would have to be returned.
Later, the section on remedies goes into more detail. |
Q. What if all the time I take to protect my legal rights results
in my losing a great
bargain?
A. Rarely will a truly great bargain not be there tomorrow. For
all the great deals that work out
fine, the one you will remember is the one that went sour - where they
socked you with the
fine print you didn't bother to read. A great bargain won't fall into
your lap, anyway. It requires
a lot of footwork, research, and comparison shopping. If you've done all
that, it's unlikely that
someone else is right behind you who has done it also.
Q. What is a rider?
A. A rider is a sheet of paper (or several pages) reflecting
an addition or amendment (change)
to the main body of a contract. Often it's simpler to put changes in a
rider, which supersedes
any contradictory parts of the main contract, than to try to incorporate
the changes on the
original form.
Q. What can be so dangerous in fine print?
A. Very often the fine print contains terms that could greatly
affect your personal finances
beyond what the actual deal would lead you to believe. It may contain
details about credit
terms, your right to sue and your right to a jury in a lawsuit.
Q. What should I do about the fine print?
A. First, try to read it. Often if you sit down with it, sentence
by sentence, you'll find that you
can understand a lot more than you expect, especially in states that have
passed "plain
English" laws requiring that consumer contracts use nontechnical,
easy-to-understand words.
You will at least, by expending the effort, identify which terms raise
questions for you. The
trick is not to be intimidated by the salesperson or the fine print in
the contract.
Read the Fine Print
Perhaps the most unpleasant part of making contracts comes after negotiating
your best deal.
It occurs when a salesperson presents you with a form contract, which
is often one or two
pages of tiny print that you might not understand even if you could
read it. Even many law
school graduates don't know what everything in these pages means.
But the law usually
assumes that you read and, to a reasonable extent, understand any
contract you sign.
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Q. If I understand it but don't like it, must I accept the contract?
A. No. You never have to accept a contract. Every part of a contract
is open for negotiation, at least in theory. Just because the salesperson
gave you a form contract doesn't mean that you
have to stick to the form. You can cross out parts you don't like. You
can write in terms that
the contract doesn't include, such as oral promises by a salesperson.
(Make sure that all
changes to the form appear on all copies that will have your signature;
initial altered but
unsigned pages and have the other party do the same.)
That doesn't mean the other side has to agree to your changes. You have
no more power
to dictate terms than they do. But if you get a lot of resistance on what
seem to be reasonable
issues, take a hard look at with whom you are dealing - specially if they
resist your request to
put oral promises in writing.
And what if there is "no other side," such as in the case of
a software or website license?
You still don't have to accept the terms – but you will have to
do without the product or
service you want.
Q. What if I come across "legalese" that I just can't
figure out?
A. Until you understand every term in a substantial contract,
don't sign it. Legalese most often
occurs in contracts that include some type of credit terms, such as when
you buy something on
installment payments. The parts of this book on consumer credit and automobiles
explain
many of these terms. If you still have questions, ask someone you trust
(not the salespeople) to
explain the terms to you. That could be someone experienced with the kind
of contract you are
considering, a state or local consumer agency, or a lawyer. (See "Where
to Get More
Information" at the end of this section).
Get It In Writing
When dealing with a written contract, a court will almost always treat
the contract's terms as
the final, complete contract. The court usually will not even consider
oral promises that are
not in the contract. The main exception to this is when oral promises
are used fraudulently to
induce one party into signing the contract in the first place. That
is, the party is persuaded by
the fraudulent oral promise to enter into a contract he or she otherwise
would have avoided.
The general rule prohibiting evidence of oral promises in all other
cases protects both parties,
since they know that once they sign the contract, they have clearly
and finally set the terms.
Don't be swayed if the salesperson orally promises you an extended
warranty or a full
refund if you're not completely satisfied. Get it in writing.
Similarly, beware of any Web-based agreement that does not permit
you to print out,
download or cut and paste a copy of the text you are agreeing to.
This is a red flag – always
watch out when the other side wants to "get it in writing"
from you but won't let you do the
same. |
The License
You go to the computer superstore and plunk down good money to "buy"
a software package.
When you load it onto your computer, however, a grey dialogue box appears
on the screen full
of big words under a caption that says, "License Agreement."
Well, did you buy the software
or did you do something else?
In fact, what you are doing by clicking "YES" or "I AGREE"
is buying the nonexclusive
right to use the software. The ownership of the software is still vested
in the
company that sold it to you (which in turn may have licensed the right
to sell it to you from
some other person or company!). Software "code" – the
instructions that tell your computer to
do what you want the program to do – may cost thousands or millions
of dollars to develop.
You can't expect to "buy" it even for a few hundred dollars.
It follows logically that making
illegal copies of that software is criminal. It is the right to license
software that makes it
valuable.
Similar licenses are granted by some websites or other Internet services,
though they
may look like no more than "rules of use" unless you read them
carefully. Consumers usually
have no choice but to agree to the terms of these licenses if they want
the goods or services
involved. The good news is that for most people, these licenses do not
constitute a significant
legal burden. But they may limit your ability to seek satisfaction in
court or otherwise if the
product in question doesn't work out the way you hoped.
Q. Are there any laws that protect consumers against the use
of confusing language?
A. Yes. Many states now require plain-English consumer contracts,
with potentially confusing
sections or clauses in precise, standard terms that nearly anyone can
understand. Federal and
state truth-in-lending laws require providers (or grantors) of credit
to furnish specific
information about credit contracts in clearly understandable form. Finally,
the legal doctrine
regarding contracts of adhesion may protect you.
Q. What are contracts of adhesion?
A. As mentioned briefly earlier, these are contracts that give
you little or no bargaining power,
as often is the case in many of the form contracts discussed above, such
as loan documents,
insurance contracts, and automobile leases. The consumer has some protection,
however.
Courts generally assume that such contracts have been drafted to provide
maximum benefit to
lender, lessor, or insurance company. So when a dispute arises over terms
or language, the
courts usually interpret them in the way most favorable to the consumer.
In one case, for example, a woman tried to collect on an airline trip
insurance policy she
had purchased. The insurance company held that the policy applied only
to a trip on
"scheduled airline" and that "technically" under some
obscure regulations the woman's flight
was not "scheduled," even though she had every reason to believe
that it was. The court held
in favor of the woman, saying the ordinary insurance buyer's understanding
should apply.
This doesn't mean that the consumer gets the benefit of the doubt on any
question about
any terms of a contract of adhesion; it only applies to confusing or unclear
clauses. To some
extent, though, even contracts that are not contracts of adhesion are
interpreted or construed to
favor the party who didn't draft them.
Like the doctrines of unconscionability and fraud discussed earlier, this
rule isn't
something to depend on prior to signing a contract. Rather it's a strategy
that you and your
lawyer may choose if a problem arises.
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