Skip to main content

Contracts, What You Should Know Before You Sign.

Budgets and bookkeeping have always come so easy to me. I had planned to be a CPA, but life kind of got in the way.

contracts-what-you-should-know-before-you-sign

Safety Lines or Binding Nightmare

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 ten business days to change your mind. Some states and/or countries can be different or the amount can be preprinted on the contract, so read it. If you change your mind, you must notify the person/company in writing before the ten 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.

Changes To The Contract

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 all copies of the contract have the change and are initial. Don't sign if you cannot reach an agreement.

Contracts can be tricky.

Contracts can be tricky.

Words And Phrases That May Be Included

  • A list of all parties along with a place for their signature and the date.
  • "Herein called" which identifies the parties without adding their name further on the contract, this allows them to type up the rest of the contract and reuse it.
  • "All parties are in agreement to the following" meaning the information that follows is binding on all parties.
  • The specific details and descriptions of what the contract is about; including addresses, numbers, latitude, and longitude if required.
  • Amount, if any, date of the contract, times for canceling if you change your mind, length of the contractual agreement, name of both parties, and what it is you are agreeing to.

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, 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. A header on the top of a contract or a footer below could list the original page count without any additions. Be sure this is changed to match additions.

contracts-what-you-should-know-before-you-sign
Scroll to Continue

Fine Print

This is a phrase that means the smaller print just before the signatures. It may be nothing more than a repeat of the information above it, or it could add penalties or fees. It can be tricky to read and can be something that could cause you a snag. An example, the contract says you are responsible for a certain amount and there may be a financial fee. The fee is listed in the fine print as fifty-two percent of the payment. That is not what you agreed to; but if you sign it, you must accept it. Yes, the fine print can be lengthy and confusing. If you do not understand it, do not sign until someone you trust can explain what it means. You can get a copy to read over at your leisure and/or to have someone else read it.


Verbal Contracts and Agreements

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.

contracts-what-you-should-know-before-you-sign

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!

Pay As Required

When you have to make a payment as per the agreement, be sure to get a copy of the receipt that details the payment. This prevents the company from later claiming you did not pay. Be sure to keep the receipt in a safe place for at least seven years, preferably ten, 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! You are not responsible for something you did not order or request. Keep track of telemarketers and don't ever tell them yes. Read each bill you receive from companies to ensure the information is accurate before you pay.

contracts-what-you-should-know-before-you-sign

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. They did not agree to the subscriptions because they didn’t sign an agreement for them. Also, don't take on debt just because a collection agency says you are responsible. If you did not make the debt, then you are not responsible for it (unless you are taking over payments for something that you are keeping).

In Summary

  1. Think long and hard before you sign a contract or agree to something.
  2. Make sure you understand the entire contract.
  3. Make sure you know what the consequences are.
  4. Make sure you get a copy of the contract before you leave the premises.
  5. Make sure you get a receipt for all payments with all of the information included.
  6. Make sure you don’t fall for salesmen's tricks.
  7. 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!
  8. Contact a lawyer if you have questions before you sign for something.
  9. And remember that you only have a set time limit to cancel.

This content is accurate and true to the best of the author’s knowledge and is not meant to substitute for formal and individualized advice from a qualified professional.

© 2012 Cheryl Simonds

Related Articles