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Don’t Get Burnt By Boilerplate Contracts

We have all been there before—ready to sign the lease on a new apartment, and then the leasing manager passes over a contract with a bunch of blanks to fill out and even more fine print. These form contracts are often referred to as “boilerplate” contracts. Although they usually look standard and straightforward, it is important to read all form contracts before you sign them. When you are asked to sign a form contract, keep the three “Rs” in mind: Read, (be) Realistic, and Respond.

Read— The most important thing to do before signing any contract is to read the entire document. In most states, courts have held that people are bound by all the terms of 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 a contract term means; even with good intentions, that party could be mistaken. When a substantial amount of money is at stake, take the time to sit down with the form and underline any parts you don’t understand. Then find out what they mean horn someone you trust, such as your attorney. Also, be suspicious if the other party to the contract urges you to disregard certain terms as unimportant. If the other party continues to push a clause as unimportant, ask if it is okay to cross it out; an individual who refuses to cross out a clause after asserting it is unimportant, is probably not one with whom you want to do business.

Realistic— Even though you must take time to read and understand all the contract terms, you must still be realistic about exercising your right to read a form contract. At the airport car rental counter, you probably don’t have the time to read the contract and get an explanation of each confusing term. And 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. Similarly, when agreeing to the license term of a commercially sold software program, no negotiation is possible. If you want the program, you have to agree. However, contract forms and terms are usually available to examine while you are considering a transaction and before you actually enter into the deal.

Moreover, if you are worried about a good deal disappearing while you take the time to read the fine print, you shouldn’t. 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 the seller socked you with the fine print you didn’t bother to read.

Respond— Think of the standard contract you are presented with as a first offer— if you don’t like a term in it, respond with your own offer. You never have to accept a contract. Every part of a contract is open to negotiation, at least in theory. You can cross out parts you don’t like. You can also add terms that the contract doesn’t include, such as oral promises made by a salesperson. (However, make sure that any changes appear on all copies that will bear your signature; initial any pages that are altered but unsigned, and have the other party do the same.)

This doesn’t mean the other side must agree to your changes. But if you encounter a lot of resistance over what seem to be reasonable issues, take a hard look at the person with whom you are dealing—especially if they resist your request to put oral promises in writing.

Lastly, take some solace in knowing that there are laws that offer you some protection in these situations. Many states now require that some or most consumer contracts use plain English, and that potentially confusing sections or clauses be written in precise, standard terms that nearly anyone can understand. Federal and state truth-in-lending laws require providers of credit to furnish specific information about credit contracts in clearly understandable forms.

If you are worried about your rights and responsibilities under a contract, or that the terms to a contract you are a party to have been violated by the other party, your lawyer will be able to help you wade through the “legalese” and determine if you have any legal recourse.

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