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Mar 17

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Read contracts carefully

How often are you asked to sign something? I don’t mean autographs or birthday cards, but legally and financially binding documents – everything from endorsing a check to signing a sales receipt to buying a house.
Either way, they’re all contracts.
In broad terms, contracts are mutually binding agreements between two or more parties to do – or not do – something. Once a contract is in force, it generally cannot be altered unless all parties agree. And, with very few exceptions they cannot easily be broken.
Sometimes contracts are formal, signed documents that outline specific conditions and penalties if those conditions are not met: For example, if you don’t make your mortgage payments, the lender can foreclose on your house. Other times they are verbal or implied agreements: If you buy spoiled milk, you can ask for a refund.
Before you enter into a contractual agreement, try to anticipate what could go wrong. For example:
• You sign a lease but later decide you can’t afford the rent or don’t like the neighborhood.
• You buy a car you can’t afford, but when you try to sell it, the car is worth less than your outstanding loan balance.
• You buy something on sale and don’t notice the store’s “No returns on sale items” policy.
• You co-sign a lease with a roommate who later backs out, leaving you responsible for the rent.
• You rent a car and later learn you accidentally agreed to optional insurance coverage or other features you didn’t want or need.
• You agree to cosign a loan and the other person stops making payments, leaving you responsible for the full amount – otherwise your credit will suffer.
• You buy a car and later notice that the sales agreement includes an extended warranty or other features you didn’t verbally authorize.
• You buy a two-year cell phone plan, but after the grace period ends, discover that you have spotty reception.
Financially inexperienced teenagers and young adults often make such mistakes, so be sure to discuss the implications of signing contracts with your kids before they turn 18.
A few additional tips:
• Make sure anything you sign contains no unfilled blank spaces, even if the other party promises to fill them in a certain way.
• Don’t be afraid to ask to take a contract aside or bring it home for more careful analysis or to get a second opinion. A lawyer or financial advisor can help.
• Don’t be pressured into signing anything: If salespeople try that tactic, walk away.
• Make sure everything you were promised verbally appears in writing. This is particularly important for terms and conditions such as interest rates, down payments, discounts and penalties.
• Keep a copy of every document you sign. This will be especially important in cases of contested rental deposits, damaged merchandise, insurance claims, extended warranties, etc.
• Pay attention to pre-checked boxes in online offers before submitting payment information for an order; they could bind you to terms you don’t want.
• Take along a “wingman” when renting an apartment or buying a car.
Remember, contracts are designed to protect both parties. Just make sure you fully understand all details before signing on the dotted line.

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