What to know before you sign a contract

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Contract issues are a popular topic on my show, but perhaps even more so as a call to my Consumer Action Center, where a team of more than 100 volunteers can field your questions 45 hours each week to offer free advice.

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‘Agreements’ are the new contracts

When somebody hands you a piece of paper to sign, they do it to take away privilege and put the responsibility on you. The bigger the company, the more one-sided the agreements tend to be. And mark this well: ‘Agreement’ is the favored euphemism for ‘contract’ these days since we’re wary of the C word.

Too often, what you are told by a salesperson before you sign doesn’t count. All that counts is what you signed your name to. If the contract handcuffs you to a company for 24 months, they mean it.  If the contract says there’s a penalty to fire them before 24 months, they mean it.

(It’s very common that a service provider tries to get you under contract and the price is not really the price when the introductory teaser rate expires.)

But this whole thing raises a bigger question: Why do business with contract companies anyway? Companies that do a really good job at customer service virtually never require you to sign a contract. Their whole culture is about making you happy, while the lousy companies just try to loop you in to a multi-month agreement.

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A look at cooling off periods

In select cases, you will have a cooling off period where you can get out of the contract you just signed for a limited window of time. Here’s a look at a few examples.

  • Timeshare contracts in most states comes with some number of days for cooling off. Read your paperwork carefully to determine the rules for your state.
  • When it comes to door-to-door sales, for any item more than $25 you have a cooling off period of 3 days under federal rules. But the salesperson may try to avoid you for those 3 days! In that case, you should send your cancelation (within 72 hours) to the address in your contract. Be sure to send it certified mail, return receipt requested. A phone call will *not* get the job done.
  • If somebody is operating from temporary location, like at a festival, you only have a cooling off period if what you’ve bought is $130 or higher. So don’t be surprised when you’re away from home to see temporary vendors selling items at $129.99 or less. By coming in under the $130 mark, they eliminate your cooling period rights.
  • Most health club contracts do *not* have a cooling off period, though it varies by states. But my real rule is simple: Don’t sign a contract at a health club. If they use the contract business model, chances are they don’t really want you to exercise. They just want to make quick cash for the club owner.


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