What to know before you sign a contract

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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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Clark Howard About the author:
Clark Howard is a consumer expert whose goal is to help you keep more of the money you make. His national radio show and website show you ways to put more money in your pocket, with advice you can trust. More about Clark
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