SmartLaw: Attorney and Lawyer Referral Service. Divorce, bankruptcy, criminal, accident, business
SmartLaw.org
Home
 
The Los Angeles County Bar Association Lawyer Referral and Information Service, the largest and oldest such service in the United States, has hundreds of pre-screened, qualified and insured lawyers in the Los Angeles area who can help you with your legal issues. Contact us now and our courteous, professionally trained staff will help you connect you with the right lawyer. The LRIS is a nonprofit public service of LACBA.


#320 Contracts and agreements

mp3 #320 What Should You Know Before You Sign a Contract? (mp3 file)



This message will discuss the following questions:

What is a contract?

Who can make a contract?

What kinds of contracts are you likely to make?

Must a contract be in writing?

What should you do before you sign a contract?

Should you co-sign a contract?

What rights do you have when you make a contract?

Can you get out of a contract legally?

What can you do if you believe that you have been cheated?

What happens if you break a contract that you can't cancel legally?

What happens if your case goes to court?

Why might you be sued?

How can you find a lawyer to represent you?

First, what is a contract?

A contract is a legally binding agreement between two or more people.

Usually a contract means that you agree to buy or sell goods or services for money. However, it could involve a trade. For example, you might say you will fix your cousin's car if he installs your garage door opener. You can also make a contract that says you will not do something. Perhaps you agree to give up smoking in return for your uncle's gold watch .

Next, who can make a contract?

Any sane person can make a contract. You do not have to be a United States citizen or speak English.

Even a "minor" -- anyone under 18 years old -- can make contract and, sometimes, a minor can get out of a contract that would be binding on others. This is why many companies will not sell an expensive item to a minor -- unless the company is paid in full before the item is delivered or an adult co-signs the contract.

The law says that most businesses cannot refuse to make contracts with you for such reasons as your race, color, sex, religion or national origin. They also cannot discriminate against you because of your age, although anyone can refuse to make a contract with a minor.

Next, what kinds of contracts are you likely to make?

Contracts are part of everyday life. Almost anything you buy, sell, borrow, loan, rent, repair or trade involves a contract. You make a contract when you use a credit card, hire someone to paint your house, rent a car or a machine to shampoo your carpet, or buy insurance of any kind.

These are some of the important contracts you are likely to make:

-Rental agreements. Not all rental agreements are alike. And, except for agreements that last more than one year, they do not have to be in writing.

-Real estate purchases. When you buy a home, you must sign a "deposit receipt," a contract that tells how much you will pay for the house, the amount of your deposit and down payment, and much more.

-Loans. When you borrow money to buy a car, a house or anything else, you must sign a contract that says how you will pay back the loan and how much "interest" you will pay. Interest is the money that the lender charges for the loan. Interest rates can vary, so be sure to check them at several places such as banks, savings and loan associations and your credit union.

You also should know that, in some cases, a lender may be able to "repossess" or take back the item you are buying if you don't make your loan payments on time.

Next, must a contract be in writing?

No. Many oral contracts are legal, but they can be risky. If you and the other person remember things differently, you will have a hard time proving the terms of your agreement.

Certain contracts usually must be in writing to be enforced, and they can be either printed or handwritten. Some examples are:

-Contracts that deal with land -- and any buildings on the land. These contracts include sale, lease, or rental for more than one year and mortgages and other debts on land.

-Contracts that will last more than a year.

-Contracts for the sale of goods worth more than $500.

-Contracts involving the sale of stocks and bonds.

-Most co-signed contracts.

-Dance and health studio contracts.

-"Contingency fee" contracts between a lawyer and a client. A contingency fee often is used when you are suing someone for money. It means that you will pay the lawyer a certain percentage of the money you receive if you win the case or if you settle the matter out of court. If you lose the case, the lawyer does not receive a fee.

Next, what should you do before you sign a contract?

First, make sure you are getting a good buy by shopping around before you make a decision. Then, read the contract carefully. If the contract is complicated or you are buying or selling something expensive, it's a good idea to have a lawyer read the contract before you sign it.

You can make changes on the contract before you sign it as long as the other person agrees. But both of you should initial the changes when you sign the contract. Do not rely on spoken promises. You probably won't be able to enforce them. Make sure that everything the salesperson promises you orally is written into the contract before you sign it. Don't sign any contract until all the blanks are filled in, and be sure to keep a copy.

Note: suppose you discuss in Spanish what the contract will say. The law says that you have a right to ask for a translation of the contract before you sign the English-language version. This law does not apply to any other language.

Next, should you co-sign a contract?

When you co-sign a contract, you promise to take over if someone fails to live up to the agreement. Maybe your niece is buying a car, and you co-sign the sales contract. If your niece doesn't make the payments, you can be sued if you do not make them. You will not get the car. And you will not get your money back, unless your niece decides to pay you some day.

Next, what rights do you have when you make a contract?

That depends on the kind of contract you make. These are some examples of the protection that the law can give you:

-Warranties. The printed warranty that comes with a product that you buy spells out the conditions under which a manufacturer or store will fix or replace the product -- or refund your money -- if something goes wrong. So be sure you understand what the warranty includes before you buy.

What if there is no printed warranty? Except for items sold "as is," most new merchandise that is sold has an "implied warranty." This means that the item must do what it is supposed to do for a reasonable period of time, depending on the particular product. For example, the zipper of a jacket should not break if the jacket fits properly and has been worn only a few times.

-Automobile purchases. If your new car is a "lemon" and does not run properly, you may be able to get either a new car or your money back. You first must give the car dealer and the manufacturer a chance to fix the car. If this doesn't work, either you or the dealer or manufacturer can try to settle the dispute by arbitration.

-Dance and health studio contracts. These contracts must be in writing, and the studio must give you a copy. Lifetime contracts cannot be enforced. Neither can dance contracts for more than $3,750 or health studio contracts for more than $1,000. Both kinds of contracts must state that neither you nor your "estate" will have to keep paying if you become disabled or die. Your estate includes the money and other possessions you own at the time of your death.

-Car repair estimates. These estimates usually must be in writing, and no repairs can be made without your consent.

-Credit sales. You can buy something on credit through an installment plan. When you agree to pay a store for a refrigerator or other expensive item over a period of months, you have an installment sales contract. What if you miss a payment? Depending on the terms of your contract, the store may demand that you return the refrigerator or that you pay the full amount all at one time.

You also can buy on credit with most credit cards. If you make payments over a period of time, you will have to pay an extra amount, called a "finance charge" or "interest."

Whether you make time payments through an installment plan or a credit card, the law says the contract must tell you how much the finance charge will be. You should know that you cannot be discriminated against because of your race, color, religion, national origin, .sex, marital status or age in getting credit. However, anyone can refuse to give credit to minors.

Next, can you get out of a contract legally?

In some cases, you can. However, most contracts are binding. so, be very sure that you know what you are getting into before you make a contract.

The contracts you may be able to cancel legally include:

-Any contact that you and the other party agree to cancel.

-Many contracts made by minors. For example, if you are a minor and buy a stereo on time and then cannot keep up with the payments, you can cancel the contract before your 18th birthday. You will get back the money you paid so far, but you must return the stereo.

However, there are certain contracts that a minor can't get out of. These include an agreement to join the military and, in certain cases, contracts for the necessities of life such as food, clothing, shelter and medical care.

-Door-to-door sales. If you agree to buy an encyclopedia or anything else worth more than $25, you can cancel the contract. But you must do so in writing by midnight of the third business day after you sign. The contract should say you have three business days to cancel. If it doesn't, you can take longer. Suppose you and the salesperson discuss your purchase mostly in a language other than English, such as Chinese. Then, the contract based on a door-to-door sale must be in Chinese, too, or you can cancel. If you cancel after you receive the items you ordered, you must give them back.

-Mail order sales. If you order a needlepoint kit by mail from a catalog, advertisement or some other way, the seller must deliver the kit on time. If no delivery time was promised, the seller must ship within 30 days of receiving your order. If the delivery takes longer, you can cancel the order and get your money back, or agree to a new delivery date. You do not have these rights if you order by phone.

-Contracts that must be in writing but are not. However, you may have to pay something for services or goods you received.

-Contracts that involve "fraud" or "misrepresentation". Fraud is a false statement that is made on purpose. Misrepresentation may involve a mistake. You can get out of a contract based on a false statement made by the other person. Suppose you are told that a used car you are buying was driven only 44,000 miles. If you find out that the mileage is 100,000 miles, you probably can get out of the contract.

If the contract contains an innocent mistake, you can get out of the agreement if the mistake is important. For example, you may order a car with an automatic transmission. If you get a car with a standard shift instead, you probably can get out of the contract.

-Contracts involving "undue influence". Suppose a niece takes care of you during a long illness and you become dependent on her help. If she convinces you at that time to sell her your house at a very low price, you may be able to get out of the agreement.

-Contracts made against your will. Perhaps someone threatens to break the windows of the restaurant you own if you don't agree to buy all your wine from him.

-Contracts that involve doing something illegal.

You should know that -- even though you may be able to cancel these contracts legally -- you might have to sue or you might be sued if the other party doesn't want to let you out of the contract. A judge would then decide if the contract can be cancelled.

Next, what can you do if you believe that you have been cheated?

First, you should send a letter -- by certified or registered mail, with a return receipt requested -- to the person or business that you believe is doing something wrong, and keep a copy of the letter. Perhaps the matter can be settled at this point.

Some written contracts call for "arbitration" if you have a problem. This means that you have the right to take the dispute to an impartial person -- or group of persons -- with no connection to the courts. The arbitrator hears both sides of the story and suggests a solution. You and the other party decide beforehand whether you want the arbitrator's decision to be "binding" or final. If your contract doesn't name a certain arbitration service, look for one in the yellow pages of your telephone directory under "arbitrators".

Or, you might consider "mediation". This means that a person or group will try to help you and the other party come to an agreement. For the names of persons or organizations that provide mediation in your area, look in the yellow pages under "mediation services".

You should know that many arbitration and mediation services charge fees.

You also can check on whether there is a consumer agency that handles the kind of problem you have. Look in the white pages of your telephone directory under "consumer complaint and protection coordinators," or call the state department of consumer affairs for advice. If the department does not have a branch office in your community, you can telephone its headquarters in Sacramento.

Depending on the problem you have, you might call the police or an agency such as a housing bureau or better business bureau. You also can call consumer action operations sponsored by newspapers and radio and television stations.

If you believe you are the victim of fraud, get in touch with your county district attorney's office. In many areas, these offices have consumer fraud units.

In all cases, be prepared to show sales receipts, repair orders, warranties and any other papers that have something to do with your problem. You also may decide to sue if you believe you have been cheated.

Next, what happens if you break a contract that you can't cancel legally?

You can try to get the other party to compromise. For example, perhaps you and your house painter will agree that you can pay for a painting job in three installments instead of one payment.

If you cannot work out a compromise and you fail to pay for an item or service, the other party might hire a debt collection agency to try to make you pay. However, debt collectors legally cannot harass you with lots of telephone calls, call you at work or threaten to harm you.

Also, your name might be given to a "credit reporting agency," which makes information about debts available to anyone who checks with them. A bad credit report may hurt your chances of getting credit in the future. Suppose someone refuses to give you credit because of a bad report. Then, you have the right to see the report. If it contains mistakes, you can request corrections. Suppose you have some work done on your home. Anyone who provides materials for the work or actually does the work can file a "mechanic's lien" on your property. This means that your property can be sold if the person's bill is not paid. However, before the work starts, you must be given a notice that tells some of the steps you can take to protect your property.

What if you have something repaired or cleaned? Be sure you know when the item should be picked up. If you wait too long, you have broken the contract and the item can be sold.

However, you should know that you risk being sued whenever you break a contract.

Next, what happens if your case goes to court?

If you are suing or being sued for money and the amount is $7,500 or less, your case can be heard in small claims court. A lawyer cannot represent you in this court, but you can talk to one before hand.

Lawsuits for more than $7,500 are taken either to municipal or superior court, depending on the amount. It is best to have a lawyer represent you in these courts.

You also may go to court even if your lawsuit doesn't involve money. You can sue either to get out of your contract or to keep someone else from breaking the contract. And, you can compromise even after a lawsuit has been filed.

Important note: in any event, do not ignore any "summons" that you receive. This is a paper that says you are being sued. If you do not respond to the summons within the time it states, you automatically lose the case. So, you want a lawyer to help you respond, get in touch with one as soon as possible.

Next, why might you be sued?

Most lawsuits involving contracts are the result of someone's failure to keep a promise. Perhaps you agree to sell your car to Ms. Smith for $1,500 and then change your mind. Ms. Smith finds a car like yours for $1,750. She can sue you for $250, the extra amount she must pay.

Or, the lawsuit could involve money you promise to pay if you fail to live up to a contract. For example, if you sell carpeting, your contract may say that you must install a carpet in a new shop by the day it opens or pay $25 for every day you are late. If you don't finish the job on time and fail to pay the money you owe, you can be sued.

What if the other party wants the item he or she contracted for instead of money? If real estate or certain unique items -- such as heirlooms or works of arts -- are involved, the other party can sue to try to make you stick to the agreement.

Suppose you have a "secured debt". This means that you must give the other party something you own -- perhaps your car, gold watch or house if you do not pay your debt. The other party usually has to go to court to take the item from you without your consent.

In rare cases, you might have to pay a certain amount as punishment. For example, if you write a bad check and don't make it good, a judge may say that you must pay the amount of the check plus either $100 or three times the value of the check up to $500.

Note: suppose someone sues you for money and you lose the case. If you do not pay the amount the judge says you owe, the other party can try to "attach" or take some of your property, such as real estate or bank accounts. Or, up to 25 percent of your salary might be "garnished," this means that a judge would order your employer to withhold part of your salary to pay your debt. In some cases, you can protect your property and wages, however. You can get forms for this purpose from a court clerk, and you may want to get a lawyer's advice.

Next, how can you find a lawyer to represent you?

If you do not know a lawyer, ask a friend, co-worker, employer, or business associate to recommend one. Or call a lawyer referral service run by a bar association in your area. Look in the yellow pages of your telephone directory under "attorney referral services," "attorneys" or "lawyers". The person who answers your call can make an appointment for you to see a lawyer.

Usually, you will pay a small fee to talk with the lawyer for about half an hour. If you decide to hire the lawyer, make sure you understand what you will be paying for, how much it will cost and when you will be expected to pay the bill.

What if you do not have enough money to pay for legal advice? You may belong to a "legal insurance" plan that covers the kind of services you need. Or, if your income is very low, you may qualify for free low cost legal help. Check the white pages of your telephone directory for a legal aid society or legal services foundation in your county.

Back to Top

() -

 
 

Find a lawyer outside of California.