From a lawyer's perspective, living in a litigious society is kind of amusing. Nearly everything people do these days, from opening a bank account to signing a credit card receipt, involves entering into a formal legal agreement. Often, those agreements are extremely complex, and the legal wording seems to go on forever. The typical response from most people is to head right to the end of the sea of fine print and sign the form or click the box that says they've read and understood what they just skipped over or, at best, skimmed.
While this technique rarely backfires on people, it can be extremely frustrating when it does. Even when you believe you've been treated unfairly, the only response you seem to get from anyone is that the answer is in the contract you signed. Although there are numerous cases in which the legal agreements themselves are ambiguous or misleading, you can avoid the majority of problems simply by taking the time to read through everything and understanding what may happen if something goes wrong.
There are a number of areas in which this type of situation comes up. Here are a few of them.
1. Hiring a home-improvement contractor.
You may have the best of intentions to visit a local home-improvement supplier to tackle house projects on your own. Even though retailers such as Home Depot and Lowe's try to make things easy for homeowners, many homeowners have neither the time nor the inclination to take on major home improvements without outside help. Yet many homeowners who hire contractors to help them with such projects often end up being incredibly dissatisfied, both with the quality of labor and materials and with costs that sometimes come in well above initial estimates.
The usual problem is a lack of communication and of understanding what a home-improvement job will actually require. Take the time before you hire your contractor to find out exactly what your project will entail and how any unexpected problems will be handled. You may not avoid unpleasant surprises, but you'll at least be prepared for them. While it may not be reasonable to expect your contractor to anticipate every single thing in an initial estimate, setting an upper limit for cost overruns is useful and appropriate. Similarly, some delays with housing projects may be unavoidable, but setting an absolute final deadline that has some leeway for delays can help you plan what to do while the work is being completed.
2. Getting promotional offers at banks.
You probably get frequent offers in the mail for low-interest credit cards or mortgage loans. If you've ever looked more closely at these offers, you might have noticed that while the language offering you a 0% rate is in big bold letters on several pieces of paper, there's also plenty of minuscule fine print strategically and inconspicuously placed toward the bottom or on the back of the pages. For some offers, the fine print is so small that it's easy to overlook. For others, the customer agreements are so long that few people take the time to read them all the way through.
As many discover, however, the fine print includes some important provisions that you might not otherwise find out about until they bite you. While those 0% credit card offers are designed to last for several months, most of them allow your card company to go back and charge huge amounts of interest if you're ever late with your payment. In addition, some cards offer 0% on balance transfers but then charge you their normal rate for subsequent purchases; if you try to pay for those purchases, you find that the card companies apply your payment to the 0% balance first, and you'll keep paying interest on everything else until the card is paid off in full.
If you read through the legal language of the offer, you'll sometimes find misleading or vague language. For instance, The Washington Post recently reported that thousands of mortgage customers plan to sue Chevy Chase Bank over a rate hike on their mortgages. The bank is arguing that the mortgages had adjustable-rate provisions that applied after just one month. However, one of the required legal documents referred to the loan as a "five-year fixed" loan, suggesting that the rate couldn't be raised during the first five years.
3. Buying a house.
A home is the most substantial purchase that many people will ever make. However, most people are quite happy to use whatever form agreement their real estate agent hands to them, and very few consult an attorney before making an offer. Because you'll typically pay thousands of dollars in earnest money that you may not be able to get back under certain circumstances, you'll definitely want to be careful in handling the transaction.
It's true that legal experts have usually reviewed the form contracts that most real estate agents use. However, just because the form exists, that doesn't mean you should follow it to the letter. If there are any special conditions you want in your offer, make sure you put them in writing with the offer. Otherwise, you run the risk of having the seller say that those conditions were never part of the written contract.
Contracts and other legal agreements may be long and hard to read, but to protect yourself, you should take the time to read and understand them. Only by seeing and fixing any problems before you sign can you hope to avoid bitter disputes down the road.
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Fool contributor Dan Caplinger loves keeping salespeople waiting by reading through legal documents carefully. He doesn't own shares of any of the companies mentioned in this article. The Fool's disclosure policy goes beyond the fine print.
