By: Mike Einterz

 

            Regularly we are offered the opportunity sign a form contract.  Whether it is a credit card agreement or a car rental agreement, or a supplier or contractor form contract they are presented as non-negotiable agreements.  The problem that comes from this is you typically execute a document that contains terms that are often unreviewed or misunderstood and never negotiated.

            It is with great trepidation that anyone should sign a form contract of any sort.  In reviewing a form contract the signer should look for the following problem clauses:

1.      Requirements that you pay the vendor’s attorney’s fees.

2.      Requirements that any disputes be litigated in another state.

3.      Requirements that any disputes be litigated through arbitration, especially through some no-name association.

4.      Provisions that release the vendor from any liability for their own negligence.

5.      Interest rates at 21% or 24% for unpaid sums or even greater interest rates.

6.      No right of exchange and no warranty or guarantee of a product’s quality or functionality.

7.      The imposition of a personal guaranty on the part of the party signing the agreement, even if it is a corporate account.

8.      Acceptance of another’s liability (for example: a property owner’s assumption of a general contractor’s obligation to pay a supplier).

9.      Indemnification of the vendor imposition of a requirement that the signer of the contract hold the vendor harmless from any possible claims, or a limit of liability capped at the amount of the funds paid to the vendor.

10.  A waiver of a jury trial by the signer.

None of these provisions should be accepted, and all should be modified.  Most people do not modify these provisions because they are misled into believing that since they are contained in a form contract they are not negotiable and do not appear to be alterable.  The other reason is people are too shy to modify a vendor’s pre-printed agreement, or under the misunderstanding that the vendor has been or will be fair in resolving disputes.  However, that shyness and that misunderstanding will result in the signer assuming far greater risk than acceptable.  Once the signer understands the full impact of these 10 clauses, it is unlikely that the signer would continue to execute an agreement that contained any of them.

Ignorance is neither bliss nor excused.  An individual or company that signs a form contract which contains these provisions will be held accountable for the consequences of their actions by Indiana courts.  An execution of an agreement with these terms contained within the body of the agreement is enforceable and will be enforced in the state of Indiana.  If it is not your intention to be bound by any of these provisions mentioned above, then they need to be deleted or negotiated away in any given form contract.