We begin the year on a legal note. I am doing this because over the Yuletide season, a friend shared with me a bad experience he had in the course of the year based on a contract he had entered into, a contract he never quite understood. As he narrated his ordeal (eventually an out-of-court settlement had to be brokered), I felt I would be a bad friend if I didn’t share with you all the dangers of signing a contract without first reading or understanding the terms of such a contract.
I know that many Nigerians do not take the pains to read or understand contracts or agreements. This behaviour goes all the way up to those who run the affairs of this country. Was it not last year in the thick of the Academic Staff Union of Universities’ strike that a highly-placed Nigerian came out to blame those who signed the agreement with ASUU for not understanding what they signed? I know that such a statement is debatable. He was either right or being mischievous. What is however clear is that it is critically important to understand agreements before signing them.
Now, let me issue a caveat: I am not a lawyer. Like a friend of mine would say, “I was not even beckoned, let alone called”.
But be that as it may, there are things that make sense. And it makes great sense to read a contract before putting pen to paper.
What I really do not understand is why a man would sign a document he does not understand and has not sought legal counsel on. I hear that a lot. “Oh, I didn’t read it at all.” Or, “I didn’t really understand it”. By simply signing the dotted lines indicated, many have made very grave mistakes. Especially in my country, Nigeria.
How do I say this? Never sign a contract you have neither read and understood nor have it explained to you by a lawyer. Any contract at all. That includes an employment contract!
That’s right. Many young graduates, having waited for so long to get a job, do not even bother to read the offer letter before they sign. Difficult times are what they are: difficult times. They should not rob us of our common sense. The reason I’m asking you to make sure you have read and understood every contract before you sign is that your not reading first can come back to haunt you!
Why should you read a contract document before you sign? Well, you should not for the following reasons:
1. ONCE A CONTRACT IS IN FORCE, IT GENERALLY CANNOT BE ALTERED UNLESS ALL THE PARTIES AGREE.
2. AND, WITH VERY FEW EXCEPTIONS, CONTRACTS CANNOT EASILY BE BROKEN.
3. WHEN A CONTRACT IS BREACHED AND RESULTS IN LITIGATION, IT CAN PUT A LOAD OF STRESS ON YOU
4. WHERE THERE IS NO LIABILITY LIMITATION, THE ENSUING CLAIMS AND DAMAGES THAT RESULT COULD CONSTITUTE A DRAIN ON YOUR RESOURCES
By the way, a contract may be broadly defined as a mutually binding and enforceable agreement between two or more parties to do – or not do – something. According to http://www.lawhandbook.org.au, a contract consist of four essential elements:
• There must be “offer and acceptance”
• There must be “intention to create legal relations”
• There must be “consideration”
• The parties must have “legal capacity” to enter into a contract.
On daily basis, there are several contracts we enter without even knowing or recognizing that we have entered into a contract. Signing a receipt after using you credit/debit card is an example. What that simply means is that the bank agrees to pay the vendor and you agree to pay the bank. For many of you that have ever bought an air ticket, how many of you can confidently say that you ever took out time to read the “Conditions of Carriage” attached to the ticket? Not even lawyers do that. Yet, that is a contract, nonetheless. Of course, I am also aware that many sign tenancy agreements without bothering to read them. We are just interested in the keys to the property so we can “move in”.
And oh, I must also not fail to mention that today, we also enter into contracts online when we click on the “I Agee” button. Very often, we do that when we open those free e-mail accounts (yahoo, g-mail, hotmail, etc.), open social network accounts (Facebook, Twitter, LinkedIn, etc.) or make purchases online. By clicking on the “I Agree” button, we are bound by the conditions of use of that service.
I know it is not easy reading a contract document. Typically, it contains so much of legalisms and leaves the non-lawyer confused. However, the website http://www.lawyers.com helps us with explanations of some legalisms you’ll most likely find in several contracts:
• Integration (or Entire Agreement) Clause. Basically, it means the contract is the complete agreement between you and the other person. What you sign is what you get, regardless off what you talked about before signing the contracts.
• Liability Limitation or Waiver. This may work a couple of ways. For one, it may protect either a seller or a buyer if he breaks or breaches the contract. The clause may specify a dollar (naira) amount the person owes the other if the contract isn’t honored. For instance, most employment contracts in Nigeria stipulate that one month’s salary in lieu of notice. That’s a liability limitation.
• Arbitration Clause. Generally, this means that if you and the other side have a disagreement about the contract, you both have to let a neutral third party – an arbitrator – try to settle matter before you may file a lawsuit.
• Force Majeure Clause. This is common in business contracts. It protects both sides from having to pay damages if either is unable to complete the contract because of an act of nature. For instance, if you agree to ship fresh produce to a buyer in another state but an earthquake makes the roads impassable, the buyer can’t hold you liable for damages for not delivering the produce.
• Assignment Clause. This is common in many contracts, such as leases, loans, and business contracts. The clause either bars (or lets) either side of the contract from transferring the contract to someone else.
So, as a rule, Jason Alderman in this article here helps us with what to do before we sign a contract:
• Ensure that everything you were promised verbally appears in writing.
• Make sure all blank spaces are filled in or crossed out before signing any documents –including the tip line on restaurant and hotel bills.
• Don’t be afraid to ask to take a contract home for more careful analysis or to get a second opinion. A lawyer or financial advisor can help.
• Don’t be pressured into signing anything. If salespeople try that tactic, walk away. (Be particularly wary at timeshare rental meetings.)
• Keep copies of every document you sign. This will be especially important for contested rental deposits, damaged merchandise, insurance claims, extended warranties, etc.
• Take along a “wingman” if you’re making an important decision like renting an apartment or buying a car to help ask questions and protect your interests.
• Be wary of “free trial” offers. Read all terms and conditions and pay particular attention to pre-checked boxes in online offers.
So, there you have it people. It’s a new year. And even though it sounds like straight out of a condom advert, be protected.
You can follow me on Twitter @ehissman.