At its core, the primary intent of a contract is to allocate the duties of the parties in the event that things do go wrong, there is an understanding as to which bears responsibility. Be clear about such things as:
a.Which party bears the risk of loss if the product is damaged in transit?
b.What happens if the product fails after a week? A month? A year?
c.Who is responsible if a third-party is injured by the product?
d.Who maintains “title” to the property? (Hint: Bet you didn’t know you probably don’t “OWN” the rights to your wedding photos)
e.Are there use, resale or other restrictions on your ownership? (Ex: A friend who purchased a rare breed of cat had to agree it would never be allowed to roam outdoors
The question arises as to how one can remain protected without having to hire an attorney every time he or she enters into a routine transaction. That answer includes several steps.
It’s first important to determine the significance of the contemplated transaction. For example, you can be justifiably less concerned when clicking your assent to the terms of your latest iPhone app than you should be when signing a loan agreement for the purchase of a car or a home. Loan agreements commit you to significant and often long-term obligations for which the ramifications for noncompliance can be substantial and costly. An iPhone app can usually be cancelled at will.
When negotiating, be aware that if a court is ever invoked to enforce your agreement, it will view its job as one of interpretation – to evaluate the legal enforceability of the terms – and rarely the “fairness” of what was agreed to. For example, in a contract for the purchase of a vehicle, it is no defense and, frankly, is a waste of time and good oxygen, to try to convince a court that you should be let off the hook from any further payments because the seller charged you too much for the car in the first place. If you knowingly agreed to the price, and you were of age to contract, sober at the time and there are no allegations of fraud or misrepresentation, you will not be protected from your own ignorance or stupidity if you agreed to overpay for something.
Because adhesion contracts are not subject to negotiation, sometimes courts will refuse to uphold them if they determine that the unequal bargaining power of the parties resulted in a situation that is so unfair that enforcing the terms would be unconscionable due to the procedural circumstances surrounding the procurement of the agreement, or the substantive terms of the agreement itself.
Realize that it is an extreme case when a court will not enforce an adhesion contract. The mere fact that a contract is one of adhesion will not singularly provide the basis to relieve a party of its obligations under such an agreement.
It’s not possible to address all of the preferred contract terms for inclusion – and exclusion – in one article. However, when negotiating a contract, here are some noteworthy terms to consider including – and NOT including:
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If you’ve determined that the contract / agreement is one that requires more thoughtful consideration, next identify if it is one that is subject to further negotiation, or is an “adhesion” contract. This is an important distinction for several reasons.
An adhesion contract is one that is presented in final form for acceptance and is not subject to further negotiation. It is offered by a party with superior bargaining power on a “take it or leave it” basis. Examples of adhesion contracts include cell phone agreements, insurance policies and the liability disclaimers that are always printed on the back of the claim tickets you receive in a parking garage.
If you determine that the contract you’re contemplating may be subject to further negotiation, then take advantage of the opportunity. Even some agreements that appear to be adhesion contracts, such as leases, may present opportunities for the negotiation of some material terms.