Contracts: Enter Cautiously, Cancel Carefully
Ever sign a contract? If you leased a car, signed up for cell phone service, or became a member at your local gym, you did. By definition, a contract is an agreement between two or more parties in which an offer is made and accepted. Though they can be formal or informal, in order to be enforced they usually must be made in writing.
Contracts are serious business – and should never be entered without a great deal of consideration. Take the time to read, understand, and approve a contract before signing. Complete all parts, and never sign a blank contract. Protect yourself even further by having the document first reviewed by a lawyer. Keep a copy of the signed contract.
When a Contract Can Be Canceled
The Federal Trade Commission, the Truth in Lending Act, and most state laws give consumers a right to reconsider certain contracts within three days of signing. If you were not told of this right, you may have even longer to cancel it. Cancelable contracts include:
Some purchases are exempt from this cooling-off period, so be particularly sure you want to go ahead with them before signing anything. These include car loans and leases, real estate, insurance products, and securities.
Still, even if the time frame has lapsed or it didn't apply to your contract, you may have other options to end the deal. There are legal ways to break a contract, called "contract defenses." They are:
How to Cancel a Contract
When a Contract Can't be Canceled
If you fail to pay according to the terms of the contract, the original company may send the unpaid balance or penalty to a third-party collector, or even sue you for what you owe. In either case, credit damage is both highly likely and severe.
The moral of the story is that all contracts should be entered carefully and taken very seriously – they can only be canceled if certain conditions are met. If you have trouble meeting the terms of a non-cancelable contract, make every attempt to work it out with the company before you miss a payment.
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