You typically can’t buy a car, open a bank account or obtain Internet service without signing a contract. Those contracts inevitably are drafted by the company offering the product or service. That’s a perfectly sensible system—it wouldn’t make sense to hire a lawyer to hammer out a contract every time you wanted to obtain phone service or a credit card.

Problem: The contracts that companies are asking us to sign have become increasingly one-sided in the companies’ favor in recent decades. Hidden in their small print are unexpected and unfair fees, rules and restrictions.

Among the dangers in small print…

ARBITRATION CLAUSES

Contracts from financial institutions, car-rental companies and other corporations often force consumers to forgo their right to sue—even if the consumer clearly has been wronged. Consumers who sign these contracts must instead settle any conflicts through binding arbitration. That may sound reasonable, but the arbitration process usually is strongly slanted against the consumer. Arbitrators have an economic incentive to side with the companies rather than the consumers—if they don’t, they won’t get work from those companies in the future.

Many contractual arbitration clauses also grant the company tremendous power in the selection of the arbitrators. They let the company choose where the arbitration will take place, which can lead to prohibitive travel costs for consumers. They require consumers to pay half or more of the arbitrators’ fees, which can be $400 an hour. And they might even include rules limiting the consumer’s ability to present evidence.

What to do: When you’re handed a contract containing an arbitration clause, write “I disavow this section of the contract” next to this clause and then initial the modification. (Make a copy.) There’s no guarantee that the company will accept this—or that the disavowal will hold up in court—but there’s little harm in trying, and in some cases the tactic could increase the odds that the company will be willing to agree to an out-of-court settlement rather than risk the possibility that you could force a court case.

If you are asked to sign a contract containing an arbitration clause and a very large sum of money is involved—for instance, the contract may be with the investment company that you intend to entrust with your retirement savings—it’s worth paying a lawyer to review the contract before signing.

If you become entangled in a serious dispute with a company with which you have signed a contract containing an arbitration clause, a jury trial still might be possible—but you will need an attorney who has a very specific background to achieve this. Google the words “arbitration,” “clause,” “case” and the name of your state to find attorneys who have handled and won such cases, or contact your state bar association.

ESCAPE HATCHES

Companies sometimes insert language into the small print of their contracts that allows them to escape promises they have made to their customers—even promises made in writing—without being legally liable for the consequences.

Example: A condominium buyer secures a promise from the real estate developer that it will repair his/her unit’s leaking windows. The developer then fails to do the repairs, and water damage ruins the condo—yet depending on the wording of the contract, the buyer might have no legal recourse.

Companies do this in two ways…

They insert language in contracts that grants them the right to unilaterally change the terms of the agreement after it is made. Consumers later are mailed notices of contractual changes, but the language tends to be dense, difficult-to-interpret legalese.

They write contracts in a way that takes advantage of the legal distinction between a promise and the duty to live up to that promise. In the eyes of the law, these are distinct things. A company that exploits this distinction might be shielded from charges of fraud unless consumers can prove that the company had an intention to deceive when the promise was made—and intent is extremely difficult to prove.

What to do: When lots of money is at stake, pay an attorney specializing in contracts to confirm that the contract really does require the company to do what it has promised to do.

If you receive a notice of updated contract terms from a financial institution—or any other company with whom you have signed a contract—wade through the dense legalese of the notice to determine what, specifically, has changed. If the new terms are not acceptable to you, it might be time to take your business elsewhere.

There is some good news—you might escape a contract without penalty if a company changes the terms of its agreement with you in a way that works against your interests. For example, contractual changes sometimes offer a way out of multiyear cellular-service contracts without incurring early termination fees.

PHONE AND INTERNET TRAPS

Phone and Internet provider contracts have become riddled with small print—and the bills so laden with incomprehensible fees—that consumers often aren’t sure what they’re being charged for or what they’re receiving. Two examples…

Phone bills have increased by more than twice the rate of inflation in the past 20 years despite technological advances that should have dramatically reduced the price of calls. Much of this price increase has been quietly slipped onto bills in the form of new fees. Typically these added fees are fairly low, so consumers don’t bother to complain about them, but there are so many of them that they quickly add up. Some of these fees even are designed to look like taxes—that “FCC subscriber line charge” that appears on many phone bills isn’t really imposed by the Federal Communications Commission. It’s simply a fee that the phone company charges to let the customer have access to the long-distance network.

What to do: The only way to reduce phone fees is to reduce the number of phone lines you pay for, perhaps by canceling your landline and using only a cell phone or Internet-based phone.

Internet speed usually is not as fast as what customers think they have been promised. Take a close look at the small print in high-speed Internet service contracts. Whatever speed customers order, they are promised only “up to” that speed. Usually they receive much slower service, particularly at peak usage hours.

What to do: If you have multiple Internet providers in your area, it is possible that one offers noticeably faster connections in practice even if all advertise similar speeds, something you can determine by asking your neighbors which providers they use and how fast their connection speeds have been.

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