Tuesday, July 14, 2009

Fun with Contracts

We tend not to think much about the contracts we sign on a fairly regular basis. Almost every time you sign something you are essentially signing a contract. Most of us don’t bother to read these contracts, but I sometimes do read them and I’ve noticed something interesting.

Frequently, if I look for the fattest paragraph in the latter half of a contract, the latter half of this fat paragraph will contain something unpleasant. It could be that I’m guilty of confirmation bias, but it could also be that those who write these contracts are doing their best to hide the controversial parts.

Applying this rule to my credit card agreement, I found that if a charge in a foreign currency gets reversed, I won’t get all of my money back. I’ll lose out on the dollar conversions in each direction.

In the agreement to buy my last car, the fat paragraph informed me that if the deal fell through for any reason and my trade-in car was returned to me, I’d have to pay the dealership for the “Safety Standards Certificate and all other costs associated with transferring the Trade-In back into my name, [and] all repairs and improvements.”

Applying the rule to a consulting contract, I found that I was to be liable for any costs if the company infringed a patent. This was to apply to any part of the large project and not just the part that I worked on!

It would certainly make things easier if we could always find the worst part of a contract by finding the fat paragraph.


  1. Shhh!! If the lawyers catch on to this, they'll start adding big, fat, happy paragraphs to hide the bad ones.

  2. Patrick: Fortunately, adding big fat happy paragraphs is extra work; so, I'm not too worried :-)

  3. A while ago I had a charge reversed for an online UK order because the merchant had incorrectly added VAT. The credit card company did not refund the currency conversion so I phoned them and complained. They ended up reversing the currency charge without any reference to the cardholder agreement. Not having reviewed the fattest paragraph in the latter half of the cardholder agreement, I can't say whether that provision was in my agreement. However, the credit card company's practice suggests it probably was. Therefore it appears some companies will forgo enforcement in relatively trivia situations if they are concerned they may lose a long-term customer.

  4. Darn, you've discovered my hiding spot for really nasty contract terms. :)