I have recently encountered several agreements with contractual terms that are one-sided to the extent that one contractual party is severely prejudiced. An example is a commercial lease agreement that does not allow for cancellation on fair terms and demands payment of the full outstanding term, even when another tenant occupies the property. Some contracts even stipulate that if either party cancels, one party cannot claim outstanding monies owed to them.
In most cases, the clauses are not worded in a way that makes them hard to understand. Upon a simple read-through, it is often clear that the contract benefits one party far more than the other.
When signing an agreement, you are not bound by what is written—you may query and amend any term, as long as consensus is eventually reached. Here are some red flags to watch for when signing an agreement:
- The cancellation of the agreement is either impossible or unfair:
If a contract binds you to a term and states that the contract cannot be canceled unless the remaining balance is paid, especially when you do not receive value in return, this term should be re-negotiated. For example, if a car is delivered and the contract is canceled, the buyer must pay the remaining value. However, in a rental agreement, it is unfair to claim the remaining years’ rent when a new tenant can be found. In this instance, a cancellation penalty to cover the service provider’s losses would be reasonable.
- Non-performance by the service provider is not a cause for cancellation, refund, or excuse for non-payment:
If a contract states that the service provider is not liable if the product is not delivered or is faulty, and payment remains due, this clause should be re-negotiated or the agreement reconsidered. Exclusions of negligence should be approached with caution.
- Severe and prejudicial consequences for cancellation:
If the result of cancellation is unfairly severe for one party only, the agreement should be avoided or re-negotiated. For example, this includes situations where work already done is not paid for if the agreement is canceled.
- Voetstoots clauses:
A “voetstoots” clause indemnifies the seller from any claims regarding faulty products. If a product is sold “voetstoots,” it means the buyer takes it as it stands, whether suitable for the intended purpose or not.
- Clauses that attempt to exclude applicable legislation:
For example, if a provider states that the Consumer Protection Act does not apply, this is a red flag. Such a clause is unenforceable in law, and though it may be successfully challenged in court, it signals the intent of the other party.
- Unreasonably long agreement terms:
A commercial lease is usually 5 years, and a residential lease is usually 1 year. If a longer term is requested without justifiable cause, this should be re-negotiated.
- Actions by the supplier without consumer consent:
For example, if an advertising provider places ads without final approval and still expects payment, this clause should be avoided. Be wary of clauses that assume your acceptance if you do not object to communications.
There are many more potential harmful clauses, so it is critical to carefully read each agreement and ensure you understand it in full. Consulting with an attorney is always a good idea if you need advice on contractual terms.
Please feel free to contact our office for any contract-related inquiries.
