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Agreement Writing

Common Misconceptions

In General

There are a number of beliefs that are commonly held in regards to contract that are incorrect and tend to get people in trouble. These include a number that are discussed below.

Creditors Must Take Partial Payments

One common misconception is that if a partial payment is made on an obligation, the creditor is prohibited from suing or otherwise attempting to collect that obligation. Unfortunately, this is not true. The creditor is entitled to the full amount of each monthly payment or the balloon payment as it comes due. Failure to pay amounts when they come due can result in additional costs and expenses.

Repossession Only After 30 Days Late

Another common misconception is that the bank who holds a lien on your motor vehicle cannot repossess that vehicle unless you are more than 30 days late. Most contracts have a due date followed by a grace period. For example, your payment is due on the first but payable by the tenth. If you do not make your car payment by the due date or any applicable extension, your car can be immediately repossessed. Even if you are only 1 day late. If your car is repossessed, it will cost you a substantial amount of money to get it back.

They Can't Repossess From My Driveway

This is also false. The lender may repossess your vehicle as long as they do not "breach the peace." This means that as long as they do not cause a public disturbance, or damage personal property, or enter private areas of your property, they can repossess the vehicle. Thus, if your car is parked in the driveway, which is accessible to the public, a repossessor could come in the night and remove the vehicle. However, if the vehicle is locked in your garage, they are not allowed to break the lock or enter into that private area in order to repossess the vehicle. Nor is a repossessing agent allowed to take a vehicle if you are standing in front of it denying them the right to do so. In such a case, they are required to obtain a court order to take possession of the vehicle. Be aware however, that if a creditor is forced to obtain a court order to be allowed to repossess your vehicle, the costs you will pay after a deficiency will be much higher.

If They Take The Property Back, It Wipes Out The Debt

A creditor who repossess their collateral, is entitled to sell that property and collect from you the difference between the total amount of the debt including sales and collection costs and the amount received at the sale of the property. Unfortunately, repossessed property, whether it be a TV set or a Dodge Ram will not go for full fair-market value and you may have a substantial debt remaining to the finance company.

I Have A Three Day Right To Cancel

In some cases, this is true; but in most it is not. Each state has its own consumer protection laws. In some states if you are sold a product in your own home you have 3 days to change your mind. However, you must do so in writing within that time period. Failure to act will result in the loss of this right. If you enter into a contract at the creditors place of business, you will not be allowed to cancel the contract unless the contract has a provision that allows you to terminate it.

If you find yourself in a situation where you have purchased something you do not want, and cannot afford, it is generally best to return that item as quickly as possible. You need to return it to the creditor in as good as condition as possible. You may lose any deposit you have made, but generally the creditor will not sue you if the property is immediately returned even though they are entitled to do so.

I Cannot Be Bound By Provisions I Am Not Aware Of.

This is also false. Everyone is presumed to have read and understood each of the provisions of any contract they sign. As a result, it is important that you carefully read the contract before you sign it. This will tend to make the salesman very nervous, but is a good practice. If he is nervous, there is generally a reason that will hurt you later if you are not aware of it.

I Can Rely Upon The Salesman's Statements

Most sales contracts contain wording to the effect that the company is not bound by anything the salesman may have said, and that the written document you signed is the full and total agreement. This is another reason you should carefully review the contract. If the contract does not include the provisions the salesman told you about, they should be handwritten into the document and signed by both you and the salesman.

I Am Not Responsible For Business Debts

While this is sometimes true, in most cases it is not. Today, most lenders and suppliers are fairly sophisticated when it comes to contracts. They will generally not allow you to transact business in the name of your company alone. They will usually ask you to guarantee the debt. If that is the case, then you are responsible for the bill. In addition, if you sign a business contract as an individual you are responsible for that contract. Therefore, if you are signing for a corporation, it is very important that your position with the corporation appears under your signature. If you are a sole-proprietorship or a partnership, it does not matter how you sign the documents, you remain personally liable.