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Wednesday, May 02, 2007

Contract Law on the Front Lines

On the off chance that anyone wanted to hear more about my househunting in Phoenix (*ahem*, Jay), I thought I'd share the following anecdote.  When my husband (who is also an attorney) and I were signing various agreements with our realtor, she gave us a brief description of what each page said, and then handed it to us for our signatures.  Knowing that we were binding ourselves to the language on the documents, rather than to our realtor's description of that language, my husband and I read through each page before signing it.  Our realtor remarked more than once how odd it was to see people actually reading each page of a document before signing it.

Now, I had already entered law school (and had been influenced by what I'd learned in my first year contracts class) before I'd signed any contract other than a college dorm occupancy agreement.  And whether they read documents before signing them isn't the sort of thing that I talk about with my friends who haven't gone to law school.  So maybe I have an unrealistic view of how most non-attorneys enter into contracts.  But I hope that my realtor's experience is not representative of how most people do things like buying houses.  And if it is representative --- that is, if most people enter contracts relying on oral representations and not looking at the written language --- that is really distressing.

Posted by Carissa Hessick on May 2, 2007 at 01:03 PM | Permalink


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If you are not represented by a lawyer, other than reading the variable clauses (to check that interest rate is correct and to check the terms for prepayment etc), yuor best bet may be to read nothing. THat way, you preserve a defense that this was an adhesion contract for which negotiation was not possible and where you were not given sufficient time to review the documents. Otherwise, a lay person reading the boilerplate is going to both not understand it and lose a potential defense.

Posted by: Anon | May 2, 2007 3:33:52 PM

Hi Carissa...I hope you get the house. A quick comment only because I have had similar experiences with people, aghast, that I make them wait to read the language of a contract. I have also had the similar, yet quite opposite, experience when buying a car (which makes me suspect a salesman culture when dealing with "lawyers") that when I didn't read all the loan documents, the salesman exclaimed "Just like a lawyer to sign without reading!" This has happened twice when buying cars.

In any event, I think we are forgetting one more strong reason why people don't read contracts--despair. When sitting at a 3-hour closing, signing the purchase agreement on a car after negotiating for, what seems like days, what does reading the contract get you? There is little to no chance that anyone with whom you are dealing has authority to make any changes even if you do find "problems." Even if they do have authority, the only option they often present is that "We don't change contracts. But you are free to walk away and, after spending another 3 days negotiating, getting the next company to offer you the same language." So, I don't trust, I'm inefficient, but I am also despairing of making a difference in such contexts. Happy thoughts....

Posted by: Doug Sylvester | May 2, 2007 3:00:01 PM

My wife and I have bought seven houses in the course of almost thirty years, and with first mortgages, second mortgages, equity lines, and refinancing, I will bet we have signed twenty mortgages, not a single one of which I have ever read, except to look at the amount. They are in fact all FNMA-standardized. I always read the purchase and sale agreement pretty closely, but usually to make sure the inclusions and exclusion are right. I always look at the title commitment, and ask for it not to include the "standard exclusions." (I heard a real estate lawyer do that once, and it sounded cool.) I always ask to see the "marked up" commitment. The rest of the garbage in the stack that the closer gives me I just sign, because as Bruce observes, it's all gobbledygook anyway.

Parsing over language is socially unacceptable. As an AARP member, I have authorized my children to institutionalize me if I ever ask a waiter more than two questions about the preparation of a particular dish. ("Is the fish fresh? Is it cooked in butter? Can I get it dry? How salty is it? Can I get it with the rice instead of the potatoes? You don't sprinkle parsley on it, do you? Make sure you tell the chef to cook it WELL DONE. At the Denny's by my house they don't cook it that way, etc.")

Posted by: Jeff Lipshaw | May 2, 2007 2:46:17 PM

I rarely read smaller contracts -- it just sucks up too much time and as the saying goes . . . . Not that I would not be able to sort my way through an agreement, it's just that I find it hard to sit back and figure out what really matters (start imagining crazy doomsday scenarios).

Come to think of it I don't think I read the contract when I bought my house either. Most of the time, if it's not worth engaging a third party (lawyer) to review a document, I think I probably should not worry about it either. (Admittedly not the best attitude.)

Posted by: BTD_Venkat | May 2, 2007 2:35:15 PM

So 'boilerplate' = 'gobbledygook' OK!

Posted by: Patrick S. O'Donnell | May 2, 2007 2:30:04 PM

This post reminds me of my experience renting an apartment in New York City. My roommate and I put applications in -- in the form of unilaterally signed one-year lease agreements -- on multiple apartments, and got word that one had been accepted, so we'd need to put down X thousands of dollars as a deposit. Before doing that, we asked to see the countersigned lease. Our agent was flabbergasted: "Twenty years in this business, no one ever ask me for lease!"

I think what's going here is that contract law is not shaping behavior in actual practice in certain types of situations, even for people who are vaguely aware of it. It's kind of like speeding -- in one sense, there's an obligation not to speed; in another sense, there's an obligation *to* speed. Even as a lawyer entering a major transaction, I always find it a bit awkward reading a consumer contract carefully as someone sits there watching me. I would guess that most non-attorneys choose to manifest "trust" or "efficiency" rather than "care" and simply take the agent/salesperson's word for what the provisions mean. Parsing carefully over language is socially unacceptable; that's one reason why attorneys are not well-liked as a class. And there's limited benefit for a non-attorney to such careful reading, as most of the provisions are gobbledygook anyway.

Posted by: Bruce Boyden | May 2, 2007 2:17:36 PM

When we bought our house (the first and last time), which happened to be part of a low-moderate income housing development by our city in conjunction with a non-profit (self-help/sweat equity) housing corporation, we were given all kinds of papers to sign (all of this very new to us) and we insisted on reading EVERYTHING. This irritated if not made angry several folks, one of whom kept repeating, mantra-like, "Look, it's all boilerplate, just sign it." At the time I did not know what "boilerplate" meant and so his pleas fell on deaf ears. We're glad we read everything and I actually found some of it quite interesting! I don't know where or when I learned it, but I still read everything (of the contract genre) before putting my name to it.

Posted by: Patrick S. O'Donnell | May 2, 2007 1:50:43 PM

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