Why You Should Think Before You Sign

This is the first installment in a three part series exploring liability concerns and challenges that we all risk facing by signing our name, clicking “I Agree,” or even simply browsing or accessing a particular website.

How many times have you signed your name to a document, form, invoice, or various pieces of paper, or clicked through a website within the last week? The last month? How about the last year? Regardless of who you are, or what you do, there can be little question that you have signed countless documents – business contracts, loan promissory notes, sales agreements, leases, etc. – over time. Have you ever stopped to really consider, though, whether your signature (hard copy or electronic) on a particular document may impose unexpected liability or responsibility on you?

While a signatory’s liability may differ depending upon whether the contract or document inures to the benefit of an individual or a business, there are some general liability concerns that everyone should be aware of. Thus, I will first examine the issues of fine print in a contract, then discuss the validity and use of electronic signatures, and, finally, delve into the details of signatory liability in two broad categories – agreements inuring to the benefit of an individual, and agreements inuring to the benefit of a business.

Part I. General Signatory Liability Concerns

We’ve all been there – quickly scanning and then signing some type of contract or document, or clicking “I Agree” or “I Accept” to the enormously lengthy “Terms of Service” (or other similarly named provisions) for some product and/or service online. That quick signature, or “blind” clicking of “I Agree” or “I Accept” may, however, later land you in hot water; the phrase “Read the Fine Print” does exist for a reason, after all!

If you enter into an agreement for the purchase of goods or services, it is fairly likely that you will be presented with some type of form or standard contract used by the business from which you are buying those goods or services. Often, there will only be room for you to add your name, contact information, and signature; meanwhile the business has had the opportunity to create, review, and revise the contract so as to best protect and serve its interests. As such, it is essential to thoroughly read and review all of the terms and provisions within the document – including any “fine print” (or boilerplate provision) that may be on the back of the contract, or on an attachment or addendum to the contract. If you spot a provision that worries you, you may be able to negotiate with the business to strike or modify the provision, but as this is not guaranteed, you should always know what you are getting yourself into before you sign on the dotted line.

A boilerplate provision is a term and/or condition that, while not a critical component of the agreement between the parties, governs the relationship between the parties and can impact how disputes about the agreement are dealt with, and how a court is to interpret and enforce the agreement. These provisions are often grouped together at the end of an agreement, under a heading such as “Miscellaneous” or “General.” While there are a number of common boilerplate provisions utilized in contracts, all of which are certainly important to read and review, a select handful deserve careful scrutiny and attention.

In particular, it is essential that you review and understand the boilerplate provisions dealing with dispute resolution. These provisions may include, but are not limited to, Choice of Law, Jurisdiction, Attorney’s Fees, and Arbitration – each of which can have a monumental impact on your ability to dispute any issue stemming from the agreement. First, Choice of Law and Jurisdiction provisions spell out, in the event of a dispute, which state’s laws will apply, and where suit must be filed. The Jurisdiction provision, although often overlooked, is one that you should be aware of, as it mandates where (in which state and county) any suit concerning the contract must be filed. When contracting with larger companies that may be headquartered in another state or even across the country, it is particularly important to review this clause, as it may require a great deal of travel (resulting in the loss of time and money) for you to even bring your suit to court!

Let’s say you’ve climbed over the Choice of Law and Jurisdiction hurdles and are getting your day in court – did the contract say anything about Attorney’s Fees? Typical language concerning these fees provide that the prevailing (or winning) party is entitled to collect from the other party its reasonable attorney’s fees and costs incurred in the suit. Sometimes, however, a party may attempt to “sneak in” a one-way provision for attorney’s fees, providing for the collection of fees by only one party (often the one with more bargaining power, a/k/a, most often the corporation). Regardless, however, of what your Attorney’s Fee provision says, be aware that a court may be able to declare that (1) it would be unfair to enforce such a provision, particularly if one of the parties was forced to sign it; or (2) the prevailing party’s fees are not reasonable, thus reducing the amount that the prevailing party is entitled to collect.

Finally, all of the concerns listed above may never come into play at all if your agreement contains an Arbitration clause requiring that any dispute, at all, related to the contract be resolved with arbitration, rather than through the judicial system. Arbitration can be binding (enforceable by a court) or nonbinding (allowing the parties to reject the decision and take the matter to court, and also known as mediation). Arbitration occurs when the disputing parties submit evidence and arguments to a theoretically impartial third-party (the arbitrator) who then renders a decision on the matter. Arbitration may be attractive in that it is often faster, simpler, and more flexible than typical court litigation. Despite those advantages, though, there are also some major inherent disadvantages to arbitration – particularly when it is mandatory and binding! First, the arbitrator may not be subject to the Rules of Evidence that are most certainly applicable in a courtroom and, unless the Arbitration provision provides for it, there is no automatic right to discovery. Finally, with binding arbitration, a dissatisfied party cannot appeal the decision to a higher authority or to a court – he or she must deal with and conform to the decision made by the arbitrator.

Such binding arbitration clauses may likely result in the disputing party relinquishing many of his or her rights, including the right to have a judge or impartial jury hear his or her complaint! Despite these clear disadvantages to mandatory arbitration clauses, particularly for the consumer, it is becoming more and more common to see these types of provisions in all sorts of contracts. Perhaps due to the seeming absurdity of how such provisions can impact an individual in such a huge way, a number of lawsuits opposing mandatory arbitration clauses have begun to pop up around the country, and Congress has even scrutinized such provisions. As a result, some companies now allow customers to “opt-out” of their otherwise mandatory arbitration agreement. But, according to Paul Bland, a Washington D.C. attorney, “[t]he companies know that almost no consumers ever read the fine print, so then they can use the existence of the ‘opt out’ to defend themselves against reporters or members of Congress who question them;” Wina Sturgeon, et al., Arbitration: Not Reading the Fine Print of a Contract Could Cost You, Good4Utah (May 5, 2014 , 7:20 AM), http://www.good4utah.com/news/local-utah-state-news-/arbitration-not-reading-the-fine-print-of-a-contract-could-cost-you. Worrisome, huh?

The next installment of this series will discuss liability concerns related to electronic signatures. Be sure to check back in to find out if the provisions discussed above may bind you, even if you have not necessarily signed a hard copy contract, but rather have agreed to a set of terms and conditions via an online button!

Leave a Reply