There has been quite a bit of discussion around our office this week because one of the staff repeated something he had heard about breaking a contract. It turned out to be be wrong but it got me thinking how we often have an idea, more of an urban myth than fact, and we continue to believe it for a very long time. It can be to our detriment.
We have various Consumer Laws that try to give us some protection when we are a signing a contract. This week I took the time to research ‘cooling off’ periods for residential real estate sales in each of the States and they vary greatly. This could be why people are not always clear on their rights.
For each type of contract there may be completely different protections. If you are buying a car is there a cooling off period? I don’t know. Signing for a new expensive sound system? Small purchases have different rules.
What I did realise when I talked about this with our staff is how important it is to know BEFORE you sign your name on the dotted line. You need to ask and see it or have it put in writing BEFORE you sign. Most contracts will have rules about cooling off printed on the contract. If you can’t see them ask. Sometimes the print is so small on the back of contracts you can barely read it. Take the time to do so.
Different circumstances for the same type of sale may differ. A sale at auction of a home has no cooling off period for a specified number of days before and after the auction. A private sale next door will have the cooling off allowed in that State.
Be clear on when the cooling period actually ends. We see in movies people rushing in at 5 minutes to midnight – NO. It is usually at the end of the business day. Is that 5.00pm or 5.30pm? Ask. To whom should you send your written decision to not go ahead with the sale. It has to be in writing to protect yourself.
As a finishing thought real estate sale contracts, understand there will be some kind of financial cost of cooling off. That will be explained in the written rules of cooling off. The termination fee can be as high as 0.25% which doesn’t sound that high until you do the sums. On a $500,000 property that is $1,250. Ouch!
So do your deep thinking before you sign.
This applies for signing a residential lease as well. There is no cooling off on a lease. So ask your questions before you sign. Make sure any assurances about what the landlord has undertaken to do are written down and signed by appropriate parties.
Contracts can be made on a handshake or the back of a damp napkin. All is good whilst each side honours these contracts. However, if one side reneges it is much harder to prove what the contract actually was.
A great example is the verbal contract you have with your teenager about cleaning his/her room. He/she says it’s finished and you look in and are shocked as it is nowhere as clean as you expected. Both sides had a completely different definition of ‘clean’. That’s why we have written contracts so that each side is crystal clear on what is expected from the other side. With my son I had a checklist of 15 items that had to be completed before it could be classified as ‘clean’.
So be cautious. Ask if you have the opportunity to cool down. Ask what the consequences, financial or other, are if you do cool down. Make ‘the asking’ your habit ‘before signing’.