Grab that Magnifying Glass and Read the Fine Print

We all do it. We see tiny print in a contract and we instinctively ignore it. There are ten pages of fine print associated with every smartphone app you use, and in the license agreements of every piece of software installed on your desktop and laptop. They take up the entire back of your parking ticket at the valet and banks are positively obsessed with them. They’re also in documents you actively negotiate and re-negotiate, such as your office lease, vendor agreements, service contracts and even on invoices. If the content of the fine print were important, it would be large, right? Possibly in bold? Maybe at the beginning of the document, to make sure you saw them? Unfortunately, that’s not the case. The devil truly is in the details and those details are in fine print.

There are three main reasons why you should pull out that magnifying glass (or zoom in on your computer screen) and pay close attention to the fine print:

1. Make sure the terms you agreed to aren’t contradicted by the fine print and understand whom the contract favors. Contract law is state-specific, meaning that you will have to consult with a local attorney specializing in business (or commercial) law to confirm, but in most states, once the contract is signed, the contents of your handshake deal, and anything that was discussed during negotiations but ultimately didn’t make it into the writing, go flying out the window. All that matters are the four corners of the signed agreement itself. To the extent that there are terms that are important to you, and specifics about the performance or the dealings that you would like to bind the parties, you would be well-served by making sure those are contained in the agreement. And while you’re at it, confirm that the fine print doesn’t somehow contradict, undercut, or take the teeth out of the terms you diligently included. The fine print also frequently contains an often overlooked but critically important “choice of law” provision, meaning what state’s (or country’s!) contract laws will be used to interpret the agreement, which can also impact contract interpretation. These terms can all be negotiated, so if you don’t like something, speak up, and get it removed! Ideally, an agreement will protect all of the parties to it. Realistically, though, the agreement’s fine print favors the party who wrote it. Take the time to review, and to negotiate, to ensure a balance of power.

2. The fine print typically contains termination procedures and controls dispute resolution – and it can cost you some serious money. Let’s face it: sometimes things just don’t work out. That’s when the fine print matters the most. Contracts often include very specific termination procedures that detail both the timing and the manner of termination. If those procedures aren’t followed exactly, the termination is not valid. The termination procedures can be as specific sending a letter to an identified address via certified or overnight mail within a small window of time, long before the end of the initial contract term. The fine print is also frequently where those annoying auto-renewal provisions hide, stating that if you don’t terminate within this tiny window, the contract automatically renews for another year (or more), and you end up owing for another year of service you didn’t want from a vendor whose services have been less than satisfactory. The fine print can also limit your dispute resolution options by shortening the period within which you can file a claim, require you to waive a jury, limit your ability to join a class action lawsuit against the contracting party, require arbitration in lieu of a trial, or limit appeals. Similarly, the terms contained in the fine print may increase your costs by requiring mediation, or arbitration – both of which require you to hire a private judge, and pay that judge’s hourly fee for hearing your case – or requiring that you bring the lawsuit in another country or state.

3. You can’t avoid an obligation just by saying you didn’t read the fine print, so what you don’t know definitely can hurt you. The law presumes that the parties have read the contract and understood what they were signing. Failure to read – or failure to fully understand – the contract does not constitute a defense. Time and time again, courts have held parties to contracts they admitted they didn’t read, and terms in impossibly small writing that the companies seeking to enforce them undoubtedly knew the average small business would miss or ignore. Don’t fall victim to this trap. Although an entrepreneur’s time is always limited, take the time to read and understand an agreement, including its fine print, and consult with an attorney to confirm that your reading is accurate, and that you understand the consequences of each provision. The worst-case scenario is that you’ve spent a little money confirming that your understanding is spot-on – in which case, good for you. That sure beats taking the risk that you’ve missed something that can really come back to bite you! To quote American musician Pete Seeger: “Education is when you read the fine print; experience is what you get when you don't.”

The moral of the story is that trouble lurks in tiny font. So read the fine print, consult with an attorney to make sure you understand the terms. Then negotiate away what you don’t like and abide by those terms! Just because they’re small doesn’t mean they’re not important. To the contrary, those are the zingers that may hit you hardest of all.

The foregoing is provided for informational purposes only, is not an advertisement, does not constitute legal advice or legal opinion, and does not create an attorney-client relationship. The content may not apply to the specific facts or a particular matter. You should not act or rely on any information contained in this article without first seeking the advice of an attorney licensed to practice in your jurisdiction.

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