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Reading the Fine Print

4 contract gotchas you should avoid

Smiling Senior Woman Using Cell Phone --- Image by © Reg Charity/Corbis

It pays to recognize contract terms that can cause major harm. — Photo by Reg Charity/Corbis

Beware of the fine print. You've heard that advice before, but do you really know what to be looking out for?

Companies can use lots of confusing language to limit your options and to angle agreements in their favor. Here are the four most egregious things to smoke out before you sign:

Does that phone really work?

Many consumer agreements include a "no guarantee of suitability" clause in which the company admits that its product or service may not work as advertised. This can include anything from software to cellphones. For example, here's the wording in AT&T's wireless phone contract:

"AT&T makes no warranty, express or implied, of merchantability or fitness for a particular purpose, suitability, accuracy, security, or performance regarding any service, software or goods."

In simple terms, they're saying that your cellphone might not work as a phone, or reliably at any particular time or place — your home, for instance. Companies use these unsuitability clauses to say no when customers want out of a contract. And, such language is often enough to persuade credit card companies to refuse a charge-back request.

The Fix: During the trial period, make sure that you test the product or service in all locations and situations in which you'll need it to perform. If it doesn't work satisfactorily, and the company can't — or won't — fix the problem, run to the return line.

Litigating in Las Vegas?

Even if you've not been sidelined by a suitability disclaimer, you may end up taking a long trip in order to make your case through the legal process. Many agreements require any complaint action to take place in a jurisdiction of the company's choosing, regardless of where you live or where the product was purchased.

Check out the following language from financial guru Robert Kiyosaki's customer contract on his "Rich Dad" website, which sells books, seminars and coaching.

"The sole jurisdiction and venue for any litigation arising out of this Agreement will be an appropriate federal or state court located in Nevada."

Whether you live in Vermont, New Jersey or North Dakota, any dispute with Kiyosaki or his products will have to be won in the West.

The Fix: Before signing the contract, check with your state office of consumer affairs. Even if a contract commands otherwise, many states require cases to be argued in the jurisdiction where the sale was made. If your state isn't one of them, and the company won't agree to amend the contract language, keep your money in your pocket.

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Money maven Jean Chatzky has some advice about decision-making. One of her "money rules" is that the more time you spend agonizing over a money decision, the less happy you'll be. Often, "good enough" is best.

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