Fine print of contracts
Corporate Securities Info

Fine print of contracts

A recent decision of the Supreme Court is cautionary to people who sign contracts without reading or understanding their content.

The case involved a woman who died of hypertension shortly after she finished her exercise routine at a fitness center. Her husband sued the center for negligence on the grounds that it failed to take her blood pressure and for not having a doctor on-site at all times.

The lower and appellate courts decided in favor of the husband, but the high court reversed their rulings and dismissed the claim for damages.

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It said the center was not negligent because she stated in her application that she was not suffering from hypertension despite her duty to inform it of any medical problem before engaging in any exercise activity.

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In addition, the center’s records and handouts to its members showed that it had no obligation to take their blood pressure and have a doctor on standby at the premises at all times.

This case brings to mind the dismissive attitude of many Filipinos toward written contracts in business transactions that require the accomplishment of supporting documents.

Thus, for example, transactions with banks, insurance companies, and car dealers are accompanied by various kinds of documents that spell out in detail the duties and responsibilities of the parties, including the consequences that may arise in case those terms are not complied with.

Because those papers often consist of several pages and are written in legalese or arcane business words that can cause a nosebleed to a layperson, their signatories often hardly read them and simply affix their signatures.

They assume that the other party would act in good faith and would not take advantage of the trust they’ve given them.

Besides, requesting clarifications or asking questions may not sit well with the counterparty who may want to conclude the transaction as soon as possible and receive his or her commission, if any.

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Those documents may be described as “contracts of adhesion” or agreements that have been prepared by the party with whom a transaction is being forged and, for obvious reasons, contain fine print that is favorable or advantageous to it.

These are often cleverly concealed in “provided, however” clauses or references to other provisions elsewhere in the document that require close reading.

Under these circumstances, the party being asked to sign them is put in a “take it or leave it” position, with the chances of making changes or adjustments in their terms practically nil lest they result in unsustainable precedents.

Although going through those papers may look tedious or time-consuming, it is prudent that they be read carefully and when some items are unclear, to ask for clarification.

There should be no room for shame or embarrassment about requesting explanations, if warranted, because once the document is signed (and in most cases, notarized) it becomes binding on the parties.

Belated claims that a party did not understand the meaning of some of the terms and conditions or had misinterpreted the consequences of failure to comply with them will not receive a favorable ear if the contract becomes the subject of litigation.

Bear in mind, however, that business transactions cut both ways. That is, they would, if satisfactorily completed, be mutually beneficial as they would serve the interests of the contracting parties, so the right to be enlightened on vague provisions should be exercised.

Another flaw in the treatment of documents in business transactions is ignoring or making light of disclosure requirements or provisions that request relevant personal or professional information.

Because these data are relevant to the transaction under consideration, it is essential that they are accurate or up to date, otherwise the failure to do so could be cited as legal basis to invalidate any claims that may arise from the subject documents.

Going back to the case of the disallowed claim for damages, the high court had no choice but to dismiss it because if the rules were bent for humanitarian reasons, it would create an unfavorable precedent on the principle of sanctity of contracts that businesses feel very strongly about. INQ

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TAGS: Business, CSI

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