Katie signs up for a cell phone plan and gym membership Lesson 4, Part 1: Contracts

Meet Katie! Katie used to be part of her parents’ cell phone plan but now is out on her own. She needs to sign up for a plan but wants to be sure she knows what she’s getting into.

Katie wonders…What is a contract? How am I protected if I sign one? Legally binding agreement Get it in writing Read the fine print for important terms and conditions

Cell phone contracts Company must provide you a phone and service, consumer must pay for the services Will include info such as: – Return policy – Whether upgrades extend length of contract automatically

Katie also want to sign up for a gym membership Katie has rights under Ohio’s Prepaid Entertainment Contracts Act 3-day right to cancel contract Cancellation must be in writing Cancellation letter must be postmarked by midnight of 3 rd day

Katie signs up for her gym membership on Saturday. Under Ohio’s Prepaid Entertainment Contracts Act, she has until midnight on Wednesday to cancel the contract.

Limited contract cancellation rights Right to cancel a contract exists for: – Door-to-door sales – 3 days – Credit/debt counseling services – 3 days – Prepaid entertainment contracts – 3 days – Home equity loans/mortgage refinancing – 3 days – Business opportunity plans – 5 days – Hearing aids – 30 days – Telemarketing sales – 7 days or until buyer signs written agreement Most other contracts do not have cancellation rights

Let’s say you sign a contract to buy a gym membership on Thursday from a local gym that had a booth at the county fair. You agreed to pay $100 for the services, but later found another salon that only charges $75. Can you cancel the first contract? If so, how long do you have to cancel?

How to Cancel a Contract Cancellation periods measured in business days If cancellation rights apply, seller should provide consumer with cancellation form – Sign and date form and mail OR – Write letter notifying seller of cancellation and mail Don’t cancel via , fax, or telephone

Review Questions What should a consumer do before signing a contract? Under Ohio law, how can a consumer cancel a contract?

Katie buys a used car and is told about a warranty Lesson 4, Part 2: Contracts

Katie wants to protect her purchase and wonders… What are warranties and service contracts? Are they worth buying?

Warranties Guarantees by manufacturers/sellers that their goods/services have the qualities they represent them to have Magnuson-Moss Warranty Act Vary in length and coverage “As is” = no warranty

Questions Katie uses to evaluate the warranty How long does it last? Who will perform the services? What are the company’s responsibilities? What is covered? Is it in writing?

Extended Warranties Lengthen coverage provided by regular warranty Sometimes unnecessary

Katie decides to buy an extended warranty for her car from the used car dealership. A couple months later, the car dealership goes out of business. Is the warranty still valid?

Service Contracts Not warranties Provide certain maintenance and upkeep Offered by retailer, manufacturer, or a third party Extra protection may be unnecessary

Tips for Extended Warranties and Service Contracts Check the warranty provider. Shop around and determine what the contract covers. Avoid duplicate coverage. Don’t buy coverage for items that are cheap to replace. Watch out for additional costs.

Review Questions What is the difference between a warranty and a service contract? What should consumers consider first when purchasing a warranty?

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A Short Quiz! 1. You have three days to cancel any contract or purchase under Ohio law. True or False? 2. What is a possible downside of buying an extended warranty for a product? 3. You purchase a gym membership. The gym fails to notify you that under Ohio law, you have a three-day right to cancel a contract with a health club. Under Ohio law, your right to cancel extends until the gym gives you notification of your cancellation rights. True or False?

Quiz (cont.) 4. What should you do when evaluating and comparing warranties? a - Find out how long the warranty lasts. b - Check for exclusions in coverage. c - Get a verbal promise from a salesperson about the warranty. d - Both a and b 5. A signed contract can be changed or broken if one of the parties involved decides the contract is unfair. True or False?