LEGAL AGREEMENTS AND RECORD KEEPING

OBJECTIVES Students will list the elements of a legally binding agreement Students will explain the benefits of keeping financial records and documents Students will explain elements of an effective filing system for your personal records

LEGALLY BINDING AGREEMENTS Contract – a legally enforceable agreement between two or more people. Credit Plans Store agrees to give you products now in exchange for regular payments for the goods Rental agreements Landlord allows you to live in the apartment in exchange for you paying the rent by a certain day each month Mortgages Mortgage company loans you money to purchase a house in exchange for monthly payments

LEGALLY BINDING AGREEMENTS Express contracts The parties have stated the terms of their agreement in words Can be oral or written Implied contracts Unwritten Agreements Terms are assumed

CONTRACT ELEMENTS For a contract to accomplish it’s purpose it must be binding All parties who enter into the contract must be legally obligated to abide by its terms

CONTRACT ELEMENTS The Following Elements Must Be Present for a Contract to be Legally Binding and Enforceable: Agreement A valid offer is made and accepted Both the offer and acceptance must express a voluntary intent to be bound by the agreement When an offer is made and it is changed by the other party, it now represents a counteroffer which must then be accepted by the first party

CONTRACT ELEMENTS The Following Elements Must Be Present for a Contract to be Legally Binding and Enforceable: Agreement There must genuine agreement by both parties to the contract terms. This cannot exist if one of the following exists: Mistake Fraud (intentional misrepresentation) Duress (threats) Undue influence (someone exerting influence over someone)

CONTRACT ELEMENTS The Following Elements Must Be Present for a Contract to be Legally Binding and Enforceable: Consideration There must be something of value exchanged as part of a contract Object of value Money A promise A performed service Each party to the agreement receives something of value

CONTRACT ELEMENTS The Following Elements Must Be Present for a Contract to be Legally Binding and Enforceable: Contractual Capacity Refers to the competence (legal ability) of the parties to enter a contract No mental deficiencies or illness Not minors

CONTRACT ELEMENTS The Following Elements Must Be Present for a Contract to be Legally Binding and Enforceable: Legality Contract must be lawful Cannot contract an unlawful act

STATUTE OF FRAUDS Every state has a statute of frauds The purpose of this law is to prevent harm due to fraudulent conduct This law requires that some contracts be in writing and signed to be legally binding.

STATUTE OF FRAUDS Examples: Contracts for the sale of real property (homes and land) Contracts that cannot be fully performed in less than a year Contracts involving the sale of goods for $500 and over Contracts in which one person agrees to pay the debts of another Contracts involving consideration of marriage

CONSUMERS RESPONSIBILITIES IN AGREEMENTS Fill in all spaces or indicate N/A for items that are not applicable Write all terms clearly. Vague phrases are often not enforceable Enter dates, amounts, and other numbers correctly and clearly Be sure the seller has supplied all relevant information, including rate of interest, total finance charges, cash payment price, etc.

CONSUMERS RESPONSIBILITIES IN AGREEMENTS Understand all terms contained in the agreement. Do not sign until you have read it as your signature acknowledges you have read and understood the contract Check that no changes have been made after you have signed it. Initialing at the bottom of each page will prevent substitution of pages Keep a copy of the agreement and store in a safe place

NEGOTIABLE INSTRUMENTS Negotiable – legally collectible Negotiable Instrument – an unconditional written promise to pay a specified sum of money upon demand of the holder

NEGOTIABLE INSTRUMENTS Most common negotiable instruments: Checks Promissory notes

NEGOTIABLE INSTRUMENTS Promissory note Written promise to pay a certain sum of money to another person or to the holder of the note on a specified date. It is a legal document, and payment of the note can be enforced by law Maker – the person who agrees to pay the note Payee – the person to whom the money is payable Co-signer – a person who agrees to pay the note if the maker fails to pay (often used by people who haven’t established a credit rating or have a poor credit rating) Promissory notes are often used when borrowing from a bank or other financial institution

WARRANTIES (GUARANTEE) A statement about a product’s qualities or performance that the seller assures the buyer are true Generally includes what the seller will do if the product fails to live up to the standards specified Return purchase price Repair the product at no cost

WARRANTIES (GUARANTEE) Implied warranties Generally understood that product will perform to a certain level Written warranties Generally state that a product will perform to a certain level for a specified time period

BENEFITS OF ORGANIZING YOUR FINANCIAL DOCUMENTS Helps you quickly find any document you may need in a hurry Handle routine money matters, such as paying bills on time Determine how much money you will have now and in the future Make effective decisions about how to save money Many others

WHERE TO KEEP YOUR FINANCIAL DOCUMENTS Home Files File Folders File labels Filing Cabinet – File Drawer – Cardboard Box

FOLDERS AND CONTENTS Personal and Employment Records Social Security Number Employee Benefit Information Current Resume

FOLDERS AND CONTENTS Money Management Records Current Budget/Spending Plan Balance Sheet/Net Worth Statement Cash Flow Statement List of Financial Goals Copies of Documents Stored in a Safe-Deposit Box

FOLDERS AND CONTENTS Financial Records Checkbook Cancelled Checks Bank Statements Location of Number of Safe-Deposit Box

FOLDERS AND CONTENTS Tax Records W-2 Forms Paycheck Stubs Copies of Tax Returns Documentation of Deductions

FOLDERS AND CONTENTS Consumer Records Receipts for major purchases Automobile Records Service and Repair Records Owner’s Manuals Owner’s Manuals for Appliances and other major purchases Warranties

FOLDERS AND CONTENTS Housing Records Lease (if renting) Property Tax Records Home Repair and Improvement Receipts

FOLDERS AND CONTENTS Insurance Records Original Policies Insurance Premium Amounts and Due Dates

FOLDERS AND CONTENTS Investment Records Records of stock, bond, and mutual fund purchases and sale List of investment certificate numbers Brokerage Statements Dividend Records

FOLDERS AND CONTENTS Estate Planning and Retirement Records Will Pension Plan Information IRA Statements Social Security Information

OTHER POSSIBILITIES FOR FOLDERS All monthly bills Utilities Phone Credit Cards Medical Entertainment Household Subscriptions Etc.

SAFE-DEPOSIT BOX A small storage compartment you can rent in a bank Locked in a fireproof room that is only accessible while the bank is open Can only be opened with a combination of your key and a key that the bank maintains Offers greater security than items stored at home

SAFE-DEPOSIT BOX Examples of what to store Birth certificates Mortgage loan papers Title deeds Copy of will Certificates of deposit Automobile titles Valuable collectibles Etc.

ELECTRONIC RECORD KEEPING Cannot store all records here Helpful for financial planning and some forms of record keeping that require calculations Examples Budgets Summaries of checks written and other bank transactions Tax records Etc.