Contracts - Read and Understand before Signing

I am a big believer that I should read and understand every document before signing, especially when related to financial matters. I never assume that signing is just a formality. That's because signed contracts are usually legally binding, requiring those that have signed to abide by the written elements. Here are my principles for signing a contract:

Read and verify every page. To me, it's important to confirm that what both parties agree to do and not do are documented in what I sign. If something is missing, I ask that it be included. If there is a verbal agreement not documented, I ask that it be included. If the document doesn't reflect what I believe is the agreement, I won't sign.

In our last house closing, I read every document before signing. I was apologetic, since it doubled or tripled the time for our closing, but no one refused my right the read the documents. Fortunately, everything was as we had agreed, and the closing was completed.

Understand the documents. Most contracts are written in terms that I can understand. If I'm not sure about something, I will hire an expert to confirm my understanding. When spending thousands of dollars, it's worth investing a few hundred as insurance against an error.

For most service or purchase contracts, I feel I am able to read and understand the contract myself. A couple years ago, we invested in a partnership, and I hired a lawyer to confirm that our liability was limited to only our investments.

Sign only when I agree completely. If I do not believe the contract properly represents my purchase, I won't sign, even if it means I lose the item. To me, it's better to not sign, than to enter into a contract with unfavorable terms for me.

Of course, I have made my share of mistakes with service and purchase contracts in the past. Once, I was given an additional service verbally by a salesperson, which was not honored by the owner because it was not in the purchase contract. However, based on experience, I have learned to either include an item in a contract, or to not expect to get the item without paying an additional cost.

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This is not financial advice. Please consult a professional advisor.

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