In case you haven’t heard, Google is unveiling a new privacy policy on March 1, 2012. This new policy will sweep across (almost) all its services, rather than each site or product having its own privacy policy. This makes sense, but some people are decrying it as a violation of Google’s mantra, “Don’t be evil.” Since Google has probably sunk its claws into you in some manner, it’s important to know how this new privacy policy will affect you. And now you can find out without needing to read all that fine print.

(Note: If you’re not familiar with key terms like cookie, IP address, or pixel tags, you may want to look at Google’s term definitions first.)

1. Information Gathering. Google gathers information about you two ways: first is information you give to Google, like when you sign up for a Google account and provide your name and other information. The other way is to scour the Google services you use for particular pieces of information such as the device you are using, your location, the operating system you are using, and information from cookies, among other things. Of particular interest is the information gathered through server logs, which includes your specific searches, telephone call information (such as number, duration, carrier, etc.), your IP address, information about your device (including system activity and hardware settings), and cookies that identify your browser or Google account.

2. Information Use. Of course, Google uses your information to develop its products and to tailor ad and search content to your preferences. But there are other uses for that information as well. If another Google user knows your email address or other identifying information, Google will display your name and picture to that user. They will also collect information on websites visited and some email (based on pixel tags) “to improve your user experience and the overall quality of our services”—whatever that means. As part of this privacy policy consolidation, Google will also be able to aggregate all the personal information it has for you on any of its sites or services, meaning that they will now have  a much fuller understanding of you.

3. Your Control Over Your Information. Google purports to allow you to control how your information is used (although not what information is collected). For example, you can review and control certain types of information tied to your Google account with Google Dashboard. Or you can edit your ad preferences or even opt out of some Google advertising services. You can even take information out of some of Google’s services. This last one may be difficult to control, though, as presumably that information is continually collected and will be collected again.

4. Sharing With Others. Google will not share your personal information with companies, organizations, or individuals outside of Google unless: (1) you consent to have the information shared; (2) your Google services are managed by a domain administrator or another third party that provides support; (3) Google hires an outside party to process the information for them; or (4) for legal reasons, such as enforcing applicable laws or preventing fraud or security issues. The domain administrators category seems like a difficult one to understand, if only because the domain administrator may have its own contradictory privacy policy, and its policies may allow it to do anything you would do with your own account. In that case, it seems more like your beef would be with the domain administrator rather than Google.

5. Information Security. Access to personal information is restricted to only those people who need access to it for purposes of processing it (be they Google employees, contractors, or third parties), and these people must sign strict confidentiality agreements to have access to the information.

6. No Opt-Out. Notably, there is no option to opt out of sharing your information with Google anymore, while still using its products anyway. Presumably you could stop using Google products and avoid most of their data collection, but that seems pretty unlikely at this point. There really is no provision allowing you to even call or write a letter, like some other privacy policies allow. There just is no opting out of Google’s information collection as of March 1, 2012.

That’s about all that really grabs my attention as I read the new privacy policy. It actually doesn’t seem that different from prior privacy policies Google has instituted, and is not that surprising. The big concern seems to be that Google can aggregate all your information from all its various services. I don’t know how much of that information is duplicated, but I’m not worried that Google will suddenly know significantly more about me than it did before.

If you have any questions or concerns, please let me know in the comments and I will try to address them. If you have problems, you can contact Google here.

(photo: http://www.flickr.com/photos/alancleaver/4105726930/)

Here’s the short version: While working on the newer incarnation of “Beverly Hills 90210,” Brian Austin Green apparently started dating co-star Vanessa Marcil-Giovinazzo. During the course of their courtship, Green lent Marcil approximately $200,000 in $50,000 increments. This was in the year 2000. In November of 2011, Green tried to collect on his loans to no avail. So Brian Austin Green filed a lawsuit against Ms. Marcil-Giovinazzo (PDF). Will he be able to enforce that agreement through the courts?

The lawsuit alleges, among other things, breach of contract and breach of oral agreement. Since the Complaint (linked above) does not include the supposed written contract, we will assume that there is only an oral contract. But what’s the point of trying to enforce an oral agreement? You can’t prove an oral agreement so it can’t be enforced, right? Not quite.

Oral contracts are just as valid as written contracts in most situations. The only difference between the two is that without something in writing, the terms of the contract are much harder to prove. But if there are circumstances evidencing a contract (for example, a witness to the agreement, or acceptance by performance), it is possible to enforce an oral contract just as one would enforce a written contract. So long as there is an offer, acceptance, and consideration, an oral contract can be enforced.

There are situations in which an oral contract is not accepted, however, and these are covered by what is known as the Statute of Frauds. The statute of frauds is typically governed by statute (no surprise there), and requires that certain types of agreement be in writing to be enforceable. Traditionally these agreements involve marriage by contract, contracts that will take over one year to perform, contracts for the transfer of land, and other situations involving executors, guarantors for someone else’s debt, and sales of goods. In Mr. Green’s claim, none of these apply, so the statute of frauds does not require that a written contract exist in order to enforce the agreement.

Some of you who are in the know might be tempted to claim that the Statute of Limitations precludes a claim for this amount of money. The statute of limitations is a time period set by the state or federal government during which certain types of claims must be made. These differ from state to state and claim to claim. Generally, though, if you try to bring a claim that is outside the statute of limitations, it will be dismissed. The purpose of statutes of limitation is generally to ensure that claims are brought within a time when the evidence is fresh or to ensure that the claim is fair. For instance, in Minnesota the statute of limitations on construction claims is 10 or 12 years (depending on the circumstances), to keep construction companies for being liable for anything that fails at any point in the future. It’s not fair to expect that construction will last forever, so there is a limit on the time period within which a person can bring a claim.

All that being said, Mr. Green’s claim does not exceed the statute of limitations for a breach of contract claim because the demand for the return of the money didn’t occur until November of 2011. So it has really only been 2 months since the breach occurred, which I would guess is within every state’s statute of limitations for breach of contract.

But if Mr. Green can’t show a written contract, he has a significant problem outside the scope of contract law, which involves the difference between a loan and a gift. A loan involves contract law because there is a promise to pay money back under certain circumstances in exchange for being loaned that money up front. A loan involves an offer, acceptance and consideration. A gift, however, does not involve any consideration. In other words, the person giving the gift does not ask for anything in return for giving the gift, so a gift cannot be a contract.

This is a potential problem for Mr. Green because in the case of being in a romantic relationship, undocumented loans are generally considered gifts. Oftentimes after a relationship has gone sour, people will try to retroactively claim that a gift was actually a loan and demand to have it returned. But all that matters for the purposes of the law is the intent at the time the money was given. If there is no documentation of the loan and the parties were romantically involved at the time, Mr. Green is going to be hard-pressed to prove that the $200,000 is a loan rather than a gift.

At the end of the day, this case probably turns on whether there is a written agreement. If so, it will be easy to prove a loan and the terms of that loan. If not, then although the statute of frauds does not apply, the money will likely be presumed to be a gift in light of their relationship at the time, and proving any sort of terms of a loan without any other evidence will be nearly impossible.

Good luck, Brian Austin Green. You’re going to need it.

(photo: http://www.flickr.com/photos/lovelornpoets/6214449310/)

Recently Progressive auto insurance has been making a push for customers to join their Snapshot driving monitoring program. For Snapshot, customers plug a device into the computer port in their car and it monitors miles driven, time of day you are driving, and the number of “hard brakes”—defined as decreasing in speed at least 7 miles per hour per second. If Progressive likes your driving habits, you can earn a discount on your insurance of up to 30%. I recently signed up for the service, so I thought I would read through the Progressive Snapshot Participation Terms and Conditions (PDF) and share my analysis here.

1. Recorded Information. The Snapshot device records vehicle speed and time information (times when driving), vehicle identification number, G force, and when the device is connected or disconnected from the vehicle. Progressive the determines miles driven, and rates of acceleration and braking from the collected information. There is no GPS, although with your consent Progressive can determine the location of the vehicle via cellular signal.

2. Returning the Device. When the program is over or when you are finished with the program, the device needs to be returned to Progressive “in a timely manner,” and in good condition. If it is not returned according to these parameters (or not returned at all), your Progressive policy can be charged up to $75. Additional documentation that came with my Snapshot device said it would be $50, but the terms and conditions are typically what govern these situations, so you should assume that Progressive can charge up to $75 for damaged or unreturned devices.

3. Use of Information. By enrolling in Snapshot, you are consenting to Progressive retaining and using the information gathered from the device. Once the device is returned, the information will be wiped from it, but Progressive will still retain copies of the information. Progressive might also use the Snapshot information if you are in an accident, and you may be required to preserve and provide the information if a lawsuit occurs due to the accident. Interestingly, if you file an insurance claim with Progressive, they will not use the Snapshot data to resolve the claim unless they receive your permission first. I assume that if you refused, Progressive would claim that you are hindering their investigation and may not process the claim fully, but nothing about this is noted in the Snapshot terms and conditions.

4. Discount (or Surcharge). The Snapshot data will be used to determine your discount (if any) or surcharge (in Rhode Island). This only applies to bodily injury, property damage, and collision coverage. Interestingly, a “technology expense” may be added to your bill to cover the cost of the device and the amount Progressive needs to pay to have the data sent to them. That seems like a disincentive to me.

5. Pricing Model 1. Different states have different pricing models. Depending on your state (a list of which is not provided in the terms and conditions, but the per-state pricing model is listed on Progressive’s website), your pricing may be determined (a) when the policy begins, or (b) at the time the Snapshot is installed in the vehicle. The discount may also be removed if the Snapshot is not installed in a timely manner, resulting in a premium increase. Renewal of this type of pricing applies to each policy period (usually 6 months) based on the previous 12 months’ driving data, and the pricing may vary from period to period.

6. Pricing Model 2. The initial discount will be based on the first 30 days of driving data. After 75 days of driving a second driving score will be given, which will determine your discount going forward until  (a) Progressive decides to collect more driving data, or (b) Progressive revises the discount factors. After the second driving discount has been established, you will be notified that you need to return the device, postage paid by Progressive.

7. Premature Removal or Disconnection. If the Snapshot device is disconnected prematurely or if a pattern of disconnections suggests that the driving data collected may not be representative of actual driving, the second discount determination may be affected or revoked altogether.

That’s pretty much all that is of note in the Snapshot terms and conditions. If you have any questions about my analysis, please let me know in the comments.

Many of us have seen the offers to extend your electronic product’s warranty on eBay or Amazon by purchasing an extended warranty from a company called SquareTrade. SquareTrade offers warranties or warranty extensions for electronics for a claimed 60–70% off. Not bad. But the question is what you are actually buying when you purchase a warranty from SquareTrade. That’s what this week’s Fine Print Friday aims to find out.

SquareTrade considerately provides a one-and-a-half-page “plain English” version of the SquareTrade Service Agreement (PDF) prior to the main service agreement, which is a great feature. I love when companies provide these summaries, but it’s still nice to read through the fine print and see precisely what you are bound to. So the following analysis is straight from the fine print, not the “plain English” translation.

1. Coverage: The warranty covers mechanical or electrical failure of the product for which you purchased the warranty. You need to have been using the product normally (e.g., not using your iPhone as a hammer), and SquareTrade will only repair/replace the item if it is not covered by another warranty at the time. Some things that are not covered are normal wear and tear, theft or loss, battery leakage, cosmetic damage that does not affect the operation of the device, television/monitor screen imperfections, equipment intended for heavy commercial or industrial use, consumable items such as ink or toner, damage to computers from software or viruses, and jewelry or watches that are refurbished at the time of purchase. There are other unsurprising items that are not covered as well. For a full list of what is not covered, see section 10 on page 5 of the Service Agreement.

2. Optional Accidental Damage from Handling: Accidental Damage from Handling (or ADH) coverage is optional additional coverage you can purchase for your device, providing warranty coverage for drops, spills and liquid damage. ADH still does not protect you in the case of theft or loss, abuse of the product, cosmetic damage, or damage caused during shipping—that last one includes shipping between SquareTrade’s service providers and you. Presumably that would be covered by the shipper, although it is not spelled out in the Service Agreement, so it might be a good idea to buy the shipping insurance when shipping your device for repair.

3. Watch Coverage: Watches are covered for parts and labor for defects in workmanship and wear and tear, and covers the watch band, case, crown, cracked crystal, etc. Repair to watches involves you paying for the repair first and SquareTrade reimbursing you, but you should call them about using the warranty prior to getting the watch repaired.

4. Repair and Replacement: Depending on the circumstances, SquareTrade will do one of the following: (a) repair the item, (b) provide cash or a gift card up to the coverage amount, or (c) provide a new or refurbished item with equivalent features and functionality. Two things to note here: (1) The “coverage amount” may not be the full replacement price for your covered device. Each time you use the warranty service, the value of that repair or replacement is subtracted from the coverage amount. That means that only so much repair or replacement will be covered according to dollars in addition to time. (See section 8 of the Service Agreement for more detail on how this works.) (2) It is possible that a replacement device will not be new, and it is also possible that it will not be the same device. So long as it has equivalent features and functionality, it can be substituted for your broken device under this agreement.

5. Your Responsibilities: In order to be able to submit a claim, you need to have the complete receipt for the item you purchased. SquareTrade offers to store a copy of your receipt for you, or you can just hold onto it yourself. I would think that having SquareTrade store a copy and keeping a copy for yourself would be your best bet to make sure that it is available should you need to make use of your coverage. You also need to have selected the right protection plan for your device (no guidance is given as to what happens if you select the wrong plan, or what an incorrect plan is considered to be—does coverage for an iPhone 4 cover an iPhone 4S?). Finally, you need to handle your device with care, maintain it properly, and use it according to the manufacturer’s instructions.

6. Lemons: If your covered device has the same problem repaired 4 times within 12 months, on the fourth instance, SquareTrade will replace the device for you rather than repair it again. The cost of the replacement will not be more than the original purchase price, although that’s not likely to happen anyway given how technology drops in price over time.

7. Surge Protection: Your SquareTrade warranty does cover problems with the device due to power surges so long as the device was plugged into a UL-approved surge protector. Good deal.

8. Free Shipping: For all repair work that requires shipping, your shipping will be paid for by SquareTrade, including shipping to the manufacturer if the manufacturer does not provide shipping coverage.

9. Worldwide Service: SquareTrade’s policy also applies when you travel outside the country. If the device needs to be repaired in a foreign country, you will first need to call SquareTrade to receive an authorization number. Then the device needs to be brought to an authorized repair shop, the repair needs to be paid for by the owner, and the owner needs to apply for reimbursement. It’s a bit more of a hassle than if the problem occurs stateside, but at least it’s still covered regardless of your destination.

And that’s about it for SquareTrade’s Service Agreement. If you need to contact SquareTrade, you can do so by going to http://www.squaretrade.com or by calling 1-877-927-7268.

Most contracts involve a signature of some sort—you have to sign your name or provide an electronic signature, provide a personal identification number, or click “Accept”. These are all purposeful acts and constitute active agreement to a contract. But it’s also possible to passively agree to a contract, for which you don’t really need to do anything purposeful.

Som contracts (particularly for internet services) only require that a person use the service, regardless of whether any notice of the agreement has been provided. (Usually you can find notice in the Terms of Use for a web site or service, but you often don’t need to actively agree to them.) Take, for example, the following provision from the Terms of Service from Google Maps:

By downloading, installing, or using the Google Earth software, accessing or using the Google Maps service, or accessing or using any of the content available within the Products, you agree to be bound by the following….

When you navigate to Google Maps, there is no window that pops up requiring you to agree to the terms of service—either once, or every time you use it. But according to the Google Maps Terms of Service, simply accessing or using Google Maps binds you to the entire Terms of Service.

Legally, this is considered acceptance by performance, and all that is needed to accept the offer of one party is to perform according to the offer. Depending on the circumstances, full performance may not be needed for the acceptance to be valid; simply beginning to perform will be enough to be considered acceptance (thereby creating a binding contract).

What this means for casual web surfers is that it doesn’t matter if there is no requirement to accept terms of service for a web service; often, simply using the web service binds you to the terms of service because you are “performing” according to the offer extended by the service. So keep this in mind when using services on the web, or anywhere else. It’s not hard to be bound by a contract—even when you don’t know about it.

(photo: http://www.flickr.com/photos/freemind/)

Fine Print Friday: KinderCare Learning Centers Enrollment Agreement

KinderCare (run by the Knowledge Learning Corporation) is the largest child care provider in the United States, with more than 1,900 early childhood community education centers spread throughout 39 states and the District of Columbia. Since over 200,000 children are enrolled at KinderCare locations throughout the country, I thought it would make sense to look at the agreements made by the parents of those children, which are required for enrollment. Here are some points of interest scattered throughout the KinderCare Enrollment Agreement. (PDF)

1. Medical Policies. If your child becomes ill at a KinderCare center, the staff will let you know and you must pick up the child no later than one hour after being contacted. If the child is infected with a contagious disease, s/he will not be allowed back without a physician’s note indicating that s/he is no longer contagious. If there is a medical emergency and the parent/guardian cannot be reached, KinderCare is authorized to take emergency measures, and requested religious exemptions will only be granted if authorized by state child care licensing authorities.

2. Fees. Tuition and fees are set by each individual center, and are assessed weekly or monthly. KinderCare does not give any tuition breaks or refunds due to holiday closures, closures due to severe weather, or any other scheduled or unscheduled closures. Yikes. Additionally, tuition will not be pro-rated and all tuition is due in advance of service. This is in addition to an annual $100 registration fee that is non-refundable, and which is re-assessed every time a child re-enrolls after dropping out, even if it takes place within the same year. Two weeks’ notice must be given before terminating the service, and if it is not given, KinderCare will assess the full amount for two weeks’ tuition. Finally, if there is a credit (prepay) balance of less than $10 on your account, KinderCare will not send it back to you unless you request it in writing within 90 days after termination of services. Ick.

3. Pick Up. Late fees are assessed for each child left past closing time, and if a child is left at a center for more than 30 minutes, KinderCare’s staff can release the child into the care of child protective services. That said, KinderCare’s policy for ensuring only authorized pick up of children is very strong, and only allows unlisted individuals to pick up children if either (a) there has been prior written notice given by the parent, or (b) the parent calls in to authorize the unlisted individual and answers the security questions listed on the Enrollment Agreement.

4. Safety. No guarantees of safety are made. None. In fact, the safety of the children is not even addressed in the Enrollment Agreement aside from the medical information and emergency care sections. KinderCare’s website addresses safety extensively, but that is not contractually binding and there is no statement guaranteeing the reliability of any of the points laid out on that page. “We are serious about training for earthquakes, fires, and lockdown situations” is nice, but there is no measurable quality and no assurance of safety.

5. Education. The full name of the company is KinderCare Learning Center, although there is no assurance of education in the Enrollment Agreement, nor any reference to any other location where educational standards and expectations can be found. Many of the centers are accredited by various accreditation bodies, but there is no requirement that a KinderCare center be accredited. There is no doubt that children will learn while they are at KinderCare’s centers, and the website provides plenty of information about their education programming, but there is no listing of curricula or standards of education for the children provided in the Enrollment Agreement.

In all, KinderCare seems like a decent child care center, and I have no reason to doubt the quality of their care or programs. But this site is about contractual agreements and the ability to rely on the agreements you make. KinderCare’s Enrollment Agreement guarantees very little, other than that they will make sure they get paid–even on days off. Between the fees, the lack of safety guarantees, and not addressing learning standards, it’s not a great contract. The Enrollment Agreement doesn’t even limit their liability, which makes me think the agreement was not taken seriously when drafting it. As the largest child care provider in the country, I would expect a bit more.

This just means that consumers have to be that much more careful when choosing a day care provider, and parents need to understand that they cannot rely on what it says on the website–only what is written in the documents they sign.

That does it for another Fine Print Friday. If you have ideas for other consumer contracts you would like to see under the microscope, send them my way. Or perhaps you would like to see a competitor’s comparison to this post or a previous Fine Print Friday entry. Let me know and I will try to get to as many of your suggestions as I can.

As Minnesotans grapple with the issue of whether to build a new stadium for the Vikings, a new wrinkle has appeared in the argument, which might force the Vikings to play in the Metrodome for an additional year…based on force majeure.

I’ve explained force majeure before, but for the uninitiated, here’s the idea: if something out of the control of one or both of the parties to a contract occurs, those parties cannot be held to all the terms of the contract. For the Vikings, the issue arose last winter when a severe winter storm piled so much snow on the Metrodome that the roof collapsed, requiring significant repairs.

According to a Minnesota Public Radio interview with Ted Mondale, chair of the Metropolitan Sports Facilities Commission (which is mainly in charge of the Metrodome and has a stake in the Vikings staying for additional time and paying more rent), the Vikings’ lease was for thirty years expiring at the end of this football season. But he also notes that there is a force majeure clause in the lease stating that in case of damage from a storm like last winter’s, the lease would be extended by a year.

I haven’t seen the lease, and I wasn’t there for the negotiations, but I would expect that the force majeure clause was originally negotiated to protect the Vikings’ hold on the property in case something interrupted their season. However, at this juncture the Vikings are trying to argue that they need a new stadium because their lease is about to end at the Metrodome. In this case, the clause is actually being used to their detriment, by potentially forcing them to stay in the Metrodome for an additional year, and hamstringing their argument that they need a new stadium immediately.

This is an interesting use of force majeure, and one that I have not seen before. But it just goes to show that every provision in a contract is important, no matter how far-fetched or off-the-wall it seems, and you might just get what you wished for.

After listening to the MPR interview and reading about force majeure here at Pro and Contracts, do you think the Vikings should be forced to stay in their lease for an additional year, or do you think it should be an option that they can choose to enforce if they want to?

Since Amazon just announced that its Prime program will soon begin lending books to its Kindle owners, I thought now would be a good time to examine Amazon Prime’s Terms and Conditions to look for interesting or nasty provisions that you might want to know about.

1. Up to 5 Users per Prime Account. In case you weren’t aware of this, Amazon Prime members can invite up to 4 other “invitees” to use their membership benefits. This applies to either family members or business associates (depending on the type of account). However, only the original account holder can use the additional services such as instant streaming video. I assume this restriction will apply to the new Kindle book-lending service, as well, but we will have to wait and see once that is made part of the terms and conditions.

2. Geographic Limitations. Prime is limited to certain products being shipped to continental United States addresses. That means that Alaska, Hawaii, PO boxes, APO/FPO, and United States territories, possessions, and protectorates (e.g., Puerto Rico) are out. That said, members are still entitled to free Standard shipping to PO boxes in the continental United States and APO/FPO address with United States zip codes.

3. Method of Payment. Strangely, the allowable method of payment for your Amazon Prime membership is only credit card. Amazon specifically states that debit cards—even those with Visa or Mastercard logos—are not to be used for purchasing your automatically-renewing Prime membership. Presumably this is to keep the purchase from being rejected by the member’s bank, but it’s still kind of odd.

4. Prime Renewal. As I mentioned above, Amazon Prime automatically renews each year. That said, if for some reason it does not automatically renew, you can renew your membership within 30 days of its cancellation and the program will renew retroactively. In other words, the renewal date will be as if it had automatically renewed. What is not addressed is whether that retroactive renewal will provide you a rebate on shipping charges you paid between the time that the membership expired and it was renewed.

5. Refunds of Membership Fee. If you purchase Prime and cancel it before using any of its benefits, you will be refunded the full price of the membership. Excellent. But if you have used the free shipping or accessed any instant videos, you are not entitled to a refund. In addition, if Amazon makes changes to certain benefits after you have used them, or terminates your Prime membership, you will be given a prorated refund.

And that’s about it for Amazon Prime. In all, their terms and conditions are very short and readable, and there isn’t much in there that is concerning. It is much more of a contract that is used to explain the program, rather than a contract that is used to screw the consumer, like some contracts we have seen here at Pro and Contracts.

Have you used Amazon Prime? What has your experience been? Have you ever had trouble getting a refund for your membership fee? Tell us what happened in the comments.

You probably already know why people hate contracts, but a colleague of mine dropped something on my desk this morning and I couldn’t help but share it with my adoring fan (or perhaps “fans”).

Here is a paragraph he re-wrote for a contract of which he was to be a part (so it was in his interest for it to be comprehendible):

(1) E retains all right, title and interest (subject to the license granted herein) in and to any and all content, inventions, articles, reports, summaries, headers, reviews, categories, documents, works of authorship, designs, know-how, ideas and information made or conceived or reduced to practice, in whole or in part, by Expert before the term of this Agreement in connection with the Services (collectively, “Content”) provided by E under this Agreement. (2) H retains all right, title and interest (including all intellectual property rights throughout the world and, for clarity, any content created by H as a result of interviewing E) relating to any and all content, inventions, articles, reports, summaries, headers, reviews, categories, documents, works of authorship, designs, know-how, ideas and information made or conceived or reduced to practice, in whole or in part, by H. (3) E hereby grants to H, and H accepts, an exclusive, worldwide, assignable, sub licensable (through multiple tiers), royalty-free, perpetual, irrevocable license to display, publish, use, reproduce, distribute, transmit, enhance, modify, create derivatives of, provide user access to, and otherwise exploit, in every manner and medium now or hereafter known, the Content and any updates or derivatives that E has previously and may from time to time provide to H. (4) E will assist H, at H’s expense, to further perfect such license and to maintain, enforce and defend any rights licensed. (Notes: Sentence numbers were added for ease of reference during the rest of this post.)

OOF! Does anyone (other than the lawyers) know what that means? You could probably figure it out if you had enough free time, but if it was presented to you as part of a larger contract and you were supposed to sign it on the spot, would you know what you were signing? Probably not.

Consequently, my colleague translated it into language that a normal person could understand. Here is his version of Sentence 1:

E retains all right to any and all content made in whole or in part by E before the term of this Agreement in connection with the Services provided by E under this Agreement.

That still reads a bit like legalese, but at least you can comprehend it! Let’s look at his translation of Sentence 2:

H retains all right relating to any and all content made in whole or in part by H.

That’s pretty straightforward—if H made it, it’s H’s property. Period. Here’s Sentence 3:

E hereby grants to H and exclusive (yet assignable) license to reproduce, distribute, or modify in every manner the content that E may provide to H.

That, too, makes a lot of sense. (Sentence 4 was unmodified.)

So that enormous, incomprehensible paragraph above? It just says that E and H are going to work on something together and that while they are working together, H gets to use anything E provides to H, H gets to keep its own material, and H can’t use material E produced before they started working together. And that’s pretty much it.

Friends Don’t Let Friends Write Bad Contracts

Personally, I think people should be able to read and understand their contracts. And although the translations of those sentences above don’t quite provide the same exact rights and duties, they are darn close, probably without any actionable difference if the agreement is contested.

So if you need a contract written or need to sign one, find a lawyer who will actually help you translate it into a piece of understandable writing. You are far more likely to have a negotiated agreement (as opposed to an adhesion contract, which is not negotiated) signed if the parties can both understand what it says.

(photo: http://www.flickr.com/photos/mindaugasdanys/3766009204/)

Given the incredible glut of foreclosed homes on the market in recent years, I thought it would be interesting to look at a purchase agreement for purchasing a foreclosed home from Fannie Mae, with an emphasis on how it differs from a traditional home purchase agreement. I have already highlighted the relevant sections of the purchase agreement (which you can download here) so you don’t need to comb through the entire 11-page document yourself.

So here are some points of interest in what is likely a pretty ubiquitous purchase agreement at this point in time.

1. Inspections. Either party may have an inspection done on the property, but the seller’s (i.e., Fannie Mae’s) inspection cannot be used as a basis for canceling the agreement. If you see items on the seller’s inspection that give you pause and may cause you to want to rescind the agreement, you need to get your own inspection done. Then you can cancel the purchase agreement if sufficient defects exist.

2. Timing of Cancelation of Agreement. If the inspection reveals problems such that you would be unwilling to purchase the house, you must inform Fannie Mae within five (5) days of receiving the inspection report. If this does not occur, Fannie Mae will assume you accept the house in its current condition and you cannot cancel the purchase agreement on those grounds.

3. No Government Inspections. Unless it’s required by law, the prospective purchaser of the house cannot cause any government inspection of the property to occur. This includes building inspectors, zoning inspectors, or other government employees. This strikes me as a little odd, because it makes it sound like Fannie Mae knows it will need to make repairs to bring something up to code if the government gets involved, and it’s not interested in ensuring its properties are of that quality. Regardless, if this provision is breached by the purchaser, it’s possible s/he could be liable to Fannie Mae for any necessary repairs resulting from the government inspection.

4. Condition of Property. Since this is a foreclosure that is being purchased, the expectations are a little different, and the understanding is that the purchaser is buying the house “as-is,” kind of like buying something from the Scratch ‘n’ Dent section. It doesn’t matter if you know about any defects; even unknown defects are covered by this provision, and signing the purchase agreement means you agree with this restriction. This includes hazards such as mold.

5. Building Code Violations. Get this: If the house has building code violations and there is an ongoing enforcement proceeding to order Fannie Mae to correct the violations, then the purchaser had better take that opportunity to cancel the purchase. Otherwise, the purchaser is required by the purchase agreement to: (a) accept the property including the code violations, (b) become responsible for complying with the code and orders (i.e., fixing the violations himself), and (c) fix the violations as soon as possible after the closing of the sale. So you’re allowed to cancel the purchase if there are building code violations, but if you don’t, you are responsible for all the work and costs associated with bringing the house up to code.

6. No Quick Flipping. A specific paragraph has been added to prevent the purchaser from flipping the house for a profit of at least $23,000 within three months of its purchase. I don’t really know why this would matter to Fannie Mae; my understanding is that the banks just want to get these properties off their hands. But I could see where they would not want to be essentially competing in the same marketplace with the new owner. Just something to keep in mind.

7. No Other Representations. Finally—just to be clear—the purchase of the property is to be based solely on the purchaser’s own inspections and investigations, and not on anything represented by the seller. So anything that the seller orally promised during the walkthrough is unenforceable. Only the statements in the purchase agreement are enforceable, and almost none of them guarantee or warranty anything about the condition of the house.

And that about does it for the foreclosed home purchase agreement analysis. Of course, I skipped most of the normal language for a purchase agreement, and may come back to that in the future.

Please tell us about any experiences you have had with purchasing or inspecting foreclosed houses. Have you ever run into trouble because of provisions like these in a purchase agreement? The public is dying to know.

(photo: http://www.flickr.com/photos/respres/)