Short sales seem to have been all the rage during the last few years—not because people want to do it that way, but it seems to generally be a better alternative than going through foreclosure. For those of you considering a short sale (or the three of you out there who just find this stuff interesting), I thought it would be good to analyze a short sale agreement. This example is freely downloadable from mortgage giant Freddie Mac, and is part of the HAFA (or Home Affordable Mortgage Alternatives) program. You can find out more about HAFA and other home ownership programs at Making Home Affordable.

Please note: This is an analysis of the short sale agreement, not legal advice on how to proceed with a short sale, and not advice on the everyday operation of short sale proceedings. If you need legal advice on a short sale, please contact an attorney versed in real estate law.

1. The Agreement. It’s important to note right away that the agreement does not consist of the entire document, but rather only the portion labeled “Short Sale Agreement,” which is pages 3 through 6. The first two pages are merely an introduction and some explanations of key terms. But those two pages are not incorporated into the agreement, so be careful not to rely on anything that is stated in the first two pages of the document.

2. Term. You only have 120 days to sell your home after signing the agreement. That’s not a lot of time for selling a house, so if you are doing it yourself or you are working with a realtor, make sure you get on the ball and get to work on selling it right away. You may still be able to get a deed-in-lieu of foreclosure after the 120-day period, but there is no guarantee.

3. Arms-Length Transaction. You can’t sell the house to anyone with whom you have a close relationship—business or personal. You also can’t sell it to someone who will sell it within 90 days. The goal here is to keep you from getting out from under your mortgage through a short sale (wherein the bank may not get all the money it is owed on the mortgage) and then buying back the house for a much lower price.

4. Property Maintenance and Utilities. Just because you are selling the house doesn’t mean you don’t still own it. Consequently, until the house is either sold or returned to the bank, the owner is still responsible for all the payments required to maintain the house and keep the utilities running.

5. Liens. If there are any liens on the house, they need to be taken care of before the short sale can proceed. The agreement allows subtraction of 6% of each lien (up to a total of $6,000) from the proceeds of the sale of the house to have liens released, but Freddie Mac is not responsible either for the liens being released nor for the owner being held personally liable for satisfaction of the liens after sale of the house.

6. Commissions. Payments to real estate brokers may not exceed a total of 6% of the total contract sales price of the house. That’s 6% total split among the listing and selling brokers, not 6% each. And if the home owner is a real estate agent, s/he may not collect fees on the sale at all. Additionally, any payments that need to be made to third parties to negotiate the short sale cannot be taken out of the proceeds of the house, making the owner responsible for those amounts.

7. Relocation Assistance. If the short sale of the house occurs within 120 days and according to the other terms of the agreement, the borrower will be paid $3,000 to assist with relocating to a new place to live. That’s pretty swell…if you can get the house sold in 120 days.

8. Paperwork. If the owner receives an offer on the house, certain paperwork must be submitted to the lender within 3 business days: Request for Approval of Short Sale, a fully-executed Sales Contract, the Buyer’s documentation of funds or pre-approval/commitment letter, and all accompanying addenda to those documents. The practical advice here is to have as much of that documentation ready as possible, so if an offer comes in you don’t find yourself scrambling to get all this together and submitted in time. It’s possible that the documentation would be accepted later than 3 days after the offer, but that is also a breach of the agreement and potential grounds for withholding the Relocation Assistance payment.

9. Suspension of Foreclosure. If the house is in foreclosure while the attempted short sale is occurring, the foreclosure sale will be suspended until either the agreement expires or the closing date on the sale occurs, whichever is later. However, the foreclosure process may continue throughout the short sale process, so don’t be shocked if the bank keeps tacking on foreclosure fees while in the midst of an attempted short sale.

10. Satisfaction of Mortgage. If the terms of the agreement are met and the house is sold under the short sale agreement, the bank will record the mortgage as satisfied. That’s good news for anyone in this position.

11. Termination of Agreement. There are many conditions for termination of the agreement, which should be carefully examined. Notably, if the owner’s financial situation improves considerably, there is a significant change to the property, or litigation is initiated or threatened that could interfere with the sale, the short sale agreement can be terminated. Be sure to check out Section 14 of the short sale agreement and understand all the ways the agreement can be terminated.

12. IRS Reporting. The difference between the amount on the mortgage and the amount for which the house sells will be reported to the IRS as debt forgiveness, which may constitute income for the purposes of filing tax returns. If this is the case, check with an accountant or tax attorney to determine what needs to be reported and how it will affect your tax filing.

There’s a lot to consider in that short agreement, and most of it is pretty important. Luckily it is pretty easy to understand and there aren’t many pitfalls, so as long as you are diligent and pay attention, you shouldn’t have much trouble adhering to the terms of the agreement.

Questions? Experiences with short sales you would like to share with Pro and Contracts readers? Please comment below.

(photo: http://www.flickr.com/photos/pagedooley/4052874486/)

Since I have picked on many other commercial segments, I thought it was time to turn the microscope around and examine my own profession a little. After all, if you are concerned about a contract, you may want to hire an attorney, and then you’ll need to understand his or her contract, which is sometimes easier said than done.

For this week’s post, I have picked a readily available law firm retainer agreement and redacted the identifying information. I’m not interested in being snarky to others in my field, and this will really just serve as an illustration of what to look for or be aware of should you ever need to hire a lawyer. Hopefully I won’t find myself in hot water with the legal brotherhood—a secret society much like the Illuminati or the Jedi—for giving away all their secrets. That said, there are plenty of other retainer agreements available online for you to peruse, as well as good advice about constructing retainer agreements, so I’m not really giving anything away.

1. Duties. A good retainer agreement will lay out what the law firm is being hired for, and this example agreement is no exception. It’s a bit general for my taste (it doesn’t specifically address the matter for which the firm is being hired), but it gets the job done. Personally, I like having the purpose of the agreement laid out specifically so everyone is clear up front about the scope of the representation.

2. Fees. This attorney charges up to $450/hour for his services, although his staff charges significantly less. Often the knowledge and experience of the attorney is valuable enough to justify those rates, but it is important to consider what tasks can be accomplished by staff rather than the attorney. Having a discussion about this with your attorney up front is a good use of time so you both know what to expect. The sample agreement lays out the reasons for the way the fees are set, but don’t expect this in every retainer agreement. This agreement also suggests that they can adjust the fees at any point during the representation, which I find a bit dubious. It also charges in tenths of an hour (which is pretty standard), but bills based on a “good faith estimate,” which also seems dubious. I use a timer for all my tasks so I know how long a task has taken.

3. Expenses. Expenses are to be paid in advance, and the client authorizes the firm to incur expenses. These are listed in section III.B and include, among other things, court costs, filing fees, travel and parking, witness fees, investigation fees, and more. Photocopies and incoming faxes cost $0.25 per page, which seems high to me. An accounting will only be provided if requested by the client upon the close of the case. A good rule of thumb is to not expect the attorney to pay for goods or services only consumed because of your case. Some places charge for mailing—either by the letter or monthly service fees. Many charge for photocopies. I have gone mostly paperless in my law office, and consequently avoid most of those expenses, so my clients don’t pay them either.

4. Billing. A lot of this agreement involves billing so far, doesn’t it? Section IV addresses the firm’s practice of billing, an 18% interest rate on overdue bills, and the $5,000 retainer payment that needs to be made up front. None of this is out of the ordinary, but is worth noting in any retainer agreement. If you have a concern about the billing, notify the firm in writing within 30 days of the bill so there is a record of your contention of the bill. This is laid out in the sample agreement. The sample agreement also makes it quite clear that the firm does not necessarily have control over the circumstances that may lead to higher fees. This is generally true in a litigation context, and is something you should talk about with your attorney at the beginning of the case.

5. Withdrawal. Generally, either the attorney or the client can fire the other party at any time during the representation. It’s best if there is a reason for the termination of the relationship, samples of which are laid out in Section V. Main reasons for a firm withdrawing are lack of payment and lack of communication by the client. The main reason for a client firing a lawyer is lack of communication. Withdrawal typically occurs after the relationship has deteriorated, and this is usually due to lack of communication. So keep those lines of communication open to keep your relationship healthy and avoid withdrawal.

6. “Favorable Outcome Not Guaranteed.” This seems absurd to put in an agreement, but it tends to be required by the Rules of Professional Responsibility for lawyers. Lawyers cannot guarantee certain outcomes, no matter how sure of the case they happen to be. That’s why Section VI is in this agreement. It’s not meant to be a disclaimer of incompetence or preparation for loss of your case; it’s just a prudent ethical statement for lawyers to include in their retainer agreements.

7. Attorney’s Lien. By signing the sample agreement, you would be giving the attorney a lien against any cash or property received for the case until all the firm’s fees are paid off. So if you win something in your case and don’t pay your bills, you might just not see some or all of your judgment.

8. Arbitration. Like many other commercial agreements, the sample retainer agreement contains a mandatory arbitration clause. So if there is a dispute with the law firm, you have already agreed to forego court and go straight to arbitration, which may be good or bad. It may not cost as much as bringing a lawsuit, but depending on the arbiter and arbitration rules used, it may be disadvantageous. You should always check to see which arbitration rules are being used, because we have already seen that the American Arbitration Association’s rules and payment structure may be unfairly slanted against consumers.

9. File Retention. This firm only retains a copy of the client’s file for 2 years after completion. That seems short to me, but different states have different rules. So if you want a copy of your file, ask for it early. You may be charged for a paper copy of the file, which can be expensive to make. I provide in my retainer agreement that the file copy will be provided on CD or DVD, and consequently I do not need to charge for the first copy of the file, which the client can then replicate as s/he chooses.

10. Check with Your Lawyer. As with all contracts, it is a good idea to have someone review it with you to ensure that you know what you are agreeing to before signing. It’s kind of weird to think about hiring a lawyer to look over another lawyer’s retainer agreement with you, but in cases such as this where the agreement is 10 pages long, it may be worth your while. That’s a cost-benefit analysis to be made, but I always advocate spending a little money to ensure the contract is clear and understood initially, so that far more money does not need to be spent later on when problems arise.

And that does it for the sample law firm retainer agreement. This was a pretty long agreement from my perspective, although more complex cases often require more complex retainer agreements. You shouldn’t judge a retainer agreement by its length, but rather by its content. That said, my retainer agreement is 1 page. Regardless of the length, though, look for these items and ask about them if they are not addressed. Especially when it comes to legal services, you should know what to expect and what is expected of you.

(photo:http://www.flickr.com/photos/dan4th/5133977586/)

The UCC—or Uniform Commercial Code—is an enormous statement of the law dealing generally with sales and commercial transactions in the United States. It’s large and unruly, and it’s used all the time, so it’s probably good to know something about it—especially if you are in the business of selling or buying things. Quite often the UCC comes into play during disputes over the purchase or sale of Goods (as opposed to services), dealt with in Article 2 of the UCC, which is mainly what I will focus on here.

Generally speaking, Article 2 of the UCC specifies what the law is if there is no written contract between the buyers and sellers; it makes contractual determinations based on the actions of the parties. Case in point:

Recently a military gear contractor in Virginia sued a nonprofit in Washington, D.C. for nonpayment on an order of 18,000 pairs of boots. The nonprofit claims the boots were not of the grade they required when they arrived, so they just held onto the boots and only paid for half of them. There is a discrepancy regarding what kind of boots were actually ordered, but let’s assume that there was no contract specifying the type of boots or the purchase price. What happens in that situation?

Since there is no contract to specify how the relationship is supposed to operate, Article 2 of the UCC comes into play. Under the UCC, if a good is received that is nonconforming (i.e., isn’t what you ordered), you are obligated to refuse the good or send it back. Retaining nonconforming goods constitutes acceptance of the goods and means that you are obligated to pay the market price for the goods. In the Virginia lawsuit mentioned above, the boot producer claims that the nonprofit wanted military-grade boots at half the military-grade price. So the contractor sent the nonprofit the boots that cost what the nonprofit was willing to pay. If there’s no contract specifying the terms of the arrangement, then the UCC says that any boots that were not acceptable to the nonprofit needed to be sent back. But they were not sent back; they were retained and the nonprofit simply paid less than the cost of the boots. That is not a good strategy.

A better idea would have been to return the boots and demand the proper boots be sent. That would have highlighted the misunderstanding between the parties and allowed them to work something out without needing to file a lawsuit. In this particular instance, sending the boots back may have been more difficult because they were sent directly to troops in Uganda. But unless it was impossible or impracticably difficult to ship the boots back to the manufacturer, I suspect the Court will find that the nonprofit owes outstanding money on the goods it accepted because of the UCC.

(photo:http://www.flickr.com/photos/pagedooley/3044604181/sizes/l/in/photostream/)

Recent lawsuits in Canada and the United States have brought up an interesting issue: Can you sue your college for breach of contract, and under what conditions? Most people don’t really sign a contract to attend an institution of higher learning, although there are contractual principles at play in many cases, and the failure by one side to act on those principles could provide the basis for a breach of contract lawsuit.

One of the Canadian lawsuits involved the promise of a $50,000 scholarship and a teaching assistantship upon full time enrollment in the school’s doctorate program. She was also assured she would graduate in four years. Although scholarships from academic institutions are typically contingent upon attendance, it seems that an offer was made, and that acceptance of the offer by choosing to attend the school would form a contract. Consideration is given by the school in the form of the scholarship money, and by the student in foregoing attendance of any other institutions. Since a contract requires an offer, acceptance, and consideration, it seems like in this rather typical situation, a contract is indeed formed. And either the school then withholding the scholarship or the student accepting the scholarship and then attending a different institution would be a breach of that contract.

I wonder, however, how often something like this really happens. I think most people would expect that upon leaving a school where a scholarship had been given, that the scholarship would be revoked. It may be more common for the situation in the Canadian lawsuit to occur—scholarships being promised only to not materialize once the student commits to attending the school. But there is more than one remedy in that sort of situation that would suffice: the student could just refuse to attend the school and go somewhere else. Granted, that might not be optimal given that some students are quite committed to attending certain institutions, but I can’t imagine that the student’s experience at an institution is going to all that rosy after having sued it either.

So the short answer to whether you can sue your college for breach of contract is “Yes.” Perhaps the more important question is whether you want to sue your college.

With the recent hoopla over employers asking for Facebook passwords, Facebook has decided to fight back. In addition to issuing this statement specifically addressing requests for your Facebook password, Facebook has also changed the Facebook Statement of Rights and Responsibilities, which is part of its Terms and Conditions. This new statement is unfortunately buried in the terms and conditions, but is pretty clear:

8. You will not share your password, (or in the case of developers, your secret key), let anyone else access your account, or do anything else that might jeopardize the security of your account.

(This can be found under the Registration and Account Security section.)

That first clause—”You will not share your password”—is straightforward, and although at first it seems limiting to the user it actually provides a good deal of security should someone ever try to require you to disclose your password. If you read further into the Statement of Rights and Responsibilities, you will find that violating anything in it will result in your termination from Facebook:

If you violate the letter or spirit of this Statement, or otherwise create risk or possible legal exposure for us, we can stop providing all or part of Facebook to you.

(This can be found under the Termination section.)

The upshot is this: If a current or potential employer asks for your Facebook password, you can blame Facebook’s terms and conditions and refuse. The employer may still try to take action to compel you to agree, but now you have Facebook at your back too, and a potential claim for intentional interference with contractual relations based on the employer trying to force you to break your contract with Facebook.

Thanks, Facebook. Finally some fine print we can celebrate.

Here’s the scenario: A woman was a member of the Church of Scientology, and wanted to get out, which is apparently no small feat. After enduring various forms of torture and solitary confinement, she was finally allowed to leave…so long as she signed a non-disclosure agreement, agreeing never to speak ill of the church. In sworn court testimony, she stated that “[i]f I had refused to sign the agreement, then I wouldn’t have been able to leave.” So she essentially had two choices: sign the agreement and be set free, or refuse to sign the agreement and be held captive and subjected to torture. Which would you choose? Of course, she signed the non-disclosure agreement and was set free. Subsequently, however, she sent an email to Scientology members criticizing the church, and is now being sued for breach of contract to the tune of $300,000.

Although the Church seems to think that they have a rock-solid case of breach of contract, I would argue differently. There are two good defenses to a breach of contract claim: (1) the party did not breach the contract, and (2) there was no contract to breach. In this situation, I suspect that this woman’s defense will be the latter—that there was no contract. Here’s why:

Among the excuses to contract formation are impossibility, impracticability, and coercion or duress (which is most likely to happen when there is a power imbalance). This last condition is clearly present in this scenario (“sign the agreement or we will torture you”), so it is my contention that even though the woman signed the agreement, no contract was formed. If a contract is signed under real duress, it cannot be enforced.

Here, the woman being sued is being sued for breaching an agreement signed under duress. Since that duress rose to such an extreme level, I argue that she could not have willingly entered into the non-disclosure agreement, and it is therefore not binding.

(photo: http://www.flickr.com/photos/seier/3122721913/)

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.