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Consumer Contracts: Buyer Beware


We are all too familiar with the expression “let the buyer beware.” It means, essentially, that what you don’t know about the contract you are about to sign may hurt you.

Have you ever entered into a contract while thinking, I don’t know what this agreement is saying, but I really have no choice because I need this item? Have you ever entered into a contract and realized after the first bill came that the item was not affordable?

This article will provide a short lesson on how to protect yourself in the face of high pressure sales tactics and difficult-to-understand contracts. It will give you some basic information on how to proceed with caution on your next consumer purchase. It will also discuss New Jersey’s valuable Consumer Fraud Act, one of the strongest consumer protection laws in the nation.

Read the Contract

It doesn’t matter if the seller is in a hurry or is sweeping the floor and turning off the lights: you must read the contract. Explain that, if the seller is in a rush, you are willing to take the contract home unsigned and bring it back if you are still interested in signing it, and only after you have read it carefully.

Always ask for a contract written in your native language. If the seller has one, you will be able to avoid many problems. If you do not speak or read English well, avoid signing a contract written in English. Have a friend or family member who speaks and reads English well come with you and review the contract. Do not rely on a salesperson who speaks your language to give you an accurate translation of the contract terms. Many disputes concern allegations of fraud and misrepresentation between Spanish speakers. Don’t assume that someone who speaks your language is trustworthy.

Remember, if you do not understand something, or if you do not like what the contract says, do not sign it. Your first and best defense is to know when to walk away from an unfavorable offer.

Learn to Bargain

If there are terms you don’t like in the contract, ask the seller to remove them. If the seller agrees, make sure that the part you do not like is crossed off on the original and on all copies. Write your initials near the changes and have the seller also initial the changes in the margin of the documents. If the seller doesn’t agree to the change, you must decide whether you can live with the contract term. If you don’t like the contract term, don’t sign the contract and shop around to see if you can get a better deal.

If you want to continue with this contract, you may boldly write on the contract above your signature “no opportunity to bargain for these terms.” Make certain that the original and all copies of the contract also have this statement. This may be helpful in the future if there is a dispute.

Problem Terms

Watch out for problem terms. Many contracts set out the buyer’s duties under the contract in a way that is difficult to understand. Watch out for certain terms. Usually the terms are buried deep in the contract. Although the following is not a complete list, it may help a buyer avoid some pitfalls.

  • Cancellation Fees. Many contracts, such as contracts for cell phones or television services, have cancellation charges. They state that you must retain the service for a certain number of years. If a buyer doesn’t keep the service for this minimum period of years, then there will be a cancellation charge. The cancellation fee may be quite large in comparison to the monthly charge for the service provided.

  • Minimum Term. Many future service contracts, such as contracts for health club memberships, alarm systems, and dating services, contain a minimum membership term. This means the buyer will be billed for the monthly membership fees and charges for a minimum period of time, such as two or three years, even if the buyer never actually uses the services. Also, these types of contracts strictly limit the circumstances under which a consumer may cancel the membership once the contract has been made.

  • Interest Rate. If a buyer is purchasing an expensive item, such as a car, a loan may be part of the contract. A buyer must consider the entire cost of the credit offered. The buyer should compare his or her monthly expenses versus monthly income and determine a reasonable spending limit. It is never a good idea to buy based solely on whether or not the monthly payment is affordable. A buyer must also consider whether the purchase price is fair and whether the interest rate and other charges for the item are reasonable.

Know the Current Prime Interest Rate

Before you buy, learn the current prime interest rate. This is the interest rate that banks give to their most qualified customers. It is updated daily and can be found at a local bank, in the Wall Street Journal, or on the Internet at For instance, on the date this article was written, the prime interest rate was 5.00%. Also, all borrowers should know whether they should receive the prime rate in their loan. Creditworthiness is determined by a number of factors, including monthly income, past payment history, current debts and assets, and a person’s credit score (also known as a FICO score). You may obtain your FICO score at myFICO. You also may get a free annual credit report from each of the three credit reporting agencies, Equifax, Experian, and Transunion, with one request through

Shop Around for the Best Deal

The next step is to shop for the best deal. The lower the interest rate and the lower the purchase price, the lower the overall cost. For any purchase, always shop around, and check catalogs and the Internet to see what the item should cost. Internet sites that may be helpful include eBay (for a search of market value), Carfax (for a search on a particular used car’s history by using the VIN number), and Kelley Blue Book and (for a search of the value of a used car of a particular make and model).

Credit Insurance

A seller may slip various forms of voluntary credit insurance into a credit contract without the borrower’s knowledge. For instance, financed contracts often include credit disability, credit life, and credit unemployment insurance, to name a few. The insurance is supposed to either defer payment or pay off the debt in the event that the purchaser dies, becomes unemployed, or becomes disabled. Because of numerous restrictions in the policy, credit insurance may inflate the cost without adding real value.

Arbitration Agreements

There is an increasing number of contracts for goods or services that require a consumer to give up the right to trial in the event that there is a dispute relating to the contract. Arbitration agreements should always be avoided. The public justice system is free, and there is a right to a full hearing, discovery, trial by jury, and an appeal if the trial court gets the decision wrong. In arbitration, there is a very limited right of appeal, and the parties gain access to arbitration by paying registration fees and the hourly rates for the arbitrator’s services. Also, statistics about arbitration decisions show that the sellers usually do better in arbitration than consumers.

If You Were Already Deceived by a Seller

Basically, the law says that a seller cannot engage in “unconscionable commercial conduct” against consumers. This means that the old “buyer beware” motto is now tempered by “seller don’t deceive.”

The Consumer Fraud Act , N.J.S.A. 56:8-1 et seq., is a powerful tool that may help prevent sellers from deceiving buyers. It awards treble damages, attorney’s fees, and costs to a consumer who successfully proves that the seller of consumer goods or services engaged in unconscionable (unfair) commercial conduct in the advertisement, sale, or performance of a contract, through either:

  1. Affirmative misrepresentations (purposely giving wrong information); or
  2. Knowing omissions as to a material term of the contract (purposely leaving out an important fact); or
  3. A violation of a Consumer Fraud Act Regulation.

The regulations are found in the New Jersey Administrative Code, beginning at 13:45A-1 et seq. They cover many different types of consumer contracts. All consumers should review the regulations before signing on the dotted line.

In the absence of a valid arbitration clause, buyers may use the Consumer Fraud Act to sue a seller in a lawsuit in court or to defend themselves if they are sued. It is very important for consumers to be aware of their rights and to raise these claims when appropriate. The law does not permit a seller to collect on a contract that violates the Consumer Fraud Act. A consumer’s right to pursue a legal claim is limited under the law. In every case, a consumer who suspects a seller of wrongdoing should promptly speak with an attorney.

How do I find out more about protecting my consumer rights?

The New Jersey Division of Consumer Affairs (DCA)'s Web site is dedicated to the protection of New Jersey consumers. It contains valuable information on many consumer protection statutes, including the Consumer Fraud Act. It also provides information on a consumer’s right to file a complaint directly with the Division of Consumer Affairs, instead of a lawsuit in court.

In addition, those low-income consumers who believe they may have been duped by an unscrupulous seller are encouraged to contact LSNJ-LAW™, Legal Services of New Jersey’s statewide, toll-free legal hotline, at 1-888-LSNJ-LAW (1-888-576-5529) or their regional Legal Services office for additional assistance. Low-income consumers may be able to get legal representation from private attorneys who see the potential to get attorneys fees in certain cases. To find a private attorney, contact your county lawyer referral service at Lawyer Referral Services (from the New Jersey State Bar Association) or go to National Association of Consumer Advocates, which provides contact information for consumer attorneys engaged in the private practice of law.

This article appeared in the June 2008 edition of Looking Out for Your Legal Rights®.

This information last reviewed 10/25/11.


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