How to Read a Contract

Long gone are the days where peppercorns were exchanged as a show of good faith and good will when something was agreed upon between two people. As a matter of survival, we asked Ontario lawyer, Paul Willis to break down a few contract law basics and provide a some tips to help us get by in a world where such paperwork seems to pop up, no matter which way you turn.

As we mentioned in an earlier article, How to Break a Sales Contract (in Ontario), contract law is provincial – each province has its own legislation and rules.

To sign a contract, the person signing must be competent – a three year old or someone with mental capacity issues cannot legally enter into a contractual agreement.

Liked this article? Don't miss another one. Follow us on Twitter or Facebook.In serious matter, both sides should have independent legal advice to keep the contract from being overturned by the courts at a later date.

A lawyer will make sure that you understand what you're signing; they won't necessarily tell you whether you should or shouldn't enter into the agreement.

Don't assume verbal agreements will be honoured. Courts have enforced these, but there is no guarantee. To save a lot of time and money on lawyers' fees and headache meds, it is always preferable to get such agreements in writing in the first place to give both sides the opportunity to honour the agreement long before it gets to the point where parties are taking things to court.

Don't pay upfront. (Once you've spent the money, it can be very difficult to get it back.) Builders might require a lot of money up front to buy supplies, for instance. "I put down 20 per cent at the beginning and then paid as time went on and as work was done," says Willis.

Related:
How to Break a Sales Contract (in Ontario)
10 Tips for Hiring a Home Improvement Contractor
Hiring a Contractor: Tips and Pitfalls
Help For Homeowners

In home improvement and contractor work, be sure to hold back 15 per cent for 45 days. A contractor's employees or subcontractors who aren't paid for their work have up to 45 days to come after the homeowner for compensation. The 45 day holdback is called a construction lien. (Again, the Construction Lien Act is an Ontario piece of legislation – be sure to double check the rules that apply in your jurisdiction.)

READ THE FINE PRINT. "Read it very carefully. You'd be surprised how many people don't read the contract," says Willis. "The fine print is really important. What is your guarantee if something goes wrong?" He recommends people ask that question and have the answers spelled out in writing.

"The most important thing," he adds, "is to read the contract and understand it. If you don't like it, negotiate to get it changed."

Kate McCaffery is a freelance writer, editor and former urbanite, now living somewhere in between the lake, the ski hill and some farmer's cow path. Visit mccaffery.ca/kate2.0/ for more information.