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CONSUMER & HOUSING LAWUnit VI Individual & The LawcontractsChapter 22Elements of a ContractA contract is an agreement between two or more persons to exchange something of valueA party who fails to live up to such a promise has breached (broken) the contractA legally binding contract must have certain elements:There must be and offerThen there must be an acceptanceThere must be an exchange of consideration things of value have been exchangedPersons entering into a contract have to be legally competentMinors and ContractsMinors may make contractsThey cannot be forced to carry out their promisesThe can cancel or refuse to honor the contract but they must return the consideration still in their possessionThis is to keep minors from being taken advantage of due to AgeLack of experienceMost places require an adult to cosign with a minor on the contractThe adult is then responsible if the minor backs out of the contractMinors may be held to contracts that involveFoodClothingShelterMedical aidMinors who make payments after reaching the age of majority are said to have ratified the contract; therefore, they may no longer back out of the contractWritten & Oral ContractsContracts that MUST be in writing:Sale of land/real estateSale of goods priced over $500Agreements to pay another persons debtAgreements that cannot be met within a year from the date of the agreementThe law favors written contracts. They are much easier to enforce!Illegal ContractsUnconscionable contracts are those that the court feels are tooUnfairHarshOppressivePaying a very high price for something is not typically considered to be unconscionableRequirements for a contract to be deemed unconscionable:The consumer is presented with a contract on a take-it-or-leave-it basisThere is very uneven bargaining power between the partiesFraud and misrepresentation are grounds for invalidating a contractSalespeople cannot lie about a productSalespeople are not required to volunteer information unless they are asked to do so.warrantiesChapter 23Express WarrantiesA warranty is a promise or guarantee made by a seller concerning the quality or performance of goods offered for saleIf the seller does not live up to the promises made in the warranty, the contract has been breached (broken)An express warranty is a statement (written or oral) concerning the quality or performance of goods offered for sale that becomes a part of the bargain between the partiesExpress warranties are created by statements of factExample: You only have to change the oil in this car every 10,000 milesIf the sellers statement is merely an opinion or exaggeration it is puffing or sales talk and cannot be trustedPuffing doesnt usually create an express warranty because its so exaggerated you should know betterSellers DO NOT have to give written warrantiesMagnuson-Mass Warranty Act requires written warrantiesDisclose all essential terms and conditions in a single documentBe in simple, easy-to-read languageBe made available to the consumer before the saleThe warranty DOES NOT apply to products $15 or lessThe act labels warranties either full or limitedFull WarrantyA defective product will be fixed or replaced for freeThe consumer doesnt have to do anything unreasonable to get the warranty serviceThe product will be fixed within a reasonable time once the problem is reported by the consumerIf the product repeatedly messes up, it will be replaced or the consumer will be refundedThe warranty applies to anyone who owns the product during the warranty periodImplied WarrantiesAn unwritten promise created by law, that a product will do what it is supposed to doThree types of implied warrantiesWarranty of merchantabilityAn unwritten promise that the item sold is of at least average quality for that type of itemWarranty of fitness for a particular purposeExists when a consumer tells a seller before buying an item that it is needed for a specific purpose or will be used in a certain wayWarranty of titleA sellers promise that he or she owns the item being offered for saleConsumers who are harmed by products may be able to sue for damages because the manufacturer or seller has breached a warrantyConsumers may also be able to recover damages based either on the negligence of the manufacturer or sellerDisclaimersAn attempt to limit the sellers responsibilities should anything go wrong with a productImplied warranty disclaimerswith all faultsas isCreditChapter 24Credit Cards and Charge AccountsCredit means buying goods or services now in exchange for a promise to pay in the futureCreditors lend moneyDebtors borrow the moneyCredit termsFinance Charges more money owed to the creditor to compensate them for loaning you the moneyInterest is the money the creditor makes for loaning you moneyAnnual Percentage Rate (APR) the percentage cost of credit on a yearly basisUnsecured Credit no collateral, just a promise to repaySecured Credit has collateral worth the money you have borrowedCar payments, if you dont pay the repo man takes the car away!EFT Cards & Debit CardsBoth allow for funds to be electronically transferred from your bank account to the place where you used the cardIf you lose your card or its stolen you have 2 days to report itReport within the two days, you are only responsible for $50 of unapproved withdrawalsMore than two days, you are responsible for up to $500 of unapproved withdrawalsWhen Should You Use Credit?Credit is best used only to purchaseHomes get a mortgageCars try to stay within 3 years of paymentsEducation college loans are good if the education/degree you receive helps you to better yourself and make more moneyThe Cost of CreditInterest RatesUsury is charging above the legal interest rate its illegalLoan Sharking people who lend money at high, illegal rates of interest, then hurt or kill people when they cant repay the moneyCostly Credit ArrangementsBalloon Payments you make payments for a few years then the balance of the loan has to be paid in fullAcceleration clause this permits the creditor to accelerate the loan making all future payments due immediately in the event the debtor misses a payment.Bill Consolidation combining all bills together for one payment

Truth in LendingTruth in Lending Act law requiring creditors to give your certain basic information about the cost of buying creditThe creditor must tell you IN WRITING and BEFORE YOU SIGN a contract what theAnnual percentage rate isFinance charge isWhat Lenders Want to Know Before Extending CreditIs the consumer a reliable person?Does the consumer have a steady income that is likely to continue into the future?Is the consumers income high enough to enable him or her to pay for the items to be purchased?Does the consumer have a good record (credit rating) in paying off other loans and bills?What To Do If You Are Denied CreditThe Equal Credit Opportunity Act says creditors must tell consumers why they were turned down. The must be specificThe Fair Credit Reporting Act requires creditors who deny credit based on information received from a credit bureau to tell you that fact.Default and Collection PracticesWhat a Consumer Can Do in Case of DefaultReassess your financial lifestyle to find where you went wrongNotify each creditor of the problem and ask to have the term of debt extended or the amount owed reducedContact a consumer credit counseling service of family service agency that offers free or low-cost financial counselingSeek assistance from friends or relatives to reduce the debt to a manageable levelIn worst case scenarios you can declare bankruptcyThe debtor puts their assets under the control of a federal court in order to be relieved of debtChapter 7 the federal court takes control of most of the debtors assets, sells them, and pays off as much debt as possibleChapter 13 the federal court takes control and allows the debtor to work and pay back all or a portion of their debt.Creditor Collection PracticesFair Debt Collection Practices Act in 1978Protects consumers from abusive and unfair collection practices by professional debt collectorsCalls and LettersYou can report collectors who are harassing you to the FTCYou can send bill collectors a notice demanding that all collection contacts ceaseRepossession The creditor can usually take back the collateral if you default on the loanCourt ActionAs a last resort, creditors may sue debtors in court for the exact amount owed on the debtDefault Judgment these are usually issued if the debtor DOES NOT show up in courtGarnishment and AttachmentCreditors use a court order that forces the debtors employer to withhold part of the debtors wages and pay it directly to the creditorCreditors can also get a court order, an attachment, that forces a bank to pay the creditor out of the consumers bank account or seize the consumers property to sell it to pay off the debt