WHAT DID I JUST SIGN?

by Thomas 0. Williams, Esquire

Admit it, we've all signed a document that we did not thoroughly understand. What an uncomfortable feeling. Fortunately, consumers that have signed contracts or leases while wondering what the words in the document meant and just what their obligations are now have a friend in Pennsylvania. The friend goes by the name of the Plain Language Consumer Contract Act. This law became effective on June 23, 1994.

The Pennsylvania legislature passed this law with the intent of protecting consumers whenever they borrow, buy, lease or obtain credit, money, services or property under a consumer contract. However, as with most things in life, there are certain exceptions. The Plain Language Act does not apply to:

    1. real estate conveyance documents and contracts, deeds, mortgages, real estate certificates of title and title insurance contracts;

    2. consumer contracts involving amounts more than $50,000.00;

    3. marital agreements;

    4. contracts to buy securities;

    5. certain documents used by financial institutions;

    6. contracts for insurance or insurance policies;

    7. contracts subject to examination or other supervision by the Pennsylvania Public Utility Commission or by the Federal Regulatory Commission; and

    8. commercial leases.

The Act itself states that all consumer contracts executed after the effective date of the Act shall be written, organized and designed so that they are easy to read and understand. The Act has provided specific guidelines. Among them are:

    1. The contract should use short words, sentences and paragraphs.

    2. The contract should use active verbs.

    3. The contract should not use technical legal terms.

    4. The contract should not use Latin or foreign words.

    5. If the contract defines words, the words should be defined by using commonly understood meanings.

    6. The contract should not use terms such as "party of the first part" to identify the person signing the lease. Instead, the parties should be identified by their names, the terms "seller" and "buyer" or the terms "lender" or "borrower".

By now you are saying to yourself, "Is the IRS subject to this law?". Unfortunately, not.

If a person violates the law, the person is subject to civil penalties, including:

    1. compensatory damages;

    2. statutory damages of $100.00;

    3. court costs; and

    4. attorney fees.

It is recommended that all individuals and entities doing business in Pennsylvania review their contracts and leases for compliance with the Pennsylvania Plain Language Consumer Contract Act. Contracts, documents or leases covered by this Act may be submitted to the Pennsylvania Office of the Attorney General for pre-approval.