With Contracts, Customer Is Always Wrong - TheStreet

With Contracts, Customer Is Always Wrong

Fees are tough to avoid when you break car leases, phone contracts and gym memberships.
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BOSTON (TheStreet) -- What do Tiger Woods, the New Jersey Nets and Verizon (VZ) - Get Report customers with iPhone envy have in common? Contracts they'd love to escape.

Woods' prenuptial agreement, the Nets' arena lease that runs through 2013 and Verizon's contracts for "advanced devices" seemed acceptable at signing. But these agreements can become expensive problems when better opportunities or life-changing events arise. Verizon charges defectors $350 in early termination fees. The Nets face a $7.5 million penalty if they switch arenas. And Woods stands to lose nearly half of his $600 million fortune for violating his marriage contract.

"When people want or need to get out of contracts, they'll assume they have a right to get out of that contract," says John Sternal, spokesman for


. "That's not the case in many situations."

Such is life in contractual America, where 65% of consumers surveyed by


(SCOR) - Get Report

in December said they planned to ditch their current mobile phone and buy a

Research In Motion


BlackBerry within the next three months. Include the 20% who are eyeing iPhones and the 17% going for


(GOOG) - Get Report

Android devices, and you're looking at prorated cancellation fees of $200 for T-Mobile and

Sprint Nextel

(S) - Get Report

and $175 for


(T) - Get Report


"Every industry needs to realize that times are changing and we live in a lease lifestyle society. We live for today and not tomorrow," Sternal says. "Companies are always parading new things out in front of us and we always want latest and greatest."

So how do you get out of it? Money is usually the only answer. Dying typically transfers the onus of a consumer's contract or lease to the cosigner or next of kin. Cell phone companies usually scale their early termination fees based on length of service, while adjustable rate mortgages have been notorious for inflicting penalties for early repayment.

Transferring the lease on your own or through Craigslist or sites like auto-focused LeaseTrader, TradeaLease or Swapalease only works if the landlord or company agrees to it. Car companies, including


(HMC) - Get Report



, often place tight restrictions on lease transfers, charging fees in some cases.

Gym contracts can prove just as tricky. Some fitness chains bind users to agreements as long as they live within 50 miles of a facility, according to the Better Business Bureau.

If you don't feel like paying a fee or negotiating a settlement, avoiding contracts altogether is always an option. Verizon can't punish Droid users who drop their service if those users pay the phone's full $559 retail price and buck the company's plan. Seeking month-to-month agreements for apartments or fitness clubs like the inappropriately named

Life Time Fitness

(LTM) - Get Report

removes stability, but limits liability.

In real estate, a lessee's rights tend to vary by state. Indiana lawmakers are pushing legislation that would allow renters who have been victims of crimes like burglary to break a lease with no financial penalties if they have a police report.

The least costly strategy, however, is for consumers to know what they're signing, revisit their agreements every year and educate themselves before they spend.

"You could eliminate a lot of this confusion if you could add contracts to the curriculum as early as high school," Sternal says. "If college is about preparing us for life, this would be a natural fit."

-- Reported by Jason Notte in Boston.

Jason Notte is a reporter for TheStreet.com. His writing has appeared in The New York Times, The Huffington Post, Esquire.com, Time Out New York, The Boston Herald, The Boston Phoenix, Metro newspaper and the Colorado Springs Independent.