Contract Law Question

Originally Posted by River Dog

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In the times that I have gone to a collection agency, I literally tell them to **** off. Why? Because I don't want to deal with a collection agency and the fact that they are making a commission off collecting money from me, so they will make any **** up to get that money from me. I will go back to the company that I owe money to and tell them that I am going to pay them directly and not the collection agency. They then take my money, my credit is fine and the collection agency making empty threats got nothing except whatever the company pays them to handle all their collections.

When was the last time you ran your credit? Your situation does not comport with the experiences of many other people.

Originally Posted by harvey_birdman

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Obviously your jurisdiction is different than Pennsylvania. I have seen gyms and cell phone companies go after people quite often, even for as little as a few hundred dollars. Most of the gym contracts I have seen here provide that the gym can collect the remainder due on the contract, plus collection costs and attorney fees, which makes it worth their while to go after people.



Most gyms and cell phone companies don't follow this logic. They see the lost revenue on attracting you as a client (advertising, free phones, other promotions) that they would only make up if you stayed through the contract. To them, if you quit early and don't buy out your contract then they are losing money.

My position on gym memberships isn't the same as cell phone contracts at all. They will go after you, because they can afford to go after everyone who defaults on a contract and these companies are evil in a lot of ways. But with cell phones, there is actual revenue lost from me directly if I defaulted on a contract that I don't see in defaulting on a gym membership. I am just no longer showing up to use their equipment.

My jurisdiction isn't any different. They have all that stuff written into our gym contracts too, so maybe the only difference is that in Pennsylvania, they are willing to go full out to collect the money even if it means going to court, but where I live they can't be bothered and it's just too much of a pain **********. I really don't know anyone that has gone to court over a gym membership. They threaten and they go away.

I think, up here at least, that any "penalty" in the K for a breach needs to be in the form of liquidated damages - that is it's allowed but it needs to be a reasonable estimate of what the damages will be as a result of the breach. However, if you end early, damages will be... well, whatever you would've paid up until the end of the term. If the early termination clause is less than that it's likely not unreasonable. The landlord's late penalty clause thing might be unconscionable, I dunno. It's a pretty gray issue when you get into arguing that a term is "unreasonable".

Originally Posted by harvey_birdman

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When was the last time you ran your credit? Your situation does not comport with the experiences of many other people.

Not too long ago, it's fine. Why what has been your experience?

If you pay the company and not the collection agency, they can't report you because you didn't pay them. If you inform the collection agency that you have had discussions with the company and that you will be paying the company instead, they can't do anything about it.

If they did report you owing money hypothetically speaking, all you would have to do is show the balance paid to the company and they would have to remove it from your credit history as being an incorrect report.

+1 on what Harvey Birdman said.

Your credit score is very important. Well thats if you don't have the full amount to pay for whatever you want in cash, including a home.

Originally Posted by djblisk

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+1 on what Harvey Birdman said.

Your credit score is very important. Well thats if you don't have the full amount to pay for whatever you want in cash, including a home.

Nothing I have said has resulted into me having a bad credit score. People just need to understand their legal rights when it comes to collection agencies.

Originally Posted by River Dog

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Nothing I have said has resulted into me having a bad credit score. People just need to understand their legal rights when it comes to collection agencies.

I think you are misconstruing what happened to you.

YOU were lucky enough to deal with a party who did not have enough teeth to pursue your breach of contract further. YOU were lucky enough they did not report you to a collection and credit agency.

I'm very happy for you.

But advising people to do what you did could screw up someone's credit.

Originally Posted by harvey_birdman

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In Pennsylvania, such a clause is legal and could be enforced.

Having said that, I have occasionally been successful in the past with people who experience a death in the family or unexpected military deployment or something similar in getting the contract for a gym membership or a cell phone canceled. Remember that the enforcement of contracts is at the discretion of a local judge, and unless the creditor is willing to spend the money to appeal to a higher court the local judge can do pretty much whatever the hell he or she wants.

That is not entirely true and to my mind it is one of the aspects that make contracts such as gym memberships inherently unfair. In these type of contracts there is a presumption of guilt and obligation on the part of the contractee. This is most often seen in the form of collections and credit ratting being effected. If a party, say a gym, says you owe money they pretty much can put your ass in collections and it's up to you to get out and clear your credit record.

A perfect example of this is when a credit card changes your fee structure, adds a fee, you say "WTF, I did not sign up for this I want out of this card" and they charge you and then put your ass in collections. Even if the fee change WAS unfair or not covered by the initial contract good luck with getting them to see it your way. A collection or credit ratting agency will just assume the credit card company is right, no judge involved.

OP, one way of looking at the contract is not as a monthly but as a yearly contract that you are making payments on. As in there is no monthly contract at all but rather a monthly payment plan.
As for the contract, if you really want out, ask nicely. Then take them to small claims court.

The contracts themselves might be unfair, they could be a contract of adhesion, there could be unfair business practices or collusion between gyms but good luck ever proving it.

Originally Posted by River Dog

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It's an empty threat, but obviously you need to do what's best for you. I think one thing people need to have knowledge of is the collection industry and how little power they actually have.

If you ever get calls or letters from collection agencies, 10 times out of 10, it is empty threats and I am surprised that people get scared by these people or feel intimidated, but people simply don't know their rights.

In the times that I have gone to a collection agency, I literally tell them to **** off. Why? Because I don't want to deal with a collection agency and the fact that they are making a commission off collecting money from me, so they will make any **** up to get that money from me. I will go back to the company that I owe money to and tell them that I am going to pay them directly and not the collection agency. They then take my money, my credit is fine and the collection agency making empty threats got nothing except whatever the company pays them to handle all their collections.


Sounds like you don't understand how collection and credit scores work. even if the matter is settled, paid, or even dropped, simply having been in collections dings your credit.

Originally Posted by NorCal

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Sounds like you don't understand how collection and credit scores work. even if the matter is settled, paid, or even dropped, simply having been in collections dings your credit.

I would agree. I have always known the collection agency has bought your debt from the company, say gym in this case and is not working on commission. If the collection agency cannot collect from you thereafter, they can submit this nonpayment info to the credit bureaus. From that point I believe if you want to get it removed you can negotiate with the collection agency by agreeing to pay the balance in return from them removing the mark with the bureaus. Though you might want to get this in writing before agreeing.

Originally Posted by djblisk

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I think you are misconstruing what happened to you.

YOU were lucky enough to deal with a party who did not have enough teeth to pursue your breach of contract further. YOU were lucky enough they did not report you to a collection and credit agency.

I'm very happy for you.

But advising people to do what you did could screw up someone's credit.

I have said that people should do what's best for them and that I was simply providing my experience with gym memberships. Most people are clueless when it comes to collection agencies and their rights. I was trying to be helpful in this regard.

Let me add too that my brother is a lawyer and over the years, he has informed me on collection agencies and contracts of this nature in legal terms. They are a joke, but how many people are going to hire a lawyer to go to small claims court.

People go to court and lose, because they don't know how to defend themselves. Even if I had been sued, my brother would have destroyed them. Gym memberships are so weak in legal terms that they can barely be enforced. But they assume people don't know any better, they get scared about damage to their credit rating and gladly hand over hundreds or thousands of dollars simply out of fear.

Not every piece of paper you sign your name to is legally binding just so you know. Look at a gym membership contract compared to a cell phone agreement. A cell phone agreement can be 15 pages long or more covering every possible legal aspect you could think of. A gym agreement is 1 to 2 pages long max with so many legal loopholes, that it can't be taken seriously by any lawyer if you wanted to fight it. It's like they printed out a contract template online and put their gym name on it.

But again, people shouldn't do as I do. I just hope this information is helpful and gets people to do their own research if they find themselves in a similar situation.

Originally Posted by NorCal

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Sounds like you don't understand how collection and credit scores work. even if the matter is settled, paid, or even dropped, simply having been in collections dings your credit.

I don't know how things are where you live, but simply GOING to collections doesn't hurt your credit. It has to be reported.

Originally Posted by River Dog

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I don't know how things are where you live, but simply GOING to collections doesn't hurt your credit. It has to be reported.

Luckily they rarely report

Originally Posted by butterflystyle

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Luckily they rarely report

I think you misunderstood me. Getting sent to collections doesn't hurt your credit as they don't report it initially. This is why they send you letters, clearly stating to pay now before any damage is done to credit history. If you pay when they say to in the letter and it still showed up on your credit report, you could sue them.

A person could be sent to collections 100 times in a year and as long as he paid it off within the time agreed by the collection agency, his credit wouldn't have changed at all and there be no mention of said 100 collection agencies on his report.

Originally Posted by River Dog

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People go to court and lose, because they don't know how to defend themselves. Even if I had been sued, my brother would have destroyed them. Gym memberships are so weak in legal terms that they can barely be enforced. But they assume people don't know any better, they get scared about damage to their credit rating and gladly hand over hundreds or thousands of dollars simply out of fear. Not every piece of paper you sign your name to is legally binding just so you know. Look at a gym membership contract compared to a cell phone agreement. A cell phone agreement can be 15 pages long or more covering every possible legal aspect you could think of. A gym agreement is 1 to 2 pages long max with so many legal loopholes, that it can't be taken seriously by any lawyer if you wanted to fight it. It's like they printed out a contract template online and put their gym name on it.
A so-called "loophole" doesn't make a contract invalid, and you shouldn't discount the ability of short, simple contracts to bind you. Where a contract doesn't squarely address a particular issue you raise in litigation, a court will imply what it believes is a reasonable term. Provided the obligor and obligee demonstrate the intent to be bound by the contract (which they clearly do in a gym membership agreement), the court is going to enforce it, and it's not going to let you run free merely because the two-page agreement didn't address every conceivable contingency. "Legally binding" isn't some magical formula; it's simply an agreement by the parties with the intention of being bound by the terms of that agreement. Missing terms will be inferred from the other contract terms and from market norms. That's all by way of saying that if you signed an agreement that didn't have a cancellation provision, and the statutes of your particular state don't require such a cancellation provision, you're likely going to lose in court. Whether or not credit agencies will chase you and whether the gym will actually bring suit is another matter. You have to remember that courts are just judges (and clerks) and that judges (and clerks) are just people. Those people can generally read a 2 page contract and determine that both parties expected to be bound and that both parties understood (if they read the contract, as they should have) that there was no early termination provision. After reading that and understanding that, those people are likely finding for the gym.