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Contracts

What is a contract?
A contract is an agreement between two or more competent parties. Contracts may be oral or written and must be for a legal purpose. A contract could for example, involve a large purchase, such as a new car, computer or stereo, for which you agree to make monthly (installment) payments. Or you might sign a contract to lease an apartment for a year or to buy an insurance policy with annual premiums or to accept the terms of a new job.

Who can make a contract?
You can, if you’re at least 18 years old and of sound mind. When considering any contract, however, take some precautions:
› Read the contract completely before signing it.
› Do not sign anything until you fully understand the
agreement.
› If you don’t agree with something in the contract, talk to the other party about altering or removing it. Initial any alteration made to the contract.
› Do not sign a contract with blank spaces – either fill them in or mark it N/A (not applicable) or cross them out. Initial any section of the contract crossed out.
› Be sure to keep a complete, signed copy of the contract
(this includes the signature of all parties to the contract).

What does it mean to guarantee a debt?
A person who guarantees a debt agrees to step in and pay the debt in the event the party making the contract fails to do so. As an example, you try to buy a car, you’ve only been at your job a couple of months, the dealer tells you “you need someone to guarantee the car loan.” Your parents agree to help, they guarantee the loan, meaning, they execute the contract as guarantors with you as the primary obligor. You make payments on the contract like clockwork, then for some reason you can not make the payments. The lender will look to your parents to make the payments. Also, even if you file bankruptcy, the lender can go against the guarantor to collect on the debt.

What is collateral?
Collateral is an item of value that is accepted by the lender as back-up payment in case you are unable to repay your loan. See N.R.S. 104.9102(1)(L). As an example, if you buy a car and agree to installment payments, the car itself may be the collateral. The lender could then repossess the car if you fail to make your payments. If the lender repossesses the car, it will then sell the car and seek any remaining balance due (deficiency) on the contract from you.

Can a lender have different rules for making loans to women, men or minorities?
No. It is unlawful for a creditor to discriminate against any applicant on the basis of race, sex or marital status. Lenders can only make distinctions based on the applicant’s credit rating.

What happens if I break a contract because I didn’t understand it?
Not understanding a contract generally is not an excuse for breaking the agreement. It’s up to you to understand the terms of the contract before you sign it. Breaching a contract – failing to pay a debt according to the contract’s terms, for example – can lead to serious consequences.

You could be sued and be required to appear before a judge. If you lose your case, you may have to pay the judgment plus interest and, in some cases, the other side’s costs and attorney fees if the contract requires it.

If you have an unpaid debt, you may work out an agreement to pay your debt over time. Any modification of the contract should be in writing, especially if the contract itself expressly provides for any modification to be in writing.

You could file for bankruptcy, which may allow you to dismiss your obligation to pay certain debts, and allow you to rearrange debts and work out payment plans. Bankruptcy may give you a fresh start. But it would also have a bad effect on your credit rating and make it harder for you to get a loan in the future.

This guide is an introduction to narrow topics of Nevada law. Keep in mind that federal, state and local laws are constantly subject to change. If you have a legal question or problem, you should consult an attorney.