Understanding your financial agreements

 

A financial contract is a legally binding agreement between two or more parties in which the terms of the agreement regulate specific future monetary obligations. It is unlike a sales contract, in which a good or service is sold in exchange for compensation, as under a financial contract it is a financial instrument, such as a loan or debenture, which is agreed upon.

Using financial services

A financial contract can be extremely complex. The reason for this complexity is that financial documents often involve large amounts of risk and are binding for a significant period of time. As a result the drafting of such contracts must include terms for every realistic future possibility in order to minimise risk and future disputes.

If you buy any financial services, such as a loan, the company that sold you the service must be authorised by the FSA (Financial Service Authority). You can check the status of a financial services business you want to use on the FSA website.

A financial contract may include several condition precedents. A condition precedent:

  • Specifies that if a certain event occurs the contract will be triggered and become effective
  • Is commonly used in financial contracts known as options, in which one party agrees that if and when a specific event occurs, a specific right will arise for one or more of the parties

The Consumer Credit Act

All finance products will need a financial agreement that binds both you and the company that is selling you the product. Most of the financial agreements you will enter into will be for consumer credit such as hire-purchase agreements. The Consumer Credit Act governs how these products can be sold and also states what your rights are under the Act.

The Consumer Credit Act itself is enforced by the OFT (Office of Fair Trading). It is the OFT’s job to protect the rights of consumers when they enter into financial agreements. You should of course ensure you fully understand the commitment you are making before you sign any financial agreement. If you are in any doubt about an aspect of the financial agreement you are about to sign, take advice before you do so.

Filing a complaint

If after signing your financial agreement you later discover that the product was not what you thought, and you feel that the company that sold you the product did not fully explain the product to you, a complaint can be made. These financial agreement complaints are handled:

  • In the first instance by the FOS (Financial Ombudsman Service)
  • The Pensions Ombudsman if you have taken advice, or purchased a pension product

After the FOS has considered your case, and if they found that the company that sold you the financial product was not at fault, you could take the company concerned to court. In these cases it is important to have fully qualified legal representation.

If you are having a dispute which is the result of a financial contract you are advised to consult a specialist solicitor. Such advice will allow you to be sure that your rights are protected, and that any implied contract terms (i.e. terms which the courts would consider part of the contract even though they are not written in it) are fully explored and utilised on your behalf.

As finance law is complex, your solicitor can not only interpret the law for you, they can also help you to build a strong case that will deliver a positive outcome. Never try and bring this type of case to court alone. The court will want to see that all parties have proper legal representation.

For more information on the law relating to financial products, see our page on financial law.

Have you bought a financial product and you are unhappy with the results? Contact Law can put you in touch with a solicitor specialising in financial advice to help you make a complaint, or simply help draft financial agreements in the early stages. Please call us on 0800 1777 162 or complete the web-form above.

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