Can they do that? Probably not. Things that shouldn’t be in contracts.

Let’s start with the most important rule: always read the contract. Seriously — always.

There are generally three types of contracts: those for the sale of goods, those for services, and mixed contracts that involve both. Why does this matter? Because sales of goods fall under the Uniform Commercial Code (UCC), while services and mixed contracts are governed by the more unpredictable realm of common law — which, despite its name, is rarely “common” to my clients.

Now, I won’t pretend this short post can cover every nuance of contract law. But here’s one key takeaway: penalties in contracts are usually unenforceable.

So what’s considered a penalty? In legal terms, it’s a punishment for breaching or canceling a contract — often disguised as “liquidated damages.” However, for a liquidated damages clause to be valid, it must reflect a reasonable estimate of actual losses, not an arbitrary or inflated sum.

You can’t be hit with an outrageous fee just for canceling a contract — that’s a penalty, and penalties don’t hold up well in court. Similarly, a vendor or contractor generally can’t keep your deposit if they haven’t started providing any goods or services. There are exceptions, of course — for instance, if you paid a deposit for ten custom-made Christmas shirts and cancel after production has started, you’re likely out of luck (or out of… you know the phrase).

The same logic applies to contractors. If someone starts renovating your bathroom and you cancel mid-demolition, you still owe for the work already completed — even if the project isn’t finished.

This post mainly addresses contracts with unfair or exploitative terms — the kind that rely on heavy-handed language like “fines,” “forfeitures,” or questionable “liquidated damages” to squeeze unearned money from consumers.

Again: read your contract carefully. You’re not obligated to use a particular vendor or service provider. Negotiate terms upfront. If you don’t understand a clause or disagree with it, speak up. Contracts are only valid when there’s a true “meeting of the minds.”

And if the contract says it contains the entire agreement between you and the other party, make sure that any prior discussions or modifications are included in writing. Otherwise, as the old saying goes: “If it’s not in writing, it didn’t happen.”

Finally, to contractors and vendors — this isn’t an attack. It’s a call for fairness. I review, draft, enforce, and defend contracts on a regular basis. If you have questions about the legality or enforceability of a contract — or if you’re a consumer facing excessive cancellation fees — I’d be happy to talk.

As always, this blog is not intended to give legal advice. You should consult with a licensed attorney to address your issue. If you would like to schedule a consultation with me, feel free to contact me at (334)557-0500 or email to: hayden@hsizemorelaw.com. Consultation fees do apply.

Alabama law requires this disclaimer: No representation is made that the quality of the legal services to be performed is greater than the quality of legal services performed by other lawyers.