Q. I sometimes hear about companies offering services with “no contract.” Is this true?

Image of contract with pen and two 100 dollar bills.

If you are paying money in exchange for something in return (and that something isn’t already owed to you), then you have a contract—plain and simple. What you should discern from a service advertiser who promotes that they have “no contracts,” is that there are “no ongoing commitments.”

For example, say a cellular telephone service provider states that it is offering unlimited service for $50.00 a month, “with no contract.” Bob decides this is a good deal, so he goes to the store, purchases a cell phone, and pays $50.00 for the first month of service. Does Bob have a contract? Does the cellular service provider owe Bob anything in return for his $50.00 payment? Obviously, it owes him one month of cellular telephone service. But, why? If the service provider did not owe Bob one month of service under a contract in return for his payment, then the $50.00 was nothing more than a gift to the cellular service provider, and it owes Bob nothing in return.

The fact is, in my example, Bob does have a contract. He doesn’t have an annual contract. He doesn’t have any ongoing commitments to continue his service after the first month. But, he has a month-to-month contract, and the cellular service provider does owe Bob a contractual duty to provide him with one month of service in exchange for his payment. Actually, this scenario should make Bob happy that he does have a contract, since the cellular service provider cannot accept his money without being bound to provide him with service in return.