Bmo Mosaik Mastercard Cardholder Agreement - Business Law

Executive summary:

          A contract is, “a deliberate and complete agreement between two or more competent persons, not necessarily in writing, supported by mutual consideration, to do some act voluntarily that is enforceable in a court of law”^[1]. Moreover, this report provides an in-depth analysis of the contractual agreement between a credit cardholder and a credit card issuer.

          This report analyzes the “BMO Mosaik MasterCard Cardholder Agreement”, where all terms and conditions in the contract are thoroughly explained, legal business principles pertaining to the agreement are applied, recommendations are suggested, and legal corrective provisions are provided for possible contract flaws.

          Legal risk management, law as a business asset, dispute resolution, and the contractual relationship are all pertinent principles that are applied to the analysis of the credit card contract. Also, since there is evident unequal bargaining power in the contractual relationship, strong recommendations intended for the cardholder are suggested regarding the complete understanding of the agreement in order to maintain a good contractual relationship.

          In addition, it is evident that the credit card agreement is drafted to benefit the card issuer, seeing that the cardholder must respond accordingly. Hence, there are certain flaws in the agreement pertaining to specific clauses that are unfair to the cardholder. Consequently, these unfair clauses are identified and provisions that create more equality in the agreement are drafted.

Introduction:

          In today’s society, the majority of people take part in monetary transactions in order to obtain goods and services. However, most of these transactions are not done using cash, they are accomplished through credit. People view credit cards in a positive way, as they create convenience for their holders when they do not have the right amount of cash on hand to make a purchase or simply need an advance of money. On the contrary, what cardholders do not understand is that banks that issue credit cards have a plan drawn out for the cardholder; hence, banks want cardholders to use their credit cards in order to collect interest and service charges to put consumers in further debt and ultimately maximize profits. Therefore, this paper will explain all terms and conditions related to a specific credit card agreement and suggest recommendations in order for all credit card holders to have a plan for themselves when they enter into a contractual relationship with a bank. Moreover, “If you don’t have a plan for yourself, someone else has a plan for you”^[2]. Since there is unequal bargaining power in the contractual relationship, which will be explained further in the paper, the cardholder must take all precautions in order to keep the relationship in good standing.

          For this paper I have chosen to use the “BMO Mosaik MasterCard Cardholder Agreement”, as it is the binding legal agreement, enforceable in the court of law, which I am personally responsible for understanding and obeying for my own MasterCard. In this particular agreement, there are twenty- five clauses, in addition to a twenty- sixth section containing specific definitions pertaining to words in the agreement. Furthermore, the first part of this paper will give an explanation of all twenty- five clauses in order for the cardholder to have a complete understanding of his/her contractual obligations.

          The second part of this paper will apply specific legal business principles to the contract. It begins with identifying the fact that banks that issue credit cards ultimately use the law as a business asset; hence, they draft all clauses in the contract in order to benefit themselves and more so, to protect themselves. Also, legal risk plays a major role in the issuance of credit cards to consumers; therefore, it is in the best interest of the bank to use a legal risk management plan. In this plan, there are four elaborate steps that must be taken in order to successfully execute the plan; moreover, these four steps are thoroughly explained in the legal risk section of this paper.

          Next, the contractual relationship is described, along with a complete explanation of the seven key elements that define a contract. Another important element to the credit card contract is the use of the exemption clause. An exemption clause^[3] is ultimately a stated term/condition in a contract that limits the liability for the party who drafts the provision. Therefore, by using the exemption clause, the card issuer is able to limit its liability in certain situations by ultimately transferring risk to the cardholder. Also, since the agreement is a complete agreement where all terms and conditions are clearly stated, the parole evidence rule can be applied; hence, a cardholder may not use outside evidence to the terms of the contract to prove a case, as it will not be considered in the court of law. Furthermore, this section is concluded with an explanation of the specific methods of contract termination, proving that the method that applies mostly to credit card contracts is termination through breach. The section after the application of legal principles contains recommendations and lessons learned.

          In the recommendations and lessons learned section, I stress the importance of the cardholder reading and fully understanding all the terms and clauses stated in the contract. As previously mentioned, there is unequal bargaining power in the contractual relationship, giving more power to the card issuer; therefore, it is imperative for the cardholder to also be able to protect him/herself. Moreover, the cardholder can protect him/herself by fully understanding all contractual obligations.

          Also in the recommendations section, I emphasize the importance of the cardholder being able to manage his/her debt by paying their account balance in full each time that a statement is received. This is a very important element in avoiding the interest application; hence, once interest charges are applied to one’s account, the amount of debt simply keeps increasing. Therefore, if a cardholder wants to manage his/her debt properly, he/she must not be only making the minimum payments on his/her account.