As it turns out, there’s some truth to the cliché that contracts are made to be broken. But not ALL contracts are made to be broken, and not all the time.
In this article, Gertsburg Licata Managing Partner, Alex Gertsburg, Esq. explains which contracts can be canceled and why.
What Does the Law Say About Canceling Contracts?
The law recognizes that sometimes the ability to cancel a contract works in the public interest: sometimes a consumer buys a product or service in high-pressure, high-stress circumstances and could use a “cooling off” period before truly committing.
As a result, there is a collection of federal and state laws in Ohio that specifically list the limited types of transactions requiring a cooling-off period.
Telemarketing, Door-to-Door and Sales Not at a Usual Place of Business
Federal Trade Commission regulations deal with the two most common scenarios in which high-pressure tactics are used. Federal law gives consumers three days (72 hours from the time of signature) to cancel a sale for goods or services that was made door-to-door or anywhere other than the seller’s normal place of business.
The regulations do list some exemptions. Insurance and securities sales, craft fairs, and public car auctions are unaffected. Sales under $25 are also exempt.
Telemarketing Intrusion is a sales tactic. The Ohio Telephone Solicitation Sales Act responds accordingly (ORC 4719.01) by providing two options for cancellation rights:
- Seven days
- Or, until the buyer signs a written agreement
According to ORC 4719.07(A): No verbal agreement, made by a purchaser as a result of a telephone solicitation, to purchase goods or services from a telephone solicitor is valid or legally binding unless the telephone solicitor receives from the purchaser a signed, written confirmation that complies with divisions (F) and (G) of this section and discloses in full the terms of the agreement.
Credit Repair, Debt Counseling, Loans and Mortgages
Under the Ohio Credit Services Act, consumers are granted three business days from the time of signature to cancel a contract for for-profit credit repair, as well as debt counseling services. Under the federal Truth in Lending Act, the same is true for certain home equity loans and second mortgages.
Prepaid Services
Ohio’s Prepaid Entertainment Contracts Act allows consumers to cancel certain types of prepaid services within three days of the first lesson or service. Included are dating services, commercial gyms and health spas, dance and martial arts instruction, and weight loss programs. Specifically, consumers have until midnight of the third business day, after which the first service is available, to cancel the contract.
If the prepaid service falls within the Act, refunds are awarded on a prorated basis from the first lesson or service. If the seller’s facility closes within 180 days of contracting, or either party moves 25 miles or further from the original facility, the consumer is also entitled to a prorated refund.
Miscellaneous Contracts
The Business Opportunity Purchaser’s Protection Act gives buyers of business opportunity contracts (that is, a contract for the rights to offer, sell, or distribute a product or service) five business days to cancel.
Hearing aid purchasers can return their device for any reason at all within 30 days of receiving it.
Terms Apply
These “cooling off” laws require some sellers to inform you about your right to cancel and, in some cases, provide you with a cancellation form. Their failure to do so may extend a buyer’s right to cancel further than the statutory deadline, or the buyer may be able to petition a court to void the contract outright.
Buyers are bound by the rules of law as well. Cancellations must be made in writing, and they must meet strict cancellation deadlines – a “business day” means every day except Sundays and federal holidays. Notice by mail is dated when the letter is postmarked.
Alex Gertsburg is a managing partner at Gertsburg Licata. He may be reached at (216) 573-6000 or at [email protected].
Gertsburg Licata is a national, full-service business law and strategic advisory firm offering a full range of legal services.
Call 216-573-6000 or contact us here.
This article is for informational purposes only. It is merely intended to provide a very general overview of a certain area of the law. Nothing in this article is intended to create an attorney-client relationship or provide legal advice. You should not rely on anything in this article without first consulting with an attorney licensed to practice in your jurisdiction.
