Three-day cancellation of a contract

"Cooling-off rules" allow you to cancel certain types of contracts within three days

Several federal regulations allow you to cancel certain contracts within a few days of signing them (known as "cooling-off rules"). Contracts created during door-to-door or trade show sales, contracts for home equity loans, and delayed mail order or Internet transactions are all covered by these regulations. Also, some state laws allow you to cancel contracts for things like health club memberships, dating services, and weight reduction programs, among other things

Door-to-Door and Trade Show Sales

You have until midnight of the third business day after a contract was signed to terminate one of the following (according to the Federal Trade Commission's (FTC) cooling off rule):

• a $25 or more door-to-door sales contract (as long as the goods or services are primarily intended for personal, family, or household purposes), or
  
• a contract for $25 or more signed somewhere other than the seller's usual place of business—for example, during a hotel or restaurant sales presentation, an outdoor display, a computer show, or a commercial fair (this rule does not apply to public car auctions, craft fairs, insurance, and securities).
  

You have the right to cancel these contracts if you change your mind. An equivalent law has been implemented in every state.

Home Equity Loans and Second Mortgages

Under another federal law, you have until midnight of the third business day after a contract was signed to cancel:

• a home improvement loan
  
• a second mortgage, or
  
• another loan where you pledge your home as security (except for a first mortgage).
  

Before you accept the lender terms, the lender must inform you of your right to cancel and provide you with a cancellation form. In some cases, the three-business-day term might be prolonged for up to three years.

Catalog and Internet Orders

The Federal Trade Commission's "Mail, Internet, or Telephone Order Merchandise Trade Regulation Rule" states that if you order products by mail, phone, Internet, or fax, the seller must ship to you within the period indicated or, if no time was specified, within 30 days. Magazine subscriptions (save for the first shipment) and seed or plant orders are exempt from this limitation.

If the seller is unable to ship within certain timeframes, you must be notified and given the choice of canceling your order and receiving a refund or accepting the new date. If you don't answer, the seller may interpret your silence as acceptance of the new delivery date. If you choose a new shipping date but the vendor is unable to meet it, in any case, the seller must send you a third notification, requesting your consent to a third date. If you don't respond to the notice—silence does not constitute agreement this time—the vendor must cancel the order and refund your money automatically. If you paid by cash, check, money order, or credit where a third party is the creditor (or any other method except credit where the seller is the creditor), the seller must issue the refund promptly—within seven working days, and within one billing cycle if you charged your purchase and the seller is the creditor.

Other Contracts: State Consumer Protection Laws

Most jurisdictions have rules allowing you to terminate written contracts for the acquisition of goods or services within a few days after signing them. You can terminate contracts for health club memberships, dating services, weight reduction programs, dance or martial arts courses, timeshare properties, and hearing aids in many states. To find out what contracts, if any, are covered in your state, contact your state consumer protection office (see State Consumer Protection Offices) or speak with a local attorney.

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