Know Your Cancellation Rights

Contract cancellation rights vary from state to state, but you should know the basics.

When most of us sign contracts for goods or services, our cancellation rights never even cross our minds — if, in fact, we’re aware of them at all. But the truth is, cancellation is one of your basic consumer rights, so as a savvy consumer it’s a good idea to know when and how to take advantage of it.

So let’s take a look at your rights of cancellation under American law.

About Backing Out

Before we get too far, let me make this clear: most contracts aren’t cancellable. Assuming that no one coerced or tricked you into signing, once you’ve signed a contract, you’re legally bound to fulfill the agreement. If you missed something you didn’t like before you signed, too bad.

That said, there are certain legal situations within both federal and state law that do allow you to cancel a contract short of rescission, which is a court-ordered “unmaking” of a signed contract.

For example, the Federal Trade Commission has a “Cooling-Off Rule” which allows you to back out of many contracts up until the third midnight after the purchase. This applies only to purchases of $25 or more that were NOT made at the seller’s primary business.

Basically, this applies to anything sold in a home, workplace, or dorm, or at conventions, hotels, restaurants, and other rented facilities. There are a number of other restrictions, though, so check the FTC’s Cooling-Off Rule page to see if your situation applies.

In General

The Feds leave most consumer rights enforcement to individual states, so state law is most likely to prevail in this venue. But there are certain types of contracts that you can generally cancel within 3-7 business days of signing, and sometimes even longer. These may include contracts for:

• Business opportunities
• Credit repair
• Health clubs
• Medical devices
• Retail installment payments
• Door-to-door sales
• Telemarketing sales
• Timeshares
• Vocational schools
• Contracts in which your home is used as collateral

Remember here that the time-limit is in business days, measured through midnight. This does not include weekends or national holidays, typically enumerated as:

• New Year’s Day
• Martin Luther King Jr.’s Birthday
• President’s Day
• Memorial Day
• Independence Day
• Labor Day
• Columbus Day
• Veterans Day
• Thanksgiving Day
• Christmas Day

State by State

A final warning: again, rights of cancellation can vary from state to state. Be sure that you study yours, and don’t make any assumptions before signing a contract.

You can usually find the applicable rights on your state Attorney General’s webpage. Otherwise, try Googling them by entering your state’s name plus “contract cancellation rights” in the search field.