What is the three-day notice of cancellation, and when and how is it to be presented to customers?
This issue becomes even more confusing when you present your contracts for electronic signature, or when you mail the contract to the customer for signature. (That is, if anyone still does that.)
Starting with the Three-Day Cancellation Basics
First, some basics. The three-day notice of cancellation is often referred to as the cooling-off period. It allows the customer three days from the execution of the contract to cancel with impunity.
Contractors — and that includes you — are not supposed to begin performing the contract duties until the customer has had three days to reconsider and cancel. The penalty for ignoring the three-day cooling-off period is fairly severe; the customer can require you to remove whatever you’ve installed and restore the premises to the pre-installation condition.
The customer can refuse to proceed with the contract by exercising the rescission right. If you stop work, demand payment for the work you did — even if completed — and try to sue to recover payment for your work, you should not win.
The three-day cancellation right is for consumers only and only for household residential work. It will not apply to commercial customers.
The three-day notice is required by federal law, and it’s also required in most — if not all — states. Not only that but, in addition, you are required to use the precise statutory language, layout and font size required by the statute.
Don’t confuse the notice of cancellation that is included in your consumer contract with the actual Cancellation Form. The notice of cancellation is supposed to be placed directly above where the customer is to sign the agreement.
The actual Cancellation Form (also in required form) is a separate paper or page. It is designed to be signed by the customer who wants to rescind and then sent to you.
Three-Day Cancellation Laws Struggle to Keep Up
Three-day notice of cancellation laws have struggled to keep up with technology. New laws now permit the customer to notify you in most any manner in which the contract was executed.
So, whether it’s in person in the house (or somewhere other than your retail place of business, such as Home Depot), you will leave the customer with a cancellation form that can be signed and delivered to you via mail, email or fax.
The notice will specify how it is to be delivered, although you will find that any method will be acceptable, especially if you get the cancellation form.
When the contract is signed electronically, you still give a copy of the cancellation form, and the customer will be able to cancel electronically.
If you mail the contract to the customer, mail the cancellation form, too.
Once that contract is fully executed (you can sign in advance before sending), the customer will have three days from when he or she signs the contract and delivers it back to you to use the cancellation form to cancel. That’s true even if the customer sat with the contract for a long time before deciding to sign it and then send it back to you.
The right to rescind can be exercised at any time until that cancellation form is provided with a fully executed contract. Although we don’t see many cases in which this comes up as an issue when the relationship has been going on for some time, service is being provided and payments are being made, it’s theoretically possible.
Another Very Good Reason
For that reason, another very good reason exists for properly complying with the three-day notice of cancellation: Potential buyers of your residential accounts may refuse to bid on those accounts if you have routinely failed to comply with the three-day right to rescission laws.
You also may end up being the target of an aggressive attorney general who will want you to notify your residential customers that they have a right to cancel and get their money back. That prospect — no matter how remote — should be enough to encourage your compliance.
When you purchase a K&K residential contract, we will properly place the cancellation notice, and we will provide the proper cancellation form. Use these forms as we have provided them.
