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There are three cancellation provisions that contractors should be familiar with:
To cancel, the buyer need only give the contractor written notice of the buyer's intent not to be bound by the contract. If the contractor has not complied with certain notice requirements, the cancellation period begins when the contractor has complied (see discussion below). The cancellation provisions are most commonly applied to sales made in the buyer's home, but the test is whether the contract or offer is made somewhere other than the seller's place of business. These provisions apply whether the buyer initiated contact with the contractor or vice versa. They apply where there is no financing involved, or in the fairly rare case where the financing is through a retail installment contract. Exceptions to the Act are noted below. Contract and Notice Must be in Writing
The buyer's contract or offer to purchase must be in writing, and must be in the same language as is principally used in the oral sales presentation (for example, Spanish). The contract or offer must be dated and signed by the buyer, and must state on the first page the name and address of the contractor to which the notice of cancellation is to be sent, and the date on which the buyer signed the contract or offer. The contract or offer must contain a conspicuous, statutorily-prescribed notice of the buyer's right to cancel, which must be located near the space for the buyer's signature. This notice must state:
The contractor must give the buyer a copy of the contract or offer and the statutorily-required Notice of Cancellation forms, as described in the paragraphs below. The contractor must give the buyer duplicate, completed, "Notice of Cancellation" forms, in the same language as used in the contract, which contain a statutorily-prescribed Notice of Cancellation. These forms must be attached to the contract or offer, and must be easily detachable, so that the buyer can use the form itself to give the contract notice of the buyer's decision to cancel. At the time the contract or offer is executed, the contractor also must orally inform the buyer of the buyer's right to cancel. Notice and Cancellation Period The buyer may cancel the contract or offer until midnight of the third
business day after the day However, if the contractor has not complied with the foregoing requirements described in bold type, the buyer may cancel the contract or offer at any time until the contractor has complied with those requirements. A buyer who desires to cancel need not use the form provided by the contractor. In order to cancel, the buyer's notice of cancellation need only be in writing, and need only express the buyer's intent not to be bound by the contract or offer. The buyer's notice must be sent to the contractor at the address specified in the agreement or the offer. If given by mail, the buyer's notice is effective when it is deposited in the mail, properly addressed, with postage prepaid. The buyer also may cancel by sending a telegram to the contractor's address. The following are the most important exceptions to the Act:
If the home improvement is to be financed and involves a security interest in the buyer's home, the Truth in Lending (TIL) Act's three-business-day right of rescission (cancellation) probably applies. The TIL rescission right arises in a consumer credit transaction where a nonpurchase lien or security interest is taken in the consumer's principal dwelling, or where a security interest in the dwelling may arise by operation of law (e.g., a mechanic's or materialman's lien). The credit must be extended to a natural person for personal, family or household purposes by a creditor who regularly extends consumer credit (this can be a contractor or a lender). Major exceptions to the rescission provisions include loans to finance the construction or purchase of a home, and refinancings of the same property by the same creditor with no new advance of funds. Each consumer whose ownership interest is or will be subject to the security interest has the right to rescind the transaction until midnight of the third business day after:
If the required notice or material disclosures are not delivered, the right to rescind generally expires three years after consummation. Business and Professions Code Section B&P section 7163 complements and supplements the Truth in Lending Act's recession provisions described above. The second applies in any of the following situations:
If one of these conditions is present, the contract is not enforceable against the buyer unless all of the following requirements are satisfied:
Exceptions to B&P Section 7163 In general, the buyer's waiver of any rights under B&P section 7163 is void and unenforceable. Waiver is permitted, however, to the extent that the contract is for emergency repairs or services which are necessary for the immediate protection of people or property. In this situation, the buyer must give the contractor a signed and dated personal statement which describes the emergency, states that the contractor has informed the buyer of the buyer's right to cancel under B&P section 7163, and states that the buyer waives those rights. The waiver must be signed by each owner of the property. Waivers on printed forms are void and unenforceable. B&P Section 7165 allows use of substitute provisions in the case of a swimming pool contract financed by a third-party lender. NOTICE OF RIGHT TO CANCEL Notice of Cancellation
_________________________________________ You may cancel this transaction, without any penalty or obligation, within three business days from the above date. If you cancel, any property traded in, any payments made by you under the contract or sale, and any negotiable instrument executed by you will be returned within 10 days following receipt by the seller of your cancellation notice, and any security interest arising out of the transaction will be canceled. If you cancel, you must make available to the seller at your residence, in substantially as good condition as when received, any goods delivered to you under this contract or sale, or you may, if you wish, comply with the instructions of the seller regarding the return shipment of the goods at the seller's expense and risk. If you do make the goods available to the seller and the seller does not pick them up within 20 days of the date of your notice of cancellation, you may retain or dispose of the goods without any further obligation. If you fail to make the goods available to the seller, or if you agree to return the goods to the seller and fail to do so, then you remain liable for performance of all obligations under the contract. To cancel this transaction, mail or deliver a signed and dated copy of this cancellation notice, or any other written notice, or send a telegram to: ____________________________________ at ____________________________________________________ not later than midnight of : ____________________________________ I hereby cancel this transaction ___________________________ _______________________________________________ |
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Home improvement contracts, and virtually any other consumer transaction
involving $25 or more which takes place in the buyer's home or away from "appropriate
trade premises " can be canceled by the buyer, without penalty or obligation, within
three business days after the buyer signs the contract.
In this discussion, bold type indicates requirements that a contract must meet in
order to avoid extending the cancellation period beyond three business days.
on which the buyer signed the instrument. "Business day" means
any calendar day except Sundays and specified holidays.
