Can I cancel a contract within three days of signing it?

Federal and state laws allow people to cancel certain kinds of contracts.

Question

I've heard of a law that allows consumers to bail out of sales, including cars and houses, within 72 hours of the sale. What are the specifics?

Answer

Bailing out of a purchase you've agreed to isn't quite that easy—a contract is, after all, a contract. But both federal and state laws contain some quick escape provisions, mostly designed to protect consumers from decisions they might have been pressured into.

Door-to-door sales. There is a federal law (and similar laws in every state) allowing consumers to cancel contracts made with a door-to-door salesperson within three days of signing. The three-day period is called a "cooling off" period. You might use that law after hastily agreeing to have someone repave your driveway, deliver lawn fertilizer, or put a new roof on your house. Certain types of sales can’t be canceled, though, like sales under $25. (16 C.F.R. § 429.1, § 429.0).

Second mortgages or refinances. Another federal law allows you to cancel most contracts for a second mortgage or refinance mortgage within three days of signing. But this law does not allow you to cancel a contract for a mortgage you got to purchase your home. (15 U.S.C. § 1635).

Certain goods or services. In addition, many states allow you to cancel written contracts covering the purchase of certain goods or services within a few days of signing. Examples include contracts for dance or martial arts lessons, health club memberships, dating services, weight loss programs, timeshare properties, and hearing aids. (For specific information about the laws in your state, talk to a lawyer.)

The federal three-day cooling-off period, however, doesn't give you the right to cancel a contract to buy a new car. Because cars lose a lot of their value the moment they're driven off the lot, allowing a cooling-off period would force dealers to sell almost-new cars at sharply discounted resale prices.

For more information on canceling contracts, read Canceling a Contract Within Three Days.

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