The 3 business days to cancel contract rule is also known as the "cooling-off period" rule. It can be used in some situations but not all. State and federal laws provide some options for consumers who change their mind shortly after purchasing certain items.

Can You Cancel a Contract Within Three Days?

Sometimes, you have buyer's remorse after making a deal. Certain situations allow you to cancel the deal within three days.

Before looking into federal and state laws, try contacting the company to see if you can cancel the sale/deal. You may be able to cancel free of charge or by paying a cancellation fee.

If that doesn't work, check your state's laws. California is one of the states that gives consumers a “cooling off” period. You may have three to five days in which to cancel a contract by sending written notice to the other party.

Each state has its own requirements for giving notice. Typically, you must send a notice via certified mail by the third day.

The Federal Trade Commission (FTC) also has its own cooling-off period policy, designed to safeguard consumers from hastily entering into contracts. The agency's cooling-off time only applies to the following purchases:

  • Ones made in a location other than the seller's place of business — a trade show, for example
  • Ones made in the buyer's home

However, a buyer can't cancel using the cooling-off period rule for transactions that meet any of the following criteria:

  • The total is under $25.
  • It involves automobiles, even if it takes place at a car show.
  • It involves arts and crafts items sold at a fair.
  • It involves insurance, real property, or securities.
  • It involves goods not intended for household, family, or personal purposes.
  • It's made at the merchant's usual place of business and involves furniture, computers, or stereos.
  • It's made completely through the mail or over the phone.
  • It involves emergency home repairs.
  • You requested it for maintenance or repairs to your personal property (however, purchases made beyond covered repair or maintenance requests are covered).
  • It starts in a retail setting and finishes in your home (i.e., ordering tile flooring at the store and signing the agreement when someone comes to your house to get measurements).

If you can use the three-day cooling-off period, send a cancellation notice as soon as possible.

Some businesses have their own cancellation forms, but you're free to create your own. Make sure you include as much information about the item as possible. Also, include your name and contact information, as well as a clear statement that you're canceling the contract.

Hand-delivering is best, but you can also mail it within three business days of the transaction. The seller may not sue for breach of contract.

The Three Day Cooling-Off Rule

Under the rule, a salesperson must inform you of your cancellation rights at the time of the transaction. He or she also has to give you copies of the cancellation form, along with a copy of the receipt or contract. You don't have to explain why you're canceling.

It's recommended to send a written cancellation notice, preferably by certified mail.

If you cancel a contract within 10 business days, the seller has to refund your money and return any papers you signed. Within 20 business days, the seller either has to pick up any items you still have or pay shipping costs for you to ship them back.

Whatever goods you bought from the seller must be returned in the same condition (or as good as) you received them. If you fail to return the items to the seller, you're still obligated to the contract.

If you paid for the purchase with a credit card and have a billing problem with the seller, contact your credit card company to dispute the purchase.

While the law gives consumers some ways to back out of certain deals and transactions, it's important to know which ones are covered under the cooling-off rule and which ones are not. You don't want to regret making a purchase in haste, especially if it's a large one, such as a car. Knowing the rule in your state can help you avoid buyer's remorse.

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