72-Hour Contract Law: Everything You Need to Know
The 72-hour contract law allows consumers the right to cancel a contract during what is referred to as a "cooling off" period.3 min read
The 72-hour contract law allows consumers the right to cancel a contract during what is referred to as a "cooling off" period. The timeframe for canceling is usually 72 hours, which means a consumer has until midnight after the third day the contract is signed.
Overview of Contract Laws
Most states allow a consumer 72 hours to cancel a contract related to home repairs. If the state law does not provide for a cancellation period, the contract should. When this is spelled out, it is providing the consumer with contract rights because it is specifically added to the contract. If this is not addressed in the original contract, request a provision be added giving you the right of cancellation.
It is stipulated in many state statutes that a person has three days to rescind an offer even after agreeing to the terms of the contract.
For home equity loans, the Truth in Lending Act gives consumers the 72-hour period of protection to cancel. You have the right, by law, to cancel a second mortgage loan or a home improvement loan. The law also requires the lending institution to inform consumers of their right to cancel and to provide them with a cancellation form.
The Federal Trade Commission (FTC) has the same 72-hour rule for purchases made either inside a residence or at a seller's temporary place of business. The salesperson must explain the cancellation rights to the consumer at the time of the sale and provide a cancellation form.
There are exceptions to the FTC rule. One misconception is that the rule applies to automobiles when a temporary dealership is involved. In this situation, the buyer may be able to purchase a cancellation contract from the dealer allowing more time to decide on the purchase, but it is based on contract law and not on the FTC rule.
Reasons for Canceling a Contract
Breach of Contract
When one party materially breaches a contract by not performing the obligations of their part of the contract, this is considered a breach of contract, which provides the grounds to nullify the contract.
A material breach is one that goes directly to the main part of a contract. For example, one party orders goods from another and sets a specific date for delivery. The goods do not arrive until a week after the date set forth in the contract; this is considered a material breach.
If you are in business to sell goods and the buyer breaches the contract, you are backed by the rules of the Uniform Commercial Code (UCC). Under the UCC rules, if a buyer fails to perform their part and creates a material breach of contract, the seller has the following options:
- Withhold the goods
- Recover damages equal to the difference between the market price and the contract price
- Collect excess damages
- Void the contract
Duress, Fraud, Impossibility of Performance, and Impracticability
Whenever a contract is entered into because one party has been forced or threatened, it can be legally voided.
If someone deliberately misrepresents the material portions of the contract, that is considered fraud. Recourse for the injured party includes canceling the contract and suing the fraudulent party for damages.
Impossibility of Performance
This situation would mean you have entered into a contract with someone and before they can fulfill their obligations, the person dies. This makes it an impossible situation and the contract can be voided.
In the event the other party becomes ill, this does not constitute the impossibility of performance and does not excuse the party from completing the contract.
For a claim of impossibility to be valid, it must be impossible for anyone to perform the obligations of the contract. If this is not the case, such as becoming ill, the one party would need to arrange for someone else to handle their portion of the responsibilities or be held in breach of contract.
Some courts recognize situations where a contract is impractical. This means once the contract was formed, extreme and unanticipated circumstances made the fulfillment of the contract significantly expensive or inconvenient.
The problem or circumstances cannot have been something that could or should have been anticipated at the time the contract was formed.
When any of these situations occur, it is recommended to get the assistance of an attorney to make your case.
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