Key Takeaways

  • The FTC Cooling-Off Rule allows consumers to cancel certain purchases within three business days.
  • This rule applies to sales made at the buyer's home or locations outside the seller’s permanent place of business.
  • Qualifying sales include those of $25 or more at home, and $130 or more elsewhere.
  • Sellers are required to provide cancellation forms, notify buyers orally and in writing, and honor cancellations promptly.
  • Certain sales are exempt from the Cooling-Off Rule, including real estate, emergencies, business use purchases, and vehicle sales at permanent locations.
  • The rule does not apply to transactions initiated at the seller’s place of business, or those conducted via phone, mail, or internet.

Contract cooling off laws let people cancel certain types of contracts and the sales of certain goods for any reason, even as simple as regretting the purchase. Cooling-off laws give consumers up to three days to cancel sales of certain goods and services. Sellers of these goods are required by the Federal Trade Commission to honor this cooling-off period.

Federal Cooling-Off Law/Rule

Cooling-off laws are a federal trade regulation rule announced by the Federal Trade Commission (FTC) to prevent deceptive and unfair practices made outside of the seller's official place of business during the course of a sale. The law allows consumers to return merchandise that was bought at a place other than the seller's business address.

When Does the Cooling-Off Rule Apply?

This federal regulation applies to network marketing companies that market products or services. Considering that most sales are not made door-to-door, the regulation calls all such sales door-to-door sales. In addition to door-to-door sales, these other places of business also apply:

  • Buyer's workplace.
  • Restaurants.
  • Fairgrounds.
  • Convention centers.
  • Motel or hotels.
  • Offices rented on a short-term or temporary basis.

It is mandatory for the seller to inform the consumer that that buyer has the right to revoke a contract within three business days from the date of the sale. The seller must also provide to the buyer a:

  • Copy of the sales contract.
  • Completed receipt.
  • Summary notice notifying the buyer of the right to cancel the transaction.

The new rule revised the definition of "door-to-door sales." It distinguishes between transactions made at a buyer's home versus those made at locations outside of the home. The new definition retains coverage for all transactions made at the buyer's home that are $25 or more, and increases to $130 or more for all other covered sales.

The cooling-off rule is applicable to:

  • Leasing, sale, or rental.
  • Consumer services or goods.
  • Purchase prices of:
    • $130 or more for other locations.
    • $25 or more for the buyer's house.
  • Cases where a representative or seller solicits the sale.
  • Cases when the sale is made somewhere other than the seller's place of business.

Steps in Canceling a Sale or Contract Under the Cooling-Off Rule

The cooling-off rules require a seller and their representatives to take the following nine steps:

  1. The seller must provide a receipt or a copy of the contract, which:
    • Must be written in the identical language as the oral presentation.
    • Must identify the date of the sale.
    • Must contain the name and address of the selling party.
  2. The seller must present the buyer with two copies of the notice of cancellation form at the time the buyer purchases the goods or services, .
  3. The seller must fill in both copies of the notice of cancellation with the seller's information before presenting them to the buyer. The contact information should include:
    • Name of the seller.
    • Date of transaction.
    • Seller's business address.
    • Current date.
    • The last date at which the buyer may be granted a notice of cancellation.
  4. The seller is not allowed to manipulate any receipt or contract in order to prohibit the buyer from receiving the protection of the cooling-off rules.
  5. The seller must orally notify the buyer of their right to cancel.
  6. The seller may not orally or in a written statement attempt to misrepresent the buyer's right to cancel.
  7. The seller must honor all requests to cancel by the buyer within 10 business days following the request.
  8. The seller may not assign, sell, transfer, or negotiate any note or any other level of indebtedness to a third party prior to the fifth business day after the day sale was made.
  9. Upon the seller being notified of a notice of cancellation, the seller must notify the buyer within 10 business days regarding their intent to abandon or repossess any delivered or shipped goods.

Exceptions to the Cooling-Off Rule

Cooling-off laws do not apply when:

  • The services or goods won't be primarily used for personal, family, or household purposes.
  • The sales regarding services or goods needed to address an emergency.
  • The transaction is for less than $25.
  • The sale was made in relation to the buyer's desire that the seller perform repairs or maintenance on the property.
  • The transaction occurred over phone or mail.
  • The transaction was the result of a preceding negotiation at the seller's physical business address.

Additionally, cooling-off laws do not apply to transactions related to real estate, securities, or insurance. However, the sale of vehicles are exempt when the seller has at least one physical location.

Detailed Breakdown of Sales Exempt from the Cooling-Off Rule

While the Cooling-Off Rule offers robust consumer protections, it does not apply universally. To clarify what sales are exempt from the cooling off rule, below is a detailed list of transactions and scenarios that are not covered:

Transactions That Are Exempt:

  1. Real Estate, Securities, and Insurance Transactions
    These involve long-term investment decisions and are regulated under separate legal frameworks.
  2. Automobile Sales at Permanent Dealership Locations
    If a vehicle is sold at a seller’s permanent business address, the transaction is exempt. However, mobile or temporary sales locations may still qualify under the rule.
  3. Emergency Repairs or Services
    Services or goods required to meet urgent needs, such as plumbing or electrical repairs during a home emergency, are not covered by the cooling-off period.
  4. Purchases Intended for Business or Commercial Use
    If the goods or services are intended for business (not personal, family, or household) use, they are exempt.
  5. Purchases Made Entirely by Mail, Telephone, or Online
    The Cooling-Off Rule only applies to in-person sales made outside the seller’s regular place of business. Internet and mail-order sales are governed by other consumer protection rules.
  6. Sales Under $25 at the Buyer’s Residence or Under $130 Elsewhere
    Minor transactions fall below the monetary threshold for protection.
  7. Sales Resulting from a Prior Business Contact at the Seller’s Place of Business
    If the buyer visited the seller’s physical location and initiated negotiations that later led to a sale outside that location, the transaction may be exempt.
  8. Sales Made at Temporary Locations Where the Buyer Initiates Contact
    If a consumer walks into a temporary booth at a fair or trade show without prior solicitation, the rule may not apply.
  9. Buyer's Request for Immediate Services or Repairs
    If the buyer specifically requests services like home repairs and the seller begins work immediately, cancellation rights may be waived for completed services or customized goods.

Understanding these exclusions is critical for consumers who wonder what sales are exempt from the cooling off rule. This clarity helps distinguish between transactions that are protected versus those that are final upon agreement.

If you’re uncertain whether your specific purchase is protected under the Cooling-Off Rule, you can consult a legal professional. Lawyers on UpCounsel are available to help evaluate your rights.

Frequently Asked Questions

What is the purpose of the Cooling-Off Rule? The rule protects consumers from high-pressure sales tactics by allowing them to cancel certain sales within three business days.

What sales are exempt from the cooling-off rule? Exemptions include real estate, vehicles sold at permanent dealerships, emergency repairs, business purchases, transactions under $25 at home or under $130 elsewhere, and online or mail sales.

Can I cancel a car purchase under the Cooling-Off Rule? Generally, no. If the car is purchased at a permanent dealership, the Cooling-Off Rule does not apply.

Does the rule apply to online purchases? No. Online, mail, or phone sales are not covered. However, other federal or state laws may provide return or refund protections.

What should I do if a seller refuses to honor a cancellation? You can file a complaint with the Federal Trade Commission and consider consulting an attorney to enforce your rights under the Cooling-Off Rule.

If you need help with cooling-off laws, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.