Guide to Contract Cancellation Periods or “Cooling Off Periods” in the U.S.

Guide to Laws About Buyers Remorse and Cooling Off Periods

Are you in the “Help! I just signed a contract and I immediately regret it” phase? Well, if it’s not long after you have signed the contract, you may have an easy out. When it comes to certain consumer contracts, like those made in certain locations (e.g. door-to-door sales), or some types of transactions (e.g. gym membership), you may have a legally required cooling off period during which you can bow out gracefully.

However, if no cooling off period applies, keep in mind this is just one of several ways to get out of a contract.

What are the Cooling Off rules in the U.S.?

While most contract law is made at the state level, the Federal Trade Commission (FTC) has a cooling-off rule that applies throughout the country.

For purchases made in California, see our Guide to California Cooling-Off Periods.

What contracts or transactions does the FTC Cooling-Off rule apply to?

The FTC Cooling-Off Rule gives you three days to cancel certain transactions in which you have agreed to purchase goods or services, and the contract was made in-person at your home, workplace, or dormitory, or at a seller’s temporary location, like a hotel or motel room, convention center, fairground, or restaurant.

But there are exceptions to the above. The Cooling-off rule doesn’t cover sales:

  • under $25 if the sale was made at your home
  • under $130 if the sale was made at a seller’s temporary location
  • for goods or services intended for business use, or otherwise not primarily intended for personal, family, or household use (but the rule applies to instruction or training courses, regardless of your reason for taking them)
  • made entirely online, by mail, or telephone
  • if you have negotiated or discussed the transaction at the seller’s permanent place of business, where the seller regularly sells the goods or services you bought (even if you later signed the agreement at a non-permanent place of business)
  • where the seller made the sale outside of its normal location due to emergency circumstances
  • where you asked the seller to visit your home to repair or perform maintenance on a personal item (but if the seller sells you something beyond that repair or maintenance request, this is covered)
  • involving any of the following: real estate, insurance, securities, stocks, or bonds
  • involving cars, vans, trucks, or other motor vehicles sold at temporary locations, if the seller has at least one permanent place of business
  • involving arts and crafts sold at fairs or places like shopping malls, civic centers, and schools

How many days do I have to cancel the contract?

If the FTC Cooling-Off rule applies, you have 3 days to exercise your right to get out of the contract and get a full refund. This period lasts until midnight of the third business day after the sale.

For this rule, Saturday is considered a business day, but Sundays and federal holidays are not. Here are some examples:

If the sale happens in a week without a federal holiday, on a Monday, you have until midnight on Thursday to cancel. If the sale happens on a Monday, and Tuesday is a federal holiday, you have until midnight on Friday to cancel. If the sale happens on a Friday and the following Monday is a federal holiday, you have until midnight on Wednesday to cancel.

Keep in mind, if a state cooling-off rule also applies, and provides a longer cooling-off period, say, 7 days, then the longer period would apply.

Is the seller required to notify me of my rights?

Yes, by law, the seller must tell you, at the time of the sale, about your right to cancel. The seller also must give you:

  • 2 copies of a cancellation form: One copy is for you to keep. The other copy is to send to the seller if you decide to cancel your purchase.
  • A copy of your contract or receipt. The contract or receipt should be dated, show the name and address of the seller, and explain your right to cancel. Note: The contract or receipt must be in the same language that’s used in the sales presentation.

How do I cancel the sale?

You do not have to give a reason for canceling. The Cooling-Off rule gives you the right to change your mind for any reason.

To cancel a sale:

  • Sign and date one copy of the cancellation form. If the seller didn’t give you cancellation forms, write the seller a letter stating that you wish to cancel.
  • Mail it to the address on the form for cancellations. Send the cancellation form or letter by certified mail. You’ll get a return receipt so you have proof of when you mailed it and when it was delivered. Make sure the envelope is postmarked before midnight of the third business day after the contract date.
  • Also, keep a copy of the letter or cancellation form for your records.

What happens after I cancel?

If you cancel your purchase, the seller has 10 days to:

  • refund all your money
  • return any property you might have given them in exchange for the sale
  • tell you if they will pick up any product you still have or simply let you do what you want with it

Within 20 days, the seller must either pick up the items left with you, or, if you agree to send back the items, reimburse you for shipping costs.

If the seller gave you any items, you must make them available to the seller in a condition as good as when you got them. Otherwise you are not entitled to a refund, and you must pay the seller as you agreed under the contract.

What if the seller is not complying with the Cooling-Off rule?

If you think a seller has violated the FTC’s Cooling-Off rule, you can do one or more of the following:

  • Report it to the FTC at ReportFraud.ftc.gov
  • Report it to your state attorney general and your local consumer protection agency.
  • If you paid with a credit card, notify your credit card company that you want to dispute the purchase.
  • Talk to a consumer lawyer about it.

Further Resources

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Photo credit: by Gary Cole on Unsplash

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