Consumer and Commercial Law Section

Consumer’s Three Day Right Of Cancellation of Certain Transactions

This information was compiled as of December 27, 2005. This brochure is not intended as a comprehensive analysis. It is solely for reference and is not intended to constitute or operate as a substitute for obtaining legal counsel from a licensed attorney.

As a general rule, there is no right to cancel a transaction after the fact. Most purchases from merchants, including big ticket items such as cars, are final once the contract has been signed or the price has been paid. However, for certain limited classes of transactions, Texas law does give consumers three days to cancel and requires merchants to inform consumers of these rights. The primary statute that grants such a right is called Cancellation of Certain Consumer Transactions but is commonly referred to as the “Home Solicitation Act.” The act provides for cancellation of home solicitation transactions and provides significant other remedies for violations of the act.

Scope of the Act

Although the Act is often associated with home solicitations (door to door sales), it applies to transactions that meet each of the following requirements:

1. Consumer Transaction – A "Consumer" is defined as an individual who seeks or acquires real or personal property, services, money, or credit for personal, family, or household purposes;

2. Solicitation of a Sale at a Place Other than the Merchant's Place of Business – "Merchant's place of business" is defined as a merchant's main or permanent branch office or local address;

3. Agreement or Offer to Purchase Is Given at a Place Other than Merchant's Place of Business;

4. Purchase of Goods or Services That Exceeds $25 or Purchase of Real Property That Exceeds $100.

Exceptions

The Act does not apply to the following:

1. Purchase of farm equipment;

2. Insurance sale regulated by the Texas Department of Insurance;

3. Sale of goods or services made:

a. under a preexisting revolving charge account or retail charge agreement or

b. after negotiations at a business establishment at a fixed location

4. Sale of real property in some situations

5. Transactions of $200 or less have reduced notice requirements if the right to cancellation is on the sales receipt and consumer can return goods or refuse delivery without incurring obligation

Merchant's Duties

A merchant must provide a complete receipt or copy of any contract at the time of its execution. The receipt or copy must:

1. Be in the same language as the oral sales presentation;

2. Show the date of the transaction;

3. Contain the name and address of the merchant;

4. List the last date (at least three-days away) on which the consumer may cancel the transaction;

5. Have substantially the following language near the consumer’s signature (or be printed on the receipt):

"YOU, THE BUYER, MAY CANCEL THIS TRANSACTION AT ANY TIME PRIOR TO MIDNIGHT OF THE THIRD BUSINESS DAY AFTER THE DATE OF THIS TRANSACTION. SEE THE ATTACHED NOTICE OF CANCELLATION FORM FOR AN EXPLANATION OF THIS RIGHT."

6. Have an easily detachable form with the information as shown on Attachment A (or a form in compliance with the Federal Trade Commission's trade-regulation rule providing a cooling-off period for door-to-door sales).

A Merchant must also:

1. Inform the consumer orally of the right to cancel the transaction;

2. Not misrepresent the consumer's right to cancel;

3. Notify the consumer before the end of the 10th business day after notice of cancellation whether the merchant intends to repossess or to abandon goods;

4. Refund all payments made under the contract or sale within 10 business days after receiving notice of cancellation;

5. Return goods or property traded-in, in substantially the same condition as when received by the merchant within 10 business days after receiving notice of cancellation; and

6. Restore improvements to pre-transaction condition within 10 business days after receiving notice of cancellation.

Remedies

1. A sale or contract where the merchant fails to perform any duty is VOID;

2. Violations of the Chapter create a cause of action and provide for

a. Actual damages,

b. Reasonable attorney's fees,

c. Court costs, and

d. A cause of action under the Deceptive Trade Practices Act.

3. If the merchant fails to demand possession of the goods or the right or title to real property within a reasonable time after cancellation (20 days), the goods or real property become the property of the consumer without obligation to pay.

Attachment A

"NOTICE OF CANCELLATION

(date of transaction)

"YOU MAY CANCEL THIS TRANSACTION, WITHOUT ANY PENALTY OR OBLIGATION, WITHIN THREE BUSINESS DAYS FROM THE ABOVE DATE. "IF YOU CANCEL, ANY PROPERTY TRADED IN, ANY PAYMENTS MADE BY YOU UNDER THE CONTRACT OR SALE, AND ANY NEGOTIABLE INSTRUMENT EXECUTED BY YOU WILL BE RETURNED WITHIN 10 BUSINESS DAYS FOLLOWING RECEIPT BY THE MERCHANT OF YOUR CANCELLATION NOTICE, AND ANY SECURITY INTEREST ARISING OUT OF THE TRANSACTION WILL BE CANCELLED.

"IF YOU CANCEL, YOU MUST MAKE AVAILABLE TO THE MERCHANT AT YOUR RESIDENCE, IN SUBSTANTIALLY AS GOOD CONDITION AS WHEN RECEIVED, ANY GOODS DELIVERED TO YOU UNDER THIS CONTRACT OR SALE; OR YOU MAY IF YOU WISH, COMPLY WITH THE INSTRUCTIONS OF THE MERCHANT REGARDING THE RETURN SHIPMENT OF THE GOODS AT THE MERCHANT'S EXPENSE AND RISK.

"IF YOU DO NOT AGREE TO RETURN THE GOODS TO THE MERCHANT OR IF THE MERCHANT DOES NOT PICK THEM UP WITHIN 20 DAYS OF THE DATE OF YOUR NOTICE OF CANCELLATION, YOU MAY RETAIN OR DISPOSE OF THE GOODS WITHOUT ANY FURTHER OBLIGATION.

"TO CANCEL THIS TRANSACTION, MAIL OR DELIVER A SIGNED AND DATED COPY OF THIS CANCELLATION NOTICE OR ANY OTHER WRITTEN NOTICE, OR SEND A TELEGRAM,