Contract Cancellation Information for Consumers

This alert provides a short summary of our laws regarding your rights as a consumer, related to certain contracts:

Many people incorrectly assume they have a right to cancel any contract. They may also think they can return an item, no questions asked, for their money back.

General Principle: You do not have a right to cancel most contracts.

If the item was defective, damaged, or not delivered:

• You may be able to ask for your money back; and
• Merchants who offer a “money-back guarantee” must live up to that promise.

If items or services were provided:

• You most likely won’t be able to ask for your money back; and
• You most likely won’t be able to cancel the contract.

If a seller isn’t required by law to cancel a contract but does, they can pass on reasonable cancellation costs to you, the buyer. The contract may provide the amount you must pay if you cancel the contract. This is known as “liquidated damages.” A term fixing unreasonably large liquidated damages is likely void as a penalty.

“Cooling-off Period”

There are certain circumstances when you do have a legal right to a "cooling-off period." At the time of signing, sellers are required to provide written instructions. You must carefully follow these instructions.

There may be other laws that provide a “cooling-off period.” It is important for you to speak with your own private attorney about your specific situation and if you have a right to cancel.

Michigan’s Cancellation Laws

You have THREE business days to cancel a contract if one of these three laws applies:

Law 1 - The Home Solicitation Sales Act (HSSA) gives people who are solicited in their homes three business days to decide if they want to cancel a contract.

You are protected by Michigan's HSSA when:

• You are contacted by mail or phone. They may also contact you in person.
• You receive a promotion at your home either by mail or phone. Newspaper ads do not count.
• You agree to purchase when the salesperson is at your home. The agreement to purchase is also known as a contract.
• The goods or services purchased are worth more than $25.

Law 2 - The Gift Promotion Act gives you three business days to cancel if you change your mind and the following is true:

• You are offered anything worth more than $25 in exchange for attending a sales presentation; and
• You purchase goods, services, or memberships that cost more than $500.

Rule 3 - The Federal Truth in Lending Act applies to Home Equity Loans (not construction loans) and gives you three business days to change your mind if you:

• Took out a loan for personal, household, or family purposes; and
• A lien or security interest was placed on your house to secure payment.

If the loan won’t be used to buy or build a home and both conditions are true, then your contract may be covered by the Federal Truth in Lending Act.

You have ONE business day to cancel a contract if it falls within Michigan's Home Improvement Finance Act. You may have until 5 p.m. the next business day if:

• The contract is for home improvement; and
• You agreed to make payments to the contractor over time.

These laws can be tricky. Read the contract carefully. Know when the cancellation period expires. The Attorney General encourages residents to contact a private attorney with questions and for legal advice. It’s best to get advice before the cancellation period ends.

What to Do if Your Transaction is Covered by a Cancellation Rule

1. Read your contract thoroughly. The right to cancel must be in the contract. Sellers must explain what you need to do to cancel. If this is not included, you may have additional time to cancel.
2. Exercise your right to cancel according to the correct law’s requirements:
   • HSSA or Gift Promotion Act:
     • You can deliver or mail your written cancellation notice to the seller’s address within three business days. This is three business days from the date you signed the contract.
     • The seller must return your payment within 10 days after cancellation. Under HSSA, the seller has 20 days to demand that you return goods already delivered. If they don’t ask for them in time, the delivered goods are yours without obligation.
   • Home Improvement Finance Act:
     • You must send your written cancellation notice by certified mail to the merchant’s address no later than 5 p.m. the next business day. This is the next business day after you signed the contract.
3. If the contract does not tell you of your right to cancel.
   • Send the seller your cancellation notice by both certified and regular mail.
   • Be sure you put your return address on the envelope.
   • Keep a copy of the notice and proof of mailing.