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Residential notice of cancellation

August 7, 2021
Residential notice of cancellation   
            We are working with a few dealers that use your agreements and we have them uploaded. I had a question about the All-In-One and the Notice of Cancellation. 
            The All-In-One has a Cancellation page on the last page. There is also a separate Notice of Cancellation.  Should we have both signed on a residential agreement? 
  Thank you for your time.
            This questions pops up as reliably as Herpes.  The only things that have changed is that
  1) it's not necessarily a 3 day notice and
  2) with electronic contracts it requires an additional Consent Agreement
            It's not always 3 day cooling off period.  In California the law recently changed for seniors to 7 days cooling off.  For Medical Alert some states require 7 day notice for right to cancel.  When you buy a Standard Form Agreement we provide the necessary cancellation notice.  You should also be mindful that the cancellation notice is required by statute and that statute will usually mandate the precise language and font size of the notice.  When you get the cancellation form from K&K it will comply with the statute in your state and you should not modify it.
            Electronic contracts have added a new issue for residential customers:  how do you present a fully executed contract and the cancellation notice at time of execution when you're not there with the customer and execution is electronic?  You need the customer's consent to conduct the contract execution electronically and to provide the fully executed contract and cancellation notice electronically after execution.
            There is one cancellation notice and form in two documents.  The first is the notice which is directly above the customer's signature on the contract.  That notice refers to a form that can be used to cancel within the prescribed cancellation time.  You are required to give that notice form to the customer and fill in the date of the transaction and the date by which the customer must send you the cancellation form.  Though not required, I prefer to have the customer initial the cancellation form so you have proof you gave it to them.  With electronic contracts that cancellation form will be part of the electronic document you have the customer sign [in many places]. 
            Note that electronic execution requires consent by the customer to deliver the contract and cancellation notice electronically.  K&K provides a form, Disclosure and Consent to Electronic Communication, and if you use a company for your electronic contracts it may provide a similar form.
            The cancellation notice is not limited to door to door sales.  Unless you don't go to the residence before the contract is signed you probably need to provide the cancellation notice.  The penalty for not providing the notice is that the customer can cancel the contract any time prior to you complying with the notice and demand return to pre-contract execution status quo; you will have to remove your system and refund the money.  If you have a regular practice of ignoring the cancellation law you may be targeted by a state Attorney General and prosecuted form deceptive business practices, a rather unpleasant experience.
            You will also find that prospective buyers of your customer accounts will want a representation that you have complied, in every case and every customer, with the cancellation notice requirements.  If you cannot make that representation you may lose potential buyers or potential buyers may offer much less than you want and what they would otherwise have offered for your accounts. 
            I'm also seeing a disturbing trend among buyers looking for a due diligence period AFTER the closing.  In that scenario the buyer closes and then begins a rigorous due diligence of your accounts, reserving the right to reject some or all of the accounts and seek a refund or even rescission of the deal.  I have no idea how that would play out because I have never agreed to such provision and when I am representing a buyer I have never asked for such a provision.  I suggest you be wary of such a provision, whether you're a seller or buyer.  I mention it because if a seller can't produce the cancellation notice or form and prove it was used or explain why it wasn't, that will likely be a breach of a representation made in the buy-sell contract. 

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Ken Kirschenbaum,Esq
Kirschenbaum & Kirschenbaum PC
Attorneys at Law
200 Garden City Plaza
Garden City, NY 11530
516 747 6700 x 301