Three-Day Right to Cancel

All home improvement jobs require the federal 3-day notice of the right to cancel. Each owner has to receive two copies of the form “Notice of Right to Cancel Under Regulation Z”. Once that form is delivered, it’s good professional practice to either:

• Delay the start of work until three days have passed, or,
• Get the owner to sign a waiver of the right to cancel.

The federal right to cancel form is very clear:

You may use any written statement that is signed and dated by you and states your intention to cancel, or you may use this notice by dating and signing below.

Notice the word “written” in the federal form. The best way to cancel under Reg Z: Fill out the federal form and drop it in the mail. An email message is probably just as good. But a phone call doesn’t qualify. Cancellation has to be in writing under Reg Z.

Pennsylvania home improvement contracts require a second notice of the right to cancel. That’s Pennsylvania’s Home Improvement Consumer Protection Act (HICPA). Pennsylvania law doesn’t require a rescission form. But every PA home improvement contract needs the following language:

This contract includes a three-day right of rescission: An individual signing a home improvement contract . . . shall be permitted to rescind the contract without penalty regardless of where the contract was signed, within three business days of the date of signing.

You don’t see the word “written” anywhere in the HICPA disclosure. Is an oral cancellation enough in Pennsylvania? Some Pennsylvania contractors don’t think so. They simply ignore phone calls from customers trying to cancel. If no written cancellation is in the contractors’ office within three days of signing, they start work. No refunds. An owner trying to stop the job after three days is in breach of contract.

Pennsylvania’s HICPA is tough. If the work is more than $500, the contract has to include a long list of notices and disclosures:

• The attorney general’s phone number.
• The contractor’s street address — not a P.O. Box.
• Specific start and completion dates.
• A description of the materials to be used and a set of specifications.
• The contractor’s property damage and liability insurance limits.
• A list of subcontractors, each with a phone number and street address (no P.O. Box).
• If arbitration of disputes is required, the arbitration clause has to be in 12-point bold caps and must specify (1) whether documents will be confidential and (2) whether the arbitrator’s decision is final.
• If the contract price exceeds $1,000, the down payment can’t exceed 1/3 of the total price plus the cost of any special order materials – which have to be listed in the contract.

Is oral cancellation enough in Pennsylvania?

If a contractor has to put all these notices in writing, isn’t it fair to require written notice of cancellation from an owner? What’s good for the goose should be good for the gander.

That isn’t how the court saw it. Commonwealth v. Gillece Services, decided earlier this month. The court ruled that no writing is required to cancel. A contractor must cancel and make a refund “regardless of the medium used by the customer to provide actual notice of cancellation.” The result: A phone call can cancel the job under Pennsylvania law even if not under federal law.

The court’s decision makes sense to me. Would you start work after an owner calls to cancel the job? I don’t recommend that. It’s asking for trouble – legal trouble.

To stay out of legal trouble in any state and on any type of job, work under a good contract. The best contract drafting tool I know is Construction Contract Writer. The trial version is free.