In this article we will answer the question, “how much time do you have to back out of a contract?”  We will explain the general rule that contracts are effective when signed, and discuss some exceptions, such as contracts that are subject to the FTC’s three-day cooling off period, contracts of particular types for which state statute creates a right to revoke, and situations surrounding the signing of the contract that may lead to a valid defense.

The General Rule: Contracts Are Effective When Signed

The general rule is that when an individual or business accepts and signs a contract with another party, they are considered to be legally bound to that contract. Unless a contract contains a specific rescission clause that grants the right for a party to cancel the contract within a certain amount of time, a party cannot back out of a contract once they have agreed and signed it. If there was not a rescission clause and a party is unable or unwilling to fulfill their obligation to the contract, they can ask the other party if the contract can be voided. In some instances, the other party may agree as it’d be in their best interest to not be in a contract with a person or business who does not want to be in contract with them. This would be considered “mutual rescission” and another contract would be created to void the original one.

The FTC’s Three-Day Grace Period To Cancel a Contract Explained

There is a common misconception that consumers automatically have a three-day grace period to back out of a contract, especially when it comes to purchasing cars. The FTC has a Cooling-Off Rule and each state may have its own laws regarding when consumers can cancel a contract or agreement, but this does not apply to all transactions.

The FTC’s Cooling-Off Rule gives the buyer a three-day period to cancel a sale made at their home or workplace (such as a door-to-door salesperson), or at a seller’s temporary location, like a hotel, convention center, fairground or restaurant. This law was created to protect consumers from being pressured into deals, or and to prevent the feeling of buyer’s remorse. Under Illinois law, consumers are protected with a three-day right to cancel for these types of transactions:

• Campground Memberships (Illinois Campground Membership Act)
• Physical Fitness Center Contracts (Illinois Physical Fitness Services Act)

Illinois Hearing Aid Consumer Protection Act, which allows the buyer to cancel the transaction within 45 days when ordering a hearing aid through the mail.

If you have entered a contract that is protected under a three-day right to cancel and you decide to cancel the contract, you must provide a “Notice of Cancellation” within that time frame. Best practice in these types of transactions is to never sign a contract that does not fully and explicitly describe the three-day right to cancel, does not include the date of sale on the contract, or that contains blank spaces.

Contracts in Particular Industries For Which State or Federal Statutes Create a Right to Revoke

In addition to contracts that are subject to the FTC’s 3-day cooling off period, depending on the type of contract or the industry involved, state or federal law may contain statutory language that creates a time period in which one of the parties is able to revoke the contract.  This is most common for contracts in which one of the parties tends to be more sophisticated than the other or hold a position of power over the other.

For example, home repair or remodeling contracts also require a three-day right to cancel. This is required when the sale of services or merchandise is $25 or more, and if the contract is signed when the salesperson or contractor is physically present in the consumer’s residence. The law states that the right to cancel within three days must be given both orally and as part of the written contract. This means the contract must include wording that explains the legal right to cancel and how the consumer can exercise this right.  To learn more about this topic, check out our article: Illinois Home Repair Fraud Explained.

Under Illinois law, consumers are protected with a three-day right to cancel for these types of transactions:

• Campground Memberships (Illinois Campground Membership Act)
• Physical Fitness Center Contracts (Illinois Physical Fitness Services Act)

In addition, the Illinois Hearing Aid Consumer Protection Act allows the buyer to cancel the transaction within 45 days when ordering a hearing aid through the mail.

Circumstances Surrounding the Execution of a Contract that May Make it Invalid

Even if one if your contract is not of the type that is revocable through statutory language, if the circumstances were such that your signing of the contract was manifestly unfair, such as a situation in which you were under physical or financial duress, you may have a defense that would excuse your performance.  For more on this check out our article, Illinois Defenses to Breach of Contract Explained.