Can You Get Out of a Contract After You've Signed It?

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We enter into contracts all the time, and for many reasons. Every time you order a service (utilities, phone, internet, wireless, cable, satellite TV), buy a membership or a subscription, purchase something online, hire a repair person to fix your car / toilet / furnace / etc., or lease a vehicle – you are entering into a contract for those services.

Let's say you decide to lease a vehicle. Yesterday you signed the lease contract but today you're not so sure. Is there any way you can legally get out of it now? Quite often the answer is "yes". Many countries, states, provinces and territories have laws in place to protect the rights of consumers and to ensure that they are well informed about the goods or services they are purchasing or leasing.

What are your rights?

Consumer protection laws differ from place to place. Some offer broader protections than others, and to be sure exactly what your rights are, contact your federal or state, provincial or territorial government to find out what your rights are. Under US law, the seller is required to give you a notice of your right to rescission (in other words, the right to cancel the contract) in any transaction which might result in a lien or security interest being placed on your home.

In most cases, once you've signed a contract, you're bound by it and you can't change your mind. However, under particular circumstances,  the law usually gives a consumer the right to cancel an agreement, for instance:

• If the seller has made a false, misleading or deceptive representation about the goods or services.
• If you are sent the wrong goods, or if the goods or services are not delivered on time.
• If the contract is subject to a “cooling off” period (this is common with contracts for the purchase of higher priced items such as vehicles).
• If you don’t receive a copy of the signed agreement.
• If the contract does not fully disclose the details of the transaction, e.g. goods purchased, purchase price, taxes, financing charges and other fees, credit terms, interest rate, etc.

Consumer protection laws cover a wide range of purchase and credit transactions, such as vehicle purchases / leases and repairs, door-to-door sales, personal loans, timeshares, travel, furniture, franchises, investments, and new home warranties. The right to cancel a signed contract is called a right of rescission. Make sure that you have the right to cancel by doing your research before you sign. If there is a rescission period that applies to your situation, it may be as short as 3 days or as long as 14 days, depending on the laws that apply where you live. The right of rescission does not apply to all transactions. For instance, you cannot cancel a mortgage loan to buy or build your principal residence. And in general you cannot rescind a refinancing loan if it's made with the same lender who made the original loan.

How do you find out if you're protected by the law?

Many countries have consumer protection laws in place, including the United States, Canada, United Kingdom, Germany, Australia, New Zealand, India, the European Union, and Republic of China (Taiwan). In addition, many US states have adopted the Uniform Deceptive Trade Practices Act as a further layer of protection at the state level. To find out exactly what your rescission rights are, contact your state/provincial or federal government.

How can you cancel the contract?

Once you’ve determined that you can legally rescind the agreement, write a letter to the vendor or supplier telling them that you are cancelling the contract. Make sure that you email, fax or deliver the letter within the time limit set by the contract terms or by law. Keep a copy for your records. Here is a sample cancellation letter that you can download. Within a legally mandated time period after the contract has been cancelled, the vendor / lender / supplier must refund all the money you paid as part of the transaction (deposits, downpayments, etc). If you fail to exercise your right to rescind the contract within the time period and in accordance with the law, you must honor the contract and proceed with the transaction.