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Texas’s Three-Day Right to Cancel Contracts

Oct. 6, 2020

Well-written and well-thought out contracts clearly outline the responsibilities of both parties to avoid any confusion. Effectively, this allows both parties to accomplish their intended goals more efficiently. Though, in Texas, one may have the right to cancel contracts within three days of signing.

Contracts with Door-To-Door Sales People

Unfortunately or fortunately, depending on one’s perspective, door-to-door sales are still relatively common throughout the Houston area. Sales people walk neighborhoods selling their products face-to-face in people’s homes. Though, when a company utilizes this sales technique, Texas Business & Commerce Code Chapter 601 applies, which allows one to cancel the sales contract within three business days.

Other Types of Contracts

Chapter 601 also applies more broadly though. It applies to any contract where the seller solicits at places other than their business location, the agreement to buy is done at a place other than that location and where the transaction is for over $25 of goods or services or over $100 worth of real estate. But, other types of contracts are not covered, most notably, auto sales contracts.

Business Notice Requirements

Businesses may wish to consult an attorney to ensure they comply with Chapter 601 because it has specific requirements. By law, merchants are required to provide their customer’s notice of this three-day right to cancel.

This is done through the contract or receipt, which must state the sale date, name and address of the business and specify one’s right to cancel, including the address to send the cancellation request. This notice must be in the same language that was principally used in the transaction, so if the transaction was done largely in Spanish, this notice must also be in Spanish.

After Receiving the Notice of Cancellation

If a customer signs the “notice of cancellation” and mails it back to the appropriate address before midnight on the third business day, the sales contract is canceled. The business then has ten business day to refund all monies paid and return any other items received. Within 10 days, the business must also notify the customer whether they intend to retrieve or abandon the items involved in the transaction. Though, while this may seem straight forward, there are other requirements that could complicate matters for businesses. This is again why Houston businesses may find working with experienced business attorneys helpful.