torn-contractIf you ask 10 Californian business people if they have the right to cancel a contract within 3 days of signing a contract with another businessman, I am willing to bet you 9 out of 10 will say “OF COURSE YOU CAN – DEFINITELY!”

That is perhaps one of the most widely believed pieces of nonsensical mistakes California business people can and do make on a daily basis. I am routinely asked for confirmation of that belief and when I inform folks “HECK NO!” they look at me in total shock, followed by the traditional, “Bbbb-But I was told…”.

Stop believing what you’re told by unqualified people. There are, indeed, very certain circumstances where a contract can be rescinded or cancelled.

When To Cancel a Contract

• Contracts involving credit transactions by which an owner of residential property would place a security interest on that property
• Contracts with dating or weight loss facilities (not typically a B2B contract)

Both of the above circumstances have a three-day threshold.

Then there are contracts with immigration consultants (72 hours after signing) – also not a typical B2B situation.

There are also contracts to develop inventions – they have a 7-days threshold after signing.

In all of the above instances and others where an unconditional right to rescind (as defined by statute) exists, contractors (he who authors the contract) have an obligation to state those limits and rights to rescind in the written terms of the contract.

Exceptions to the Contract Cancellation Rules

Otherwise – Now pay close attention – Where contracts do NOT state a right to rescind (and are not otherwise controlled by statute), there is NO UNCONDITIONAL RIGHT TO CANCEL A CONTRACT YOU’VE SIGNED!

Certainly, there are statutory conditional rights to rescind if certain things are true:

• A party’s consent to a contract was obtained by fraud, duress, menace or undue influence
• The party’s consent was given by mistake, where the contract was illegal
• The consenting party did not receive the consideration (thing of value) for which he had bargained.

If you believe, as I do, that your agreements should be written with clarity, state unequivocally the conditions upon which your contract can be cancelled. Clearly state the deadline and the manner in which the contract can be cancelled. If you want to be notified in writing, will an email suffice or will you require cancellation via certified mail? Your rescission term should also specify that any such rescission shall only be at the sole discretion of the contractor.

If YOU signed a contract and believe it was a mistake or if someone signs YOUR contract and then tells you it was a mistake, SEEK THE ADVICE OF COUNSEL before you make what could be a costly decision against you. As with all contracts, when you’re trying to create one, please, please and oh yes …PLEASE consult an attorney.

The next time someone suggests there is always this mythical unconditional right to cancel any written contract, smile and then quietly suggest to them they need to talk to a good lawyer.

Dave Greenberg began his career in commercial collections with Dun and Bradstreet in Seattle, Washington. After spending 8 years with D&B, Dave took a position with ABC-Amega Inc. Over a 32-year span, he vastly expanded their international department and became an industry leader in the commercial-international niche sector. He was a Past President of the California Commercial Collectors Association, on the panel of commercial arbitrators for the American Arbitration Association, and the Council of Better Business Bureaus, while also remaining active in the US Air Force Reserve.

He is a co-author for both FCIB and ICTF for their online credentialing courses for international credit management offered through Michigan State University and Thunderbird School of Global Management. Over the decades, Dave traveled the world, providing speaking engagements to credit grantors from Cyprus to Germany to China. He currently serves as Legal Liaison with the Law Offices of Gary A. Bemis.

Dave is also an author of children’s books and, along with his wife, recently moved to California to be closer to their grandson.

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