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Contract Cancellation: A Guide For Small Business

There are times when people who enter into a contract change their minds. They may think they’ve gotten themselves into a bad deal. It could also be because of a change in the circumstances that they won’t be able to deliver what they promised to their client or customer anymore.

According to Florida contract law statutes, small businesses should consider knowing more about how to handle things when they need to cancel contracts with clients. Sellers should know what to do when they receive a notice of cancellation.

Here’s a guide for small businesses on how buyers can cancel contracts of purchase in some circumstances:

 1. ‘Cooling-Off Period,’ Not A General Right

There’s no general right to a ‘cooling-off’ period. Neither the business owner nor the buyer is entitled to any automatic ‘cooling-off’ period after the signing of the contract. There’s no statutory right for any of the parties to cancel a duly-signed contract a few hours after they’ve affixed their signatures on the dotted line.

Given this general rule, anyone who’s about to sign a contract should read it carefully to make sure they’re making the right decision before they sign the final agreement. Small business owners should seriously consider asking a lawyer who specializes in contract preparation and review to go over any contract that they’re about to sign before they do so. They should also ask their lawyer to add features in the contract, which can protect them and give them the right to back out if it turns out to be disadvantageous to them.

 2. Exceptions

Although there’s no general grant of a ‘cooling-off’ period for all contracts and business transactions, there are a number of well-recognized exceptions under the contract laws. Most of these are allowed to protect the consumer from a potentially disadvantageous purchase or transaction.

For example, if you entered into a contract to provide future services on a continuing basis, you’d be entitled to a three-day ‘cooling-off’ period. The subject matter of the contract should be for you to render services at some point in the future. If you realize that you don’t want to push through with the agreement before the three-day ‘cooling-off’ period lapses, you can still back out of the transaction.

Another exception relevant to small businesses is when the purchaser is no longer in a position to physically receive the services which were paid for in a contract for future services. The purchaser in such a contract is entitled to rescind the contract on that ground. This same ground can be invoked if the services which were erstwhile offered are no longer available under the same terms and conditions as they were in the original offer.

Home solicitation sales are also considered an exception to the general rule that there’s no ‘cooling-off’ period under the contract laws. Consumers who buy items in a home solicitation sale are also entitled to a three-day ‘cooling-off’ period. They can still cancel the sale if they decide they don’t like the item after all as long as they do so before the lapse of three days.

To be considered as a home solicitation sale, an item should’ve been sold to the buyer during a sales call at their home. The sale could’ve also taken place at a place other than the main or permanent place of business of the seller. The item should have a value of not less than $25 for the transaction to be considered as a home solicitation sale.

 3. How To Cancel The Contract

Buyers who decide to invoke or make use of their right to cancel the contract within the ‘cooling-off’ period should do it the right way. The proper way to cancel a contract is to do so in writing. The buyer should send a written notice to the seller that the buyer is making use of his or her right to cancel the contract.

The buyer should make sure that the notice of cancellation is received by the seller before the lapse of the three-day ‘cooling-off’ period. They should ask the seller to sign the receiving copy of the notice of cancellation as proof that it was made in due time. If the buyer just called up the seller to say that they want to return the item purchased during a home solicitation sale, it might be difficult to prove later on that the notice to cancel was given before the deadline lapsed.

The seller should provide a written notice to the buyer expressly stating that the buyer has the right to cancel the contract of purchase within the ‘cooling-off’ period. This notice should be given to the buyer at the time when the item is sold to the buyer. This legal requirement applies to both home solicitation sales as well as the sale of future consumer services.

The seller in a home solicitation sale should include in the written contract with the buyer a written explanation of the right of the buyer to cancel the contract within the ‘cooling-off’ period. In the sale of future consumer services, the law requires that the notice to the buyer about their rights to cancel the contract should appear right next to the blank space where the buyer will affix his or her signature to the contract of purchase.

 4. Procedure For Canceling

The proper procedure for canceling a business contract is to do it in writing. In some instances, it’d be enough for the purchaser to send a letter to the seller to tell them that the buyer canceled the contract. The party who intends to cancel the contract has to send a letter written in the accepted business format.

The party canceling the contract should inform the seller that they’d like to terminate the purchase agreement in accordance with their rights under the terms and conditions of the contract of purchase. The letter should be dated and specifically identify the product that you bought from them.

Another way of canceling a purchase is by filling out a cancellation form if the seller already has an existing set of forms for canceling purchases. If the letter or notice to cancel is going to be sent in person, they should make sure that it’s received by the seller before midnight of the third day from the date when they bought the item.

They can also do it through email as long as they do so within three days. The other option is to send the letter by certified mail with a return receipt which would prove that the letter was received by the seller.


There’s no general rule in the law that grants a right to cancel contracts, but there are a number of well-recognized exceptions. Under these exceptions, the buyer in a purchase agreement has the right to cancel the contract within the ‘cooling-off’ period. As a small business, you should know how to cancel a contract to render future services if you find it disadvantageous. You should also know how to handle cancellation notices from your buyers.

About the Author

Anne Klein often writes about anything important to small businesses. When not writing, she would be seen on the biking trails on weekends and holidays.