A purchase contract, also referred to as a contract to purchase or a purchase agreement, is a legal contract formalizing one party's offer to purchase another party's goods. Although purchase contracts are used primarily for the sale of real estate, they are also used for the sale of goods such as boats, automobiles and gym memberships. Through federal law set by the Federal Trade Commission and limited state laws, consumers have the ability to cancel certain contracts within a three-day period. This practice is referred to as the "three-day cooling off" rule.
Determine whether the contract can be cancelled. Through the Truth in Lending Act, a federal law, consumers have three days to change their minds about home improvement loans and second mortgages. If your contract was for something else, it must qualify for a cancelation under state law. For example, in California, consumers have five days to cancel a gym membership under state buyers remorse provisions.
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Prepare a formal cancellation letter. Your name and address should be listed first, followed by the date. Include the seller's name and address and under it. Include the subject -- which should read "cancellation of" and the subject matter of the purchase contract. Additionally, if the original purchase contract had an identification number, include it in the subject.
Explain the reason for the cancellation in the body of the letter. Be specific and to the point. Some state laws ay require you to have a valid reason for canceling, such as not being able to obtain funding or a loan. If your state requires a valid reason, be sure to state it clearly.
Provide an address where your voided check can be mailed to if you paid in full or provided a down payment.
Include your complete contact information at the bottom so the seller can follow up. Include your name, address, telephone number, email and work number, if applicable.
Sign and date your letter in front of a notary.
Make a copy of the notarized letter and mail the original via certified mail with a return receipt and signature confirmation to the seller. However, if the matter is time sensitive, such as in the case with the Truth in Lending Act, use an overnight mail method.
Not all contracts are covered by the three-day cooling off rule. In other words, not all contracts can be cancelled, no matter how soon after signing the contract you try to cancel them. Before signing a contract, take into consideration whether it can be canceled or not.