A Consumer’s Right to Cancel Some Types of Contracts in Maryland

Maryland businesses that sell directly to consumers – particularly in homes or at temporary locations – need to be aware that certain transactions carry mandatory cancellation rights. It is important to follow these consumer protection requirements in written contracts and in company sales practices.

Federal Trade Commission Cooling-Off Rule

The Federal Trade Commission’s (FTC) Cooling-Off Rule applies to some consumer sales made outside of the seller’s regular place of business. The rule generally applies to consumer transactions of $25 or more that occur at a consumer’s home or a temporary location such as a hotel or convention booth. When the rule applies, the consumer has the right to cancel the transaction within three business days after signing the contract. To comply, a business must take specific steps to properly disclose the consumer’s right to cancel and incorporate that right into its contracts.

Maryland Cancellation Requirements

Maryland law provides additional consumer protections under the Maryland Consumer Protection Act and industry-specific statutes. Some industries are subject to heightened requirements, such as home improvement contracts and door-to-door sales. Other regulated industries include health club memberships, timeshare sales, and credit service organizations. Maryland laws and regulations governing these industries can impose detailed requirements for cancellation rights.

Common Compliance Issues

Businesses most often encounter problems when they use generic contract templates, fail to provide adequate notice, include cancellation provisions that are incomplete or inconsistent with the law, or overlook Maryland-specific requirements that operate alongside and in addition to federal rules. Failure to comply may render the contract unenforceable and may expose the business to regulatory enforcement. Federal and state regulators, including the FTC and the Maryland Attorney General, may investigate violations, impose penalties, and take legal action.

Consult a Business Lawyer

Consider consulting with a business attorney to ensure compliance with cancellation requirements. As business attorneys, we assist business owners at every stage of ownership, offering guidance in selecting the best entity, drafting customized governing documents, and providing ongoing business counsel.