Cooling-off and cancelling unsolicited contracts

Agreements negotiated over the phone:

The cooling-off period begins on the first business day after the consumer receives the agreement document.

Agreements that have not been negotiated over the phone

The cooling-off period begins on the first business day after the agreement was made.

Consumers may terminate an agreement up to three months after it is made (or the agreement documents are received, if the agreement is by phone) if the salesperson:

• visited outside of the permitted selling hours;
• did not disclose the purpose of the visit;
• did not produce identification; or
• did not leave the premises upon request.

The period is extended to six months if a salesperson:

• did not provide information about the cooling-off period;
• was in breach of any of the requirements for unsolicited consumer agreements (such as failing to provide a written copy of the agreement or not including required information in the written agreement); or
• supplied goods or services during the cooling-off period.

A consumer may terminate an agreement orally or in writing. The termination date is considered to be the date on which the notice was given or sent by the consumer.

Once a consumer has given notice to terminate an agreement (either orally or in writing) the agreement is void. The notice is effective even if:

• written notice has been given, but the supplier has not received it; or
• goods or services supplied have been wholly or partly consumed or used.

If a consumer cancels an unsolicited consumer agreement, then any related contract or instrument is also void, which means it is also effectively cancelled.

Example:

A consumer agrees to buy a $900 washing machine from a door-to-door trader, and also signs a separate agreement for servicing the washing machine, costing $80. The second contract is not covered by the cooling-off provisions. If the consumer cools off on the washing machine purchase then the service contract is also cancelled.

For goods bought on credit or finance, it is the supplier’s responsibility to contact the credit provider and arrange for cancellation. For more information, contact the Australian Securities and Investments Commission (ASIC).

When a consumer cools off, the supplier must promptly return or refund to the consumer any money paid under the agreement or related contract.

A supplier cannot:

• take action against the consumer to recover any payments allegedly owed under the agreement; or
• place, or threaten to place, the consumer’s name on a list of defaulters or debtors.

• The consumer must, within a reasonable time, return any goods that have not been consumed or tell the supplier where to collect them.
• If a consumer has not taken reasonable care of the goods, the supplier can seek compensation for depreciated value.
• The consumer does not have to pay compensation for normal use of the goods or circumstances beyond the consumer’s control.
• If the supplier does not collect the goods within 30 days, then the consumer can keep them.
• If the agreement is terminated after the cooling-off period and a service has already been provided, the consumer may have to pay for the service. Obviously, the service can’t be 'undone' once it has been provided.

A supplier cannot enforce an agreement if the supplier’s agent (salesperson) has breached the law on unsolicited consumer agreement.

Both the supplier and salesperson may be liable for the breaches.

Suppliers should ensure their sales agents and other representatives are fully aware of legal obligations when using unsolicited marketing approaches.