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Cancelling a contract during a cooling-off period

14 December 2015

In the 2014-15 financial year, 23.8 per cent of the new complaints we received involved a contract issue. Consumers made complaints to us about issues including:

  • unclear or inadequate contractual information at the point of sale
  • the variation of contract terms, and
  • providers not allowing consumers to cancel contracts during cooling-off periods.

How cooling-off periods work

The Australian Consumer Law gives consumers who enter into an unsolicited contract, the right to cancel the contract within a ‘cooling-off’ period.

Contracts which have been initiated by a service provider over the phone such as a telemarketing call or at a location other than the provider’s place of business (for example, a door-to-door sale or being approached in a public place such as a shopping centre) are generally subject to a cooling-off period. Cooling-off periods do not apply where a consumer visits a provider’s store, calls to request a service or orders a service online. The purpose of a cooling-off period is to protect a consumer from being bound by an unsolicited contract that does not fit their needs, by giving them time to reassess and cancel the contract if necessary.

The cooling-off period for individuals is 10 business days. This period starts:

  • for sales made over the phone: the day after a consumer receives a written copy of the contract.
  • for sales made in person: the day after the agreement is made.

The consumer can cancel the contract for any reason during the 10 business days. The consumer needs to take note of how they can cancel the contract, which sometimes involves mailing a written cancellation letter to the provider.

Why cooling-off periods are important

During an unsolicited sale, a consumer usually does not have the opportunity to compare other offers. They may be persuaded to make a quick decision, for example by being told that an offer is only available for a limited period of time. Once the consumer has had time to reassess they may find there was a better deal with another provider or realise that, on reflection, they did not need the product.

While a cooling-off period is in place, a consumer who regrets agreeing to a contract can cancel within the 10 business day period. If the consumer misses the deadline, they will generally be bound by the contract.

Critical information summary

Providers must give consumers a written summary of a telecommunications offer before a consumer agrees to the offer. The written summary is called a critical information summary and it should contain important information about the contract such as the minimum contract term, billing and payment information and how a consumer can monitor their usage.

Consumers can check that the information they are told by a sales person matches the information in the critical information summary.

If there is a problem

Consumers may come to the TIO in a range of circumstances related to cooling-off periods. These include circumstances where the consumer:

  • has received bills despite cancelling during the cooling-off period, or
  • did not receive information about how to cancel and thus missed the cooling-off deadline.

If a problem arises, consumers should contact the provider as soon as possible to discuss the issue and give the provider an opportunity to look into the problem. If the consumer is not satisfied with the provider’s response, they can contact the TIO to help resolve their complaint.

More information

For more information about how we approach contract-related complaints, please see our position statements on Pre-sale information or conduct, Contracts, Transfer of services and Responding to consumers with different needs.

For more information about cooling off periods, go to the ACCC website: Telemarketing and door-to-door sales; and the Australian Consumer Law Guide on sales practices.

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