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Cancelling an Agreement

Generally speaking, unless a dealer has breached the Motor Vehicle Dealers Act (MVDA) or Consumer Protection Act (CPA) in a way that specifically triggers a customer’s/consumer’s right to rescission (contract cancellation – see below for details), or a condition on a contract is not met, there is no right to cancellation, or a "cooling-off" period, once a customer has signed a contract to purchase a vehicle. This is why each purchase agreement must contain the following statement next to the purchaser’s signature:

Sales Final

Please review the entire contract, including all attached statements, before signing. This contract is final and binding once you have signed it unless the motor vehicle dealer has failed to comply with certain legal obligations.

It is vital every consumer carefully read the entire contract (and any other associated agreements (e.g. financing contract) and only sign it when he/she is certain he/she wants to purchase the vehicle.


How to Avoid Problems with Contract Cancellation

To avoid contract cancellation disputes consumers should:

  • Understand that sales are final unless the contract includes a condition(s) allowing for cancellation
  • Ensure all promises and conditions are written on the contract
  • Understand vehicle locating and timing if the vehicle is not in stock or must be factory ordered
  • Ensure contracts are complete, including any finance terms and conditions
  • Only sign the contract if they are certain they want to purchase the vehicle

What can a Dealer do if a Consumer Cancels with no Legal Reason?

If a consumer cancels an agreement without a legal right to do so, the dealer has four options:

Cancel the contract and refund the deposit: some dealers do this to avoid the problem of dealing with cancellations. It can also generate goodwill and boost the dealer’s reputation.

Try to salvage the deal: Provide the customer with options that address his/her concerns. For example, offer to find a more suitable or affordable vehicle.

Seek compensation: A dealer may choose to seek compensation from the customer for expenses suffered because of the cancellation of the contract. These are referred to as liquidated damages, and must be reasonable and provable. If a consumer files a complaint about liquidated damages, OMVIC may ask the dealer for documentation proving the damages.

Sue the customer: A dealer could pursue civil action and ask the court to enforce the contract.


Requesting a Deposit Back

While some dealers may cancel a contract and return a deposit as a gesture of goodwill, they are not obligated to do so. Should a consumer find him/herself in this situation OMVIC recommends being honest with the dealer and seeking an amicable resolution. It may be necessary to put your request in writing.

Consumers seeking to cancel a contract may send a letter to the dealership provided that:

  1. the contract was recently signed and the purchaser has not taken possession of the vehicle, AND,
  2. the consumer wishes to cancel the agreement under one of the conditions specified in the back of the contract but mutual consent has not been given.

This is an example of how the letter to the dealership should be worded. Note: use a delivery method that provides proof of delivery.


Help Dealing with a Contract Cancellation Dispute

Consumers with questions regarding contract cancellations should contact OMVIC’s Complaints and Inquiries Department at 1-800-943-6002x3942, or via email at consumers@omvic.on.ca

Important note: OMVIC will attempt to assist consumers involved in a dispute with a registered dealer however OMVIC does not have the authority to order a dealer to cancel a contract or return a deposit, only the courts have that authority.


Exceptions: When a Contract CAN be Cancelled

While there is no mandated cooling-off period when buying a vehicle, there are certain situations that do provide consumers with the legal right to a refund or contract cancellation.

These occur when:

  • there is no signed contract
  • certain condition(s) are not met
  • rescission is owed due to non-disclosure (under the MVDA)
  • rescission is owed due to an unfair business practice (under the CPA)

Deposit Given with no Signed Contract

If a consumer gives a dealer a deposit for the purchase of a vehicle but no contract is signed, the consumer can request the deposit back at any time and the dealer must comply.


Conditions not Met

Conditions set out in clear terms what the seller and buyer are obligated to do before a purchase is completed. If a condition isn’t met, the deal is cancelled and any deposit is returned.

Are There Common Conditions Consumers Request?

While conditions stipulated should be based on what is important to the purchaser, some frequently requested conditions on a contract are:

  • Subject to a mechanical inspection
  • Subject to repairs being made
  • Subject to a spouse/partner/parent’s approval
  • Subject to satisfactory financing be arranged

First-time car-buyers may also want to consider a condition related to finding affordable insurance. Very often, young car buyers, or car buyers who have a bruised driving record, may face very expensive insurance rates, with monthly payments that are higher than their car loan payment.

Get Conditions in Writing!

Verbal promises or representations can be difficult to prove, so it is vital to get all conditions in writing. Note: a dealer can refuse to agree to a condition – it is then up to the customer to decide if he/she wants to proceed with the purchase.


Rescission Under the MVDA

Section 50 of the General Regulations of the MVDA allows a customer to cancel a contract within 90 days of delivery if the dealer and contract fails to disclose (or fails to disclose in a timely way):

  1. The previous use of the vehicle as a taxi or limo
  2. The previous use of the vehicle as a police or emergency service vehicle
  3. The previous use of the vehicle as a daily rental (unless the vehicle has subsequently been owned by someone other than a dealer)
  4. The make, model, and model year of the vehicle
  5. That a vehicle has been branded (irreparable, salvage or rebuilt), and how last classified
  6. The actual distance the vehicle has travelled. When that cannot be determined, a dealer must make the appropriate disclosure statement

Note: A margin of error is allowed to the dealer where he or she determines the total distance driven, or, when he or she cannot determine the total distance driven, but can determine the distance driven as of some past date. The disclosure of distance made by the dealer is deemed to be accurate if it is within the LESSER of 5 per cent or 1,000 kilometers of the correct distance required to be disclosed.

Template Letter Requesting Rescission under the MVDA

Consumers seeking to rescind a contract due to a failure to make one of the required disclosures mentioned above may send a letter to the dealership informing them of the intention to cancel the agreement. This is an example of how a rescission letter should be worded.

OMVIC recommends sending the letter in a manner that provides proof of delivery.


Rescission Under the CPA

Consumers may be entitled to request the cancellation of an agreement if they have been victims of unfair practices. The CPA defines unfair practices as those involving false, misleading, deceptive or unconscionable representations.

Consumers have up to one year from the date of contract signing to request rescission under the CPA. Note: as a considerable amount of time may have lapsed before rescission is granted under the CPA, the courts may allow dealers to charge for usage if a contract is rescinded under the CPA.

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