If a customer wants to cancel a signed contract, the dealer has four options:
- Cancel the contract and refund the deposit: Usually the quickest and simplest solution. It can also generate goodwill and boost the dealer’s reputation.
- Try to salvage the deal: Provide the customer with options that address their 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 called liquidated damages, and must be reasonable and provable. If a consumer files a complaint about liquidated damages, OMVIC will likely 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. While an option, this course of action is expensive and time consuming. Meanwhile the vehicle sits on the lot and can’t be sold.
Customers DO have the legal right to refund and/or contract cancellation if:
- There’s no signed contract
- Certain condition(s) are not met
- Rescission is owed due to non-disclosure
- Rescission is owed due to an unfair business practice
Click here to learn more on rescission.
A consumer has the right to rescind (cancel) a contract up to 90 days after delivery if the dealer failed to make certain mandatory disclosures. OMVIC refers to these as the “Six Deadly Sins” because they can effectively kill a deal. Rescission also cancels any other agreement (e.g. financing, extended warranties) under the contract.
The Consumer Protection Act (CPA) gives consumers the right to rescind a contract up to one year after the date of signing if a dealer makes a false, misleading, deceptive or unconscionable representation.
The video above is designed to help dealers, managers and salespeople better understand contract cancellation; how to avoid problems; what to do if a customer wants to back out; and, when consumers do have the legal right to cancel a contract.
To further assist dealers ensure compliance with contract cancellation regulations, OMVIC has produced this resource:
Understand Contract Cancellation: Fact Sheet
Contract Cancellation Quiz
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