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Three-Day Right to Cancel - When is a Transaction "Consummated"?

Written June 30, 1998

The question raised by your letter is whether notice of right to cancel and a three day cancellation period is required with respect to a transaction in which a company solicits potential customers via telephone, after which an offer to contract is mailed to the potential customer, who may accept the offer to contract and return it to your client by mail. Notice of right to cancel and a three-day cancellation period is required in such a situation.

Chapter 423, Wis. Stats., governs consumer approval transactions, which require notice and three days after such notice within which a consumer may cancel a "consumer approval transaction." "Consumer Approval Transaction" is defined at sec. 423.201, Stats., as "a consumer transaction . . . 1)which is initiated by face-to-face solicitation away from a regular place of business of the merchant or by mail or telephone solicitation directed to the particular customer and 2) which is consummated or in which the customer's offer to contract or other writing evidencing the transaction is received by the merchant away from a regular place of business and involves the extension of credit or is a cash transaction in which the amount the customer pays exceeds $25."

The transaction described above meets the definition of a consumer approval transaction. First, your client contacts customers via telephone to sell its services. Therefore, the requirement of subsection 1), that the transaction be initiated by telephone solicitation directed to the particular customer, is met. The element set forth at subsection 2) is met because the transaction is consummated away from a regular place of business and involves the extension of credit.

It is the position of this department that a transaction is consummated when a contractual relationship is created between a merchant and a consumer (see DFI-Bkg 80.311, Wis. Adm. Code, used by analogy). It is a long-accepted common law rule, and the position of this department, that an acceptance is effective upon dispatch by the customer. Adams v. Lindsell, 106 Eng. Rep. 250 (1818). In other words, once the customer places the acceptance into a mailbox (assuming, of course, there is valid consideration in the form of an action or promise to act), the contractual relationship is formed. Therefore, the transaction would be consummated away from your client's regular place of business - it would be consummated at the mailbox.

Contrary to the contentions set forth in your letter, it is not necessary for the contract to have been received by your client away from its regular place of business for the transaction to be considered a consumer approval transaction. Subsection 2) states that only one or the other condition must be met. The transaction must either be consummated away from the merchant's regular place of business or the customer's offer to contract or other writing evidencing the transaction must be received by the merchant away from a regular place of business. For the reasons stated above, the contract was consummated away from your client's regular place of business.