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ATTENTION CONSUMERS AND SMALL BUSINESS OWNERS:
A Little-Known Ohio Law Could Give Consumers
Almost Limitless Leverage and Cripple a Small Business
Chances are good that you have either done business with a small, individual or family-owned company, or you may own or work at one. Such companies are commonplace in a wide variety of industries and include most construction contractors (plumbers, painters, electricians, general carpenters, home remodeling and renovation contractors), home inspection and appraisal companies, landscapers and lawn care companies, and house cleaners. Professional and semi-professional service providers like accountants, architects, photographers, and interior designers sometimes also fall into this category. The list is extensive.
If you own or do business with companies like these, be aware that many contracts for goods or services between individual consumers and certain small businesses are subject to a right of cancellation by the consumer. For consumers “stuck” in a contract for goods or services that has gone sour, it is a valuable right that offers enormous negotiating leverage, not only before and during performance of the contract, but even after completion of the job. For the small business owner, it is a legal issue that, if ignored, could cripple or even potentially bankrupt your business.
Family-owned companies account for more than 90 percent of all businesses in the US and generate more than half the US gross national product. Many of these companies are relatively small, often run out of the owner’s home. Even if a company actually has a business office, customers may seldom visit or even know it exists.
Under a little-known Ohio law, many businesses that operate like this are subject to the same consumer-friendly rules that regulate “door-to-door” sales. Some consumers may be aware that the typical contract to purchase something from a “door-to-door” sales person is subject to a “three-day right to cancel.” Under a much broader law in Ohio, however, the concept of a “three-day right to cancel” applies far beyond a simple contract to purchase goods, far beyond the typical door-to-door sales transaction, and far in excess of three days. In reality, this same law that applies to the traditional door-to-door sales transaction also may apply to any transaction that even once includes either negotiation or contract execution at the home of the buyer.
Need an example? It is a safe bet that any company that has ever worked on or in a homeowner’s residence actually went to the home at some point prior to agreeing to do the work. In order to quote the job or prepare an estimate, a company representative probably went to the house, looked at the job, took measurements, discussed the scope of work with the homeowner, and then prepared a written estimate, proposal, or contract and either hand-delivered it to the homeowner at that time, or later dropped it off or mailed it to the homeowner. That is the common business practice of many small businesses, and in fact, it is rare when that a process like that is NOT followed by small contractors.
Take a look at the written contract that governs such a job. Does it have a three-day right to cancel? The law requires specific “notice to cancel” language in all contracts that are subject to this law, and the notice must be printed in a particular way (font size, bold type, etc.). If the contract doesn’t have the required notice of a consumer’s right to cancel, and if this law applies, guess what? The consumer may STILL have three days to cancel the contract and get a full refund.
“But the project is already completed,” you say. Surprise again! It might not matter. This law may allow a consumer to keep the benefit of all the work, products, and services and STILL get a full refund. Imagine that, FREE work!
If you’re a consumer, do you think there’s any leverage under this law if your job isn’t on schedule or the performance is poor? If you’re a small business owner, do you think you could survive long-term while refunding all of the money you’ve been paid by your customers on jobs that are already completed?
“But the homeowner called me first,” the small business owner cries. “I only went to the home because I was invited by the owner.” It might not matter. The law can apply even when the homeowner initiates the contact with the seller.
Frantically grasping for straws, the small business owner next tries this: “Well, I never actually went to the home, I just returned a few phone calls to the house and maybe mailed the contract proposal there. We never met at the customer’s house.” Are you free and clear of the law now? Not necessarily. Under this law, contact “at the customer’s house” can occur over the phone or through the mail.
This is an incredibly broad Ohio law. For consumers who are dissatisfied by poor service or delays, we can evaluate whether you might benefit from the leverage available if this law applies. And for the small business owner, we can evaluate whether this law applies to your company and, if so, counsel you on the ways you could modify your sales practices and your written contracts to help protect your company and your profits.
For these and other legal questions, BPBS attorneys are ready to help. We welcome your call at (513) 721-1350.
Steven C. Davis, Esq.