Attention Consumers and Small Business Owners:
A Little-Known Ohio Law Could Give Consumers Almost Limitless Leverage and Cripple a Small Business
By: Steven C. Davis, Attorney with Barron Peck Bennie & Schlemmer Co. LPA
Chances are good that you have either done business with an individual or family-owned company or you own one. Such companies are commonplace in a wide variety of industries and include most construction trades (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 architects, photographers and interior designers sometimes also fall into this category. The list is endless.
If you own or do business with companies like these, you should be aware that many contracts for goods or services between individual consumers and certain types of small businesses could be 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.
According to recent government statistics, family-owned companies account for more than 90 percent of all businesses in the United States and generate more than half the gross national product of our country. With some exceptions, many of these companies are relatively small concerns, often run out of the principal owner’s home. Even companies that actually have a distinct and segregated business office often operate from a location that is not typically known to or regularly visited by the business’ clients and customers.
Under a little-known Ohio law, many businesses that operate in this fashion are subject to the same consumer-friendly rules that apply to “door-to-door” sales transactions. Some readers may be aware that the typical contract to purchase goods from a “door-to-door” salesman 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” has application 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 transactions may also 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 came 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 came to the house, looked at the job, took measurements, and discussed the scope of work with the homeowner. A written estimate, proposal or contract was prepared and either hand delivered to the homeowner at that time, or later dropped off or mailed to the homeowner. Frankly, it is rare when that a process like that is NOT followed by persons in the construction trade, and it is likewise often the business practice of many of the other small business industries noted above.
Now take a look at the written contract that governs the job. Does it have a three-day right to cancel? You should be aware that the law requires specific “notice to cancel” language in all contracts that are subject to this law and this language must be printed in a particular way (font size, bold type, etc.). If the contract doesn’t have the necessary language regarding 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 and services performed by a small business owner 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 longterm 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 actually always met at the customer’s office.” 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.
As noted above, application of this particular law is quite broad. For consumers, BPBS can evaluate whether the provisions of this law might benefit you. For the small business owner, our law firm can evaluate whether your company is subject to this law and, if so, counsel you on the ways you should modify your sales practices and your written contracts to help protect your company.
For these and other legal questions, the attorneys at Barron, Peck, Bennie & Schlemmer are located in Oakley at 3074 Madison Road and in Over-the-Rhine at 1344 Vine Street. We welcome your call at (513) 721-1350.