Bad Faith 3-Day Rescission

Every contractor knows about the 3-day notice required on residential jobs. Owners get three days to back out of any deal. Starting work sooner than three business days after signing is like giving an owner a loaded cannon. I’ll explain.

The federal three-day right to cancel is called the Reg-Z Notice. Some states also require a state 3-day notice. Most states waive their 3-day notice if you give the federal Reg-Z notice. Other states require their 3-day notice even if you give the federal Reg-Z notice. And there are exceptions – such as for emergencies – under both state and federal law. This isn’t simple. And it’s an issue in nearly every residential construction contract.

Don’t even think about omitting the required 3-day notice (or notices) from a residential contract. If your client wants to start work right away and has a reason, that’s fine. Your owner can waive the 3-day notice. But the waiver has to be done just right – in the owner’s handwriting, in the owner’s own words and covering specific key points. At your option, Construction Contract Writer can include a page that coaches your client through the waiver process.

Now back to that loaded cannon. Here’s an example:

The owner signs your contract. Work starts the next day. The owner sits back perfectly content as work progresses, even for several days or weeks, never letting out a squawk. When work is done, you present a final invoice. That’s when the owner opens fire.

Too bad. I’m not paying. I got your 3-day notice. But you didn’t give me the three days. So the law says I can rescind. That’s what I’m doing. I rescind. Here’s your signed cancellation notice. Now write me a check for what I paid and stay off my property.

Don’t laugh. It happens.

As in a Pennsylvania case decided last week, Waldron Electric v. Caseber. According to the court, Casebar agreed to have Waldron install surge and lightning protection. Waldron had the good sense to offer a valid Pennsylvania home improvement contract for signature. Casebar signed with no waiver of the 3-days. Waldron finished the job the same day. That was Saturday. The following Monday, a notice of cancellation arrived by certified mail at Waldron’s office. Casebar demanded a full refund -- and got it. Then Casebar ordered Waldron off his property. You decide if that was bad faith rescission.

The court didn’t use those words in giving judgment to Waldron. Instead, the court concluded: Because there was an otherwise valid Pennsylvania contract, nothing prevented the trial court from awarding Waldron reasonable value for his services – even without waiting the 3 days to start work. "We recognize that this . . . may provide contractors an incentive to complete work before the three-day rescission period ends . . . The result, however, is compelled by the statutory language.”

Pennsylvania law saved Waldron. If you do work anywhere else, be careful. The law in your state may not be so forgiving to contractors. On every residential job, get a valid contract. Construction Contract Writer will do that. The trial version is free. Then either wait three days or get a waiver.

Please don’t misunderstand my point. I’m not dissing the 3-day right to rescind. It’s just about eliminated high-pressure selling tactics for home improvement work. But the right to rescind can do damage too. With a little care, any contractor can keep this dangerous weapon out of the hands of clients.