Dealer Compliance Alert: April 17, 2019

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What is the meaning of Rescission? In contract law, rescission is an equitable remedy which allows a contractual party to cancel the contract. Parties may rescind if they are the victims of a vitiating factor, such as misrepresentation, mistake, duress, or undue influence. Rescission is the unwinding of a transaction. This is done to bring the parties, as far as possible, back to the position in which they were before they entered into a contract.

It has come to TRVA’s attention some dealers are confused or not aware of their responsibilities when conducting or concluding the sale and/or delivery of a new, used or consignment unit outside the confines of the dealership’s primary or permanent or principal place of business.

Many dealerships advertise the “delivery” of sold units in order to provide a convenience to consumers, many of whom may not have the means to tow their unit, e.g., recent purchase of a towable unit, to its intended destination. One dealer recently reported their delivery of a motor home from Texas to Arizona to complete a sale.

There is absolutely nothing wrong in offering a delivery service, however, there are certain implications which dealers must be aware of due to the existing Federal and Texas statutes regulating the sale of units not made at the dealership’s permanent place of business. This Dealer Compliance Alert, DCA, will address these implications.


Most dealers who participate in RV shows are aware of the requirement to properly inform a consumer, when making a purchase at an RV show, that they have a Three Day Right of Rescission, a.k.a., a Cooling Off Period or Right to Cancel, in which they have a right to cancel their purchase. This is a right provided to a consumer by both Federal and Texas statutes. In fact, the Texas statute is more restrictive than the federal statute and Texas dealers must be aware of their potential exposure.

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Some dealers are simply not aware of the dealer’s responsibility to inform any consumer who is making a purchase of a unit apart from the dealership’s primary or permanent or principal place of business is due these same rights under the Three Day Right of Rescission.


▪ Advise the buyer in writing (in the language principally used during the oral sales presentation), about the right to cancel the sale.

▪ Give the buyer two copies of a cancellation form, one to keep and one to send to the seller if contract is cancelled.

▪ Date the contract and show the name and address of the seller.

▪ Do not sell, transfer or assign the contract or debt to anyone before midnight of the fifth business day after the day the contract is executed.

▪ Do not sell, transfer or assign the trade-in, if any, to anyone before midnight of the fifth business day after the day the sale is executed.


There are several exceptions to the Texas statute, so let’s get this aspect discussed right up front. However, only one exception would provide an RV dealer with an exception to the rescission statute and it reads as follows:

Texas Business and Commerce Code Chapter 601: There is no three-day right of rescission: – for sales made pursuant to prior negotiations at the merchant’s business establishment, where the sale is the result of those prior negotiations.

If the consumer had physically been in a dealership, negotiated the final price, established financing, signed all contractual paperwork and all the dealer needed to do is delivery the unit, then the three day right of rescission would not be triggered.


The Right of Rescission is triggered when the sale of an RV or other motor vehicle, e.g., a used or consignment RV, car or pickup truck, is sold to a consumer at a trade show or ANY LOCATION away from the seller’s principal place of business.

The expression “sold to a consumer” has been interpreted to have a very board meaning as it relates to the right of rescission. In other words, if a consumer phones or emails a dealer and

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negotiates the sale of a unit and the dealer delivers the unit to the consumer at a location other than the dealer’s principal business location and the sales contract is finalized upon delivery, then the three day right of rescission would be triggered.

TRVA believes there are many dealers who conduct business in this manner and do not fulfill their statutory obligation to inform the consumer of their rights under the three day right of rescission. More on that later in this DCA.


If applicable, the consumer may cancel the transaction by sending the dealer one copy of the Notice of Cancellation, which the dealer is required to provide the consumer at closing, attached to the contract not later than midnight of the third business day after the date the consumer signs an agreement or offer to purchase. This is a statutory right provided the consumer when the sale is not finalized at the dealer’s principal place of business.


▪ The dealer has ten (10) business days to refund the consumer’s money, return any note the buyer may have signed concerning the sale and return any trade-in vehicles.

▪ The dealer must notify consumer within ten (10) days whether he or she intends to retrieve the goods or abandon them. (No dealer would abandon or gift the sold unit to the consumer, but this is the language in the statute.)

▪ The dealer may not require the consumer to deliver or ship the unit back.

▪ If the dealer fails to notify consumer of its intention to repossess the goods within twenty (20) days of cancellation, the consumer may not be forced to return the goods at a later date. (In other words, the consumer is entitled to keep the unit purchased even though the purchase has been cancelled.)

▪ The consumer is not obligated to return goods to the dealer until consumer has recovered the consumer’s money and note.

▪ The selling dealer is not entitled to compensation for services performed under a cancelled contract.


If a dealer violates a provision of the right of rescission, the dealer is liable to the consumer for the following:

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▪ Any actual damages suffered by the consumer as a result of the violation.

▪ Reasonable attorney’s fees and court costs.

▪ An amount equal to cost of any trade-in stated in the contract that is not returned to consumer in substantially the same condition as received by the seller.

▪ The dealer is liable under the Texas Deceptive Trade Practices Act for up to triple damages.

▪ The dealer may lose its right to get or repossess the RV which it initially sold.

▪ The Texas Attorney General’s Office can sue to order the dealer to comply with the statutory requirements.

As listed above, these are extremely serious consequences which may be triggered if the dealer does not fulfill its statutory obligation to provide an oral and written explanation of the three day right of rescission when completing a sale when not located in its principal place of business.


Consumers are often confused regarding the applicability of the three day right of rescission for they will inform the dealer of their desire to cancel a transaction or purchase when the entire purchase process was conducted at the dealer’s principal place of business. In these instances, the dealer has no obligation to cancel the sale for the right of rescission has not been triggered.

However, dealers, often, will attempt to negotiate with the consumer to find an agreeable resolution to the consumer’s demand, e.g., suggesting the unit be returned if a different unit is purchased or locating a lower finance rate, etc., just to keep the consumer from being totally dissatisfied. With consumer complaints a simple cell phone touch screen away from being posted, it may make better sense to placate the consumer in these instances. Of course, each of these instances stands alone and the dealer’s decision is his or her own to make.


If your dealership does enter into a sale with a consumer which triggers the three day right of rescission, then your contract must contain the correct disclosure and be located on the contract of sale in the immediate proximity to the consumer’s signature. If a selling dealer has the correct wording included in the existing contract there is no addendum to the contract needed or required.

However, if the selling dealer’s contract does not contain the correct provision then the correct verbiage must be rubber stamped or attached with a label to the contract in the immediate proximity to the consumer’s signature. The wording must be in at least 10-point bold face font.

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Date You, the buyer, may cancel this transaction at any time prior to midnight of the third business day after the date of this transaction. See the attached notice of cancellation form for an explanation of this right. Buyer’s Signature Buyer’s Signature


The Notice of Cancellation should be filled in with all the dates and addresses and duplicate copies attached to the consumer’s copy of the sales contract at the time the consumer(s) sign it. The attachment can be stapled, paper clipped, etc., as long as the consumer can readily remove one copy of the notice and retain the other copy and the consumer’s copy of the contract, should the consumer decided to cancel the sale. The first date on the form is the day of the sale. The date after the words “NOT LATER THAN MIDNIGHT OF” must be at least three business days after the notice of the sale, e.g., if a sale is consummated on Saturday and there are no legal holidays the next week, the date in the second blank would be no earlier than the following or next Wednesday. When signing the closing documents, DO NOT require the consumer to sign the Notice of Cancellation form or enter the date for the consumer’s signature, as the consumer signs it and enters the date that the consumer(s) elects or decides to cancel the contract. Dealers should attach a copy of the Notice of Cancellation to the dealer’s and financing company’s copies of the sales contract in order to document the dealership’s compliance with the statutes. Always retain a copy of the notice in the deal file jacket for future reference. Remember, you must orally inform the consumer(s) of the right to cancel at the time you present the contract to the consumer(s) to sign. If the sale, negotiations and transactions are accomplished in Spanish, then all copies of the form must be made available to the purchaser in Spanish. On the following page, dealers will find a copy of the Notice of Cancellation which can be copied and used with consumers.

Notice of Cancellation:


You may CANCEL this transaction, without any Penalty or Obligation, within THREE (3) BUSINESS DAYS from the above date,

If you cancel, any property traded-in, any payments made by you under the contract or sale and any negotiable instrument executed by you will be returned within TEN (10) BUSINESS DAYS following receipt by the dealer of your cancellation notice (this notice), and any security interest arising out of the transaction will be cancelled.

If you cancel, you must make available to the dealer at your residence, in substantially as good condition as when it was received, any recreational vehicle or motor vehicle or goods delivered to you under this contract or sale, or you may, if you wish, comply with the instructions of the dealer regarding the return of the shipment of goods at the seller’s expense and risk.

If you do make the recreational vehicle or motor vehicle or goods available to the dealer and the dealer does not pick them up within twenty (20) days of the date of your Notice of Cancellation, you may retain or dispose of the recreational vehicle or motor vehicle or goods without any further obligation. If you fail to make the recreational vehicle or motor vehicle or goods available to the dealer, or if you agree to return the recreational vehicle or motor vehicle or goods to the dealer and fail to do so, then you remain liable for performance of all obligations under the contract.

To cancel this transaction, mail or deliver a signed and dated copy of this Cancellation Notice or any other written notice, or send a telegram, to:

[Name of Dealer] at [Address of Dealer]


I/WE HEREBY CANCEL THIS TRANSACTION. Date [Buyer’s Signature] [Buyer’s Signature]

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Dealers are encouraged to review their manufacturer’s franchise agreements and any agreements made with financing institutions for these agreements may contain clauses which forbid the consummation of sales outside of the dealer’s principal business location.


As was stated on page one of this DCA, there is nothing wrong with offering a delivery service to a consumer, however, dealers are encouraged to conduct all negotiations and transactions, especially as it pertains to the execution of sales or closing documents, in the dealer’s principal business location. In doing so, the dealer does not trigger the Three Day Right of Rescission statutes.

In this DCA there is a reference to both three (3) and five (5) business days and that may provide some confusion. Keep the following in mind, the consumer has three business days in which to cancel the sale, however, a sale may be consummated on a Saturday and if that is accomplished and there is a federal holiday on the following Monday, then the two days of Sunday and Monday are not considered to be business days. Therefore, the consumer would have up to five days to consider cancelling the sale.

Remember, if the trade-in is wholesaled to another dealer and the finance contract forwarded to the financing entity and the consumer elects to cancel the sale these transactions would be required to be undone or cancelled which may provide some difficulty to accomplish.

TRVA recommends, whenever the three day right of rescission is triggered, dealers do not immediately initiate the delivery or sale of a trade-in to another dealer or consumer. In addition, all financing documents should not be transmitted to the financing entity until the three day right of rescission period has passed.

A copy of the prevailing Texas statutes is attached to the email in which this DCA was transmitted.

For further questions, please email