Cancelling an Agreement

Understand when you are eligible to cancel an agreement

There is no cooling-off period or right to cancel a motor vehicle contract in Ontario once a car buyer has signed a contract to purchase or lease a vehicle, unless certain conditions are met.

  1. Dealer has breached the Motor Vehicle Dealers Act (MVDA) in a way that triggers a car buyers right to contract cancellation.
  2. A condition on a contract is not met.

That is why each purchase agreement must contain the following statement next to the car buyer’s signature:

Please review the entire contract, including all attached statements, before signing. This contract is final and binding once you have signed it unless the motor vehicle dealer has failed to comply with certain legal obligations.

You must carefully read the entire contract and any other associated agreements (for example, financing contract) and only sign it when you are certain you want to purchase the vehicle.

Avoid problems with contract cancellation

To avoid contract cancellation disputes you should:

  • Understand that sales are final unless the contract includes a condition(s) allowing for cancellation.
  • Ensure all promises and conditions are documented in writing in the contract.
  • Understand vehicle locating and timing if the vehicle is not in stock or must be factory ordered.
  • Ensure contracts are complete, including any finance terms and conditions.
  • Only sign the contract if you are certain you want to purchase the vehicle.

When a contract can be cancelled

There are certain situations that provide you with the legal right to a refund or contract cancellation.

If you give a dealer a deposit for the purchase of a vehicle but no contract is signed, you can request your deposit back at any time and the dealer must comply.

When conditions set out in clear terms about what the seller and buyer are obligated to do before a purchase is completed are not met. The deal can be cancelled and your deposit should be returned.

Common conditions

Conditions should be based on what is important to you and may include:

  • subject to a mechanical inspection
  • subject to repairs being made
  • subject to a spouse/partner/parent’s approval
  • subject to satisfactory financing be arranged

First-time car buyers may want to consider including a condition related to finding affordable insurance. Often, young car buyers, or car buyers who have a poor driving record, may be offered expensive insurance rates, with monthly payments that are higher than their car loan payment.

Get conditions in writing

Verbal promises can be difficult to prove, so it is vital that you get all conditions in writing.

A dealer can refuse to agree to a condition. It is then up to you to decide if you want to proceed with the purchase.

The MVDA allows you to cancel a contract within 90 days of delivery of a vehicle if the dealer and contract fails to disclose, or fails to disclose in a timely way:

  1. The previous use of the vehicle as a taxi or limo.
  2. The previous use of the vehicle as a police or emergency service vehicle.
  3. The previous use of the vehicle as a daily rental (unless the vehicle has subsequently been owned by someone other than a dealer).
  4. The make, model, and model year of the vehicle.
  5. That a vehicle has been branded (irreparable, salvage or rebuilt), and how last classified.
  6. The actual distance the vehicle has travelled. When that cannot be determined, a dealer must make the appropriate disclosure statement.

For used vehicles only, a margin of error is allowed to the dealer when they determine the total distance driven, or, when they cannot determine the total distance driven, but can determine the distance driven as of some past date.

The disclosure of distance made by the dealer is deemed to be accurate if it is within the lesser of five per cent or 1,000 kilometers of the correct distance required to be disclosed. This does not apply to new vehicles.

Consumers who are eligible to cancel a contract due to the failure of a dealer to make one of the required disclosures under the MVDA can send a letter to the dealership informing them of the intention to cancel the agreement. We recommend sending the letter in a manner that provides proof of delivery.

You may be entitled to request the cancellation of an agreement if you have been a victim of unfair practices. The CPA defines unfair practices as those involving false, misleading, deceptive or unconscionable representations.

Car buyers have up to one year from the date of signing a contract to request a cancellation under the CPA.

As a considerable amount of time may have lapsed before a cancellation is granted under the CPA, the courts may allow dealers to charge for usage if a contract is cancelled.

What will a dealer do if you cancel a contract with no legal reason?

If you cancel an agreement without a legal right to do so, a dealer has four options.

  1. Cancel the contract and refund the deposit: some dealers do this to avoid the problem of dealing with cancellations. It can also generate goodwill and boost the dealer’s reputation.
  2. Try to salvage the deal: provide the car-buyer with options that address their concerns (for example, offer to find a more suitable or affordable vehicle).
  3. Seek compensation: a dealer may choose to seek compensation from the car-buyer for expenses they incurred because of the cancellation of the contract. These are referred to as liquidated damages, and must be reasonable and a dealer must be able to justify these.
  4. Sue the customer: a dealer could pursue civil action and ask the court to enforce the contract.

Requesting a deposit back

While some dealers may cancel a contract and return a deposit as a gesture of goodwill, they are not obligated to do so. If you find yourself in this situation, be honest with the dealer and try to seek an amicable resolution. It may be necessary to put your request in writing and send your letter by registered mail, courier, or hand-deliver it, and obtain a receipt.

If you are trying to cancel a contract you can send a letter to the dealership provided that

  1. The contract was recently signed and the purchaser has not taken possession of the vehicle.
  2. You wish to cancel the agreement under one of the conditions specified in the back of the contract but mutual consent has not been given.

Liquidated damages

Since there is no cooling-off period in Ontario, if the dealer agrees to cancel a vehicle purchase agreement, they are entitled to claim liquidated damages and retain a part, or all of your deposit.

Liquidated damages arise from the expenses a dealer may have already incurred in when selling the vehicle to you (for example, advertising, freight and administrative costs, cost for the loss of profit resulting from the cancellation).

For additional support contact our consumer support team. We will attempt to assist you with a dispute with a registered dealer however we do not have the authority to order a dealer to cancel a contract or return a deposit, only the courts have that authority.