Q: Our agency sponsored a successful cruise night at a hotel. At the end of the show, one of our agents sold a cruise on the spot. Since it was a last-minute booking, the client had to pay in full. The next morning, we paid the cruise line using our owner's credit card, as we trusted that the client's check would not bounce. Two days later, the client called to cancel. When we told the client that the last-minute cruise booking was noncancellable because the booking date was past the cruise line's final-payment deadline, the client insisted that he had the legal right to cancel under the Federal Trade Commission's (FTC) three-day cooling-off rule. Is the client correct? If so, does the cruise line have to refund our payment?
A: The client is correct: the FTC's rule does apply, so the client is free to cancel.
The cruise line does not have to refund your payment, so you may be stuck paying for the cruise.
Under the FTC rule, which you can find by Googling "16 CFR 429," if a consumer buys goods or services at a location that is not the seller's place of business, the consumer has the option to cancel purchases of $25 or more for three days from purchase. The three days end at midnight on the third business day after the sale.
The three-day cooling-off rule applies to sales at the buyer's home, workplace or dormitory or at facilities rented by the seller on a temporary or short-term basis, such as a hotel, convention center, fairground or restaurant. The rule even applies if the buyer invites you to make a presentation in the buyer's home.
Further, if the rule applies, you must tell the buyer about his or her cancellation rights and give the buyer two copies of a cancellation form (one to keep and one to send) and a copy of the contract or receipt. The contract or receipt must be dated, show the name and address of the seller and explain the buyer's right to cancel.
The rule does not apply to sales made by phone or online, nor does it apply to sales that are the result of prior negotiations at the seller's place of business. Some big-ticket items such as real estate, cars, securities or insurance are exempt, but travel services are not exempt.
If you are a home-based agent, then the rule does not apply to sales made at your home office, as the home office is your place of business.
If you work at both your host's office and a home office, your place of business would probably be where you work most often.
The cruise line does not have to refund the payment for two reasons: First, the line made the sale at its own place of business, and second, it made a sale either by phone or online.
So, it looks like you are going to be out of luck, unless the cruise line refunds your money as a gesture of goodwill to your agency.
For future cruise nights, be sure to follow the FTC's requirements of notifying the client about his cancellation rights and providing the required cancellation form. Be sure to refrain from advancing any money to suppliers until after the three-day cooling-off period.
Mark Pestronk is a Washington-based lawyer specializing in travel law. To submit a question for Legal Briefs, email him at [email protected].