Tag: Consumer protection act

Read your contracts carefully! Beach season is coming, which means many gyms are launching “free” trials in order to entice customers to enroll in lucrative contracts at their gym. However, many consumers looking to get in shape are unaware of the recent trend by gyms to classify their contracts as “student tuition agreements” in order to avoid contractual obligations to their members.

Why does the classification matter?

Organizations such as gyms, sports clubs, dance classes, martial arts clubs and hot yoga studios, previously had their contracts classified as “personal development services.” Since many consumers are vulnerable to unscrupulous practices in the area, the government has introduced the Consumer Protection Act to regulate these services.

Some of the consumer’s rights under “personal development services” include the following:

1. the contract must be in writing and delivered to the consumer (if a copy of the agreement is not received, a consumer can cancel the contract at any time within one year);
2. consumers have a 10 day “cooling off period” where they can cancel the contract for no reason with no penalty (the “cooling off period” starts upon receipt of the contract);
3. the agreement is limited to one year (the contract is deemed not to be renewed unless explicitly authorized by the consumer or the contract has a one month’s notice opt-out provision);
4. initiation fees cannot be more than double the price of an annual membership; and
5. if the consumer is paying in monthly installments, the total amount cannot be more than 25% of the amount of the contract if it was paid upfront.

If these contracts are classified as “student tuition agreements” all of these rights are avoided. Student tuition agreements can have automatic renewals for more than one year and there are fewer requirements to provide consumers with information. Many gyms are requiring that consumers pay for their memberships using a credit card, which allows gyms to charge payments months in advance, automatically renew the membership and directly bill late fees. For personal development services, there is an implied right that the gyms must provide a reasonable use of their premises and equipment to their members, something completely disregarded in “student tuition” contracts. Usually, gyms guarantee that there is working fitness equipment, premises which are clean and sufficient space for members—otherwise, the contract can be cancelled with notice (see Findlaw Canada’s Article).

It is now common for prospective members to show up for the “free” trial class, and then be pressured into signing a “student tuition agreement” by a gym that will never provide a copy of the contract. Furthermore, the default is that the start of the contract is deemed to be the date of the first free trial class (consumers must correct this date before signing the contract). Consumers should also ensure to check the billing date of the contract—if a member signs up a few days before the end of the month there is a chance he or she could be billed for the whole month even though he or she didn’t use the facilities/classes during that time.

Visit the Government of Ontario website for more information.  It is important to know your rights before signing any sort of contract.

If you are in need of a lawyer, please visit our website and contact one of our commercial law lawyers today. If you are in need of any other services or have any questions, you may also contact our Toronto office directly at 416-449-1400.

“This article is intended to inform and entertain. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.”