PRINTER'S NO. 166
No. 161 Session of 1975
INTRODUCED BY MR. SCHMITT, MRS. GILLETTE, MESSRS. MANDERINO,
A. K. HUTCHINSON, MRS. TOLL, MESSRS. VANN, SHANE, ROMANELLI,
LAUGHLIN, COHEN, TRELLO, ROSS, ABRAHAM, DeMEDIO, RAPPAPORT,
SCHWEDER, TAYLOR, WOJDAK, DOMBROWSKI, BELLOMINI, GREENFIELD,
MORRIS, BERLIN, PIEVSKY, MUSTO, SHUPNIK, GREEN, PERRY, WALSH,
O'KEEFE, JOHNSON, MRS. KERNICK, MESSRS. MENHORN, McCALL, FEE,
MELLIRON, PRATT, IRVIS, KOWALYSHYN, RUGGIERO, ZORD, WARGO,
O'DONNELL, JANUARY 28, 1975
REFERRED TO COMMITTEE ON CONSUMER PROTECTION, JANUARY 28, 1975
AN ACT
1 Regulating contracts for health and dance services and
2 prescribing penalties.
3 The General Assembly of the Commonwealth of Pennsylvania
4 hereby enacts as follows:
5 Section 1. Short Title.--This act shall be known and may be
6 cited as the "Health and Dance Services Contracts Act."
7 Section 2. Legislative Findings; Purpose.--(a) The
8 Legislature finds that there exists in connection with a
9 substantial number of contracts for health services and for
10 dance studio lessons and other services, sales practices, and
11 business and financing methods which have worked a fraud,
12 deceit, imposition, and financial hardship upon the people of
13 this Commonwealth; that existing legal remedies are inadequate
14 to correct these abuses; that the health services and dance
15 studio industries have a significant impact upon the economy and
1 well-being of this Commonwealth and its local communities; and
2 that the provisions of this act relating to such contracts are
3 necessary for the public welfare.
4 (b) The Legislature declares that the purpose of this act is
5 to safeguard the public against fraud, deceit, imposition and
6 financial hardship, and to foster and encourage competition,
7 fair dealing, and prosperity in the fields of health or dance
8 studio services by prohibiting or restricting false or
9 misleading advertising, onerous contract terms, harmful
10 financial practices, and other unfair, dishonest, deceptive,
11 destructive, unscrupulous, fraudulent and discriminatory
12 practices by which the public has been injured in connection
13 with such contracts.
14 Section 3. Contract for Health or Dance Studio Services
15 Defined.--As used in this act, "contract for health or dance
16 studio services" means a contract for instruction, training or
17 assistance in physical culture, bodybuilding, exercising,
18 reducing, figure development, dancing or any other such physical
19 skill, or for the use by an individual patron of the facilities
20 of a dance studio, ballroom, health studio, gymnasium or other
21 facility used for any of the above purposes, or for membership
22 in any group, club, association or organization formed for any
23 of the above purposes, but shall not include contracts for
24 instruction at schools operating pursuant to the provisions of
25 the act of March 10, 1949 (P.L.30, No.14), known as the "Public
26 School Code of 1949" or contracts with organizations not
27 operated for profit.
28 Section 4. Written Contract Required.--Every contract for
29 health or dance studio services shall be in writing and shall be
30 subject to the provisions of this act. A copy of the written
19750H0161B0166 - 2 -
1 contract shall be given to the customer at the time he signs the
2 contract.
3 Section 5. Limitation on Amount and Payment Period;
4 Prohibition Against Life Contract; Permissible Service Period;
5 Cancellation Period; Single Contract.--(a) No contract for
6 health or dance studio services shall require payment by the
7 person receiving the services or the use of the facilities of a
8 total amount in excess of $1,500.
9 (b) No contract for health or dance studio services shall
10 require payments of financing by the buyer over a period in
11 excess of 3 years from the date the contract is entered into,
12 nor shall the term of any such contract be measured by or be for
13 the life of the buyer; however, the services to be rendered to
14 the buyer under the contract may extend over a period not to
15 exceed 3 years from the date the contract is entered into with
16 the right to renew for a like period.
17 (c) No contract for health or dance studio services shall
18 require payment by the person receiving the services or the use
19 of the facilities of more than $500 worth of services in advance
20 of the first lesson or services. All moneys paid in advance by
21 persons contracting for health or dance studio services shall be
22 placed by the seller of the lessons or services in an escrow
23 account in an institution regulated by the Federal Reserve
24 Board, the Federal Home Loan Bank Board, Comptroller of the
25 Currency, or the Pennsylvania Department of Banking until the
26 total number of the lessons or services represented by the
27 amount of the advance payment placed in escrow are given to the
28 buyer by the seller. Upon completion of the lessons for which
29 the advance payment is made, the seller shall be entitled to the
30 full amount of the advance payment placed in escrow.
19750H0161B0166 - 3 -
1 (d) All contracts for health or dance studio services which
2 may be in effect between the same seller and the same buyer, the
3 terms of which overlap for any period, shall be considered as
4 one contract for the purposes of this act.
5 Section 6. Performance of Contract; Cancellation and Refund;
6 Hourly Rate Stated.--(a) Every contract for health or dance
7 studio services shall provide that performance of the agreed-
8 upon services or lessons will begin within 30 days from the date
9 the contract is entered into. Any moneys paid under such a
10 contract shall be held in escrow until services are available.
11 (b) Every contract for health or dance studio services shall
12 further provide:
13 (1) That such contract may be canceled within five business
14 days after the date of receipt by the buyer of a copy of the
15 contract by written notice to the other party at the address
16 specified in the contract, and all moneys paid pursuant to such
17 contract shall be refunded within ten days of receipt of the
18 notice of cancellation, except that payment shall be made for
19 any health or dance studio services received prior to such
20 cancellation.
21 (2) Where a buyer repudiates a contract after the period of
22 recession established in paragraph (1), the seller may claim in
23 damages no more than 10% of the unpaid balance due on the
24 contract in addition to payment for any services which the buyer
25 has already received.
26 (c) Every contract for health or dance studio services shall
27 contain a written statement of the hourly rate for the services.
28 Such statement shall be contained in the contract before the
29 contract is signed by the buyer.
30 Section 7. Prohibition of Notes Cutting Off, as to Third
19750H0161B0166 - 4 -
1 Parties, Buyer's Right of Action or Defense Against Seller.--No
2 contract for health or dance studio services shall require or
3 entail the execution of any note or series of notes by the buyer
4 which, when separately negotiated, will cut off as to third
5 parties any right of action or defense which the buyer may have
6 against the seller.
7 Section 8. Prohibition Against Assignment of Contract
8 Cutting Off Buyer's Right of Action or Defense Against Seller;
9 Conditions.--No right of action or defense arising out of a
10 contract for health or dance studio services which the buyer has
11 against the seller, and which would be cut off by assignment,
12 shall be cut off by assignment of the contract to any third
13 party whether or not he acquires the contract in good faith and
14 for value unless the assignee gives notice of the assignment to
15 the buyer as provided in this section and, within 30 days of the
16 mailing of notice, receives no written notice of the facts
17 giving rise to the claim or defense of the buyer. A notice of
18 assignment shall be in writing addressed to the buyer at the
19 address shown on the contract and shall identify the contract
20 and inform the buyer that he shall, within 30 days of the date
21 of mailing of the notice, notify the assignee in writing of any
22 facts giving rise to a claim or defense which he may have. The
23 notice of assignment shall state the name of the seller and
24 buyer, a description of the lessons and other services, the
25 contract balance, and the number and amount of the installments.
26 Section 9. Relief From Payment Upon Death or Disability.--
27 (a) Every contract for health or dance studio services shall
28 contain a clause providing that if, by reason of death or
29 disability, the person agreeing to receive services is unable to
30 receive all the services for which he has contracted, he and his
19750H0161B0166 - 5 -
1 estate shall be relieved from the obligation of making payment
2 for the services other than those received prior to death or the
3 onset of disability, and that if he has prepaid any sum for
4 services so much of such sum as is allocable to services of
5 which he has not availed himself shall be promptly refunded to
6 him or his representative.
7 (b) In every case in which a person has prepaid a sum for
8 lessons and other services under a contract for health or dance
9 studio services, and, by reason of death or disability, is
10 unable to receive all such services, the party agreeing to
11 furnish such services shall, on request, immediately refund to
12 such person or his personal representative such amount of the
13 sum prepaid as is proportionate to the amount of services not
14 received.
15 (c) Notwithstanding the provisions of any contract to the
16 contrary, whenever the contract price is payable in installments
17 and the buyer is relieved from making further payments or
18 entitled to a refund under this section, the amount of the
19 contract price allocable to services not received shall
20 represent at least as great a proportion of the total contract
21 price as the sum of the periodic monthly balances not yet due
22 bears to the sum of all the periodic monthly balances under the
23 schedule of installments in the contract.
24 Section 10. Provisions Not Exclusive.--The provisions of
25 this act are not exclusive and do not relieve the parties or the
26 contracts subject thereto from compliance with all other
27 applicable provisions of law.
28 Section 11. Noncomplying Contracts Invalid.--Any contract
29 for dance studio services which does not comply with the
30 applicable provisions of this act shall be void and
19750H0161B0166 - 6 -
1 unenforceable as contrary to public policy.
2 Section 12. Fraud Rendering Contract Void.--Any contract for
3 health or dance studio services entered into in reliance upon
4 any willful and false, fraudulent, or misleading information,
5 representation, notice, or advertisement of the seller shall be
6 void and unenforceable.
7 Section 13. Waiver of Provisions.--Any waiver of the buyer
8 of the provisions of this act shall be deemed contrary to public
9 policy and shall be void and unenforceable.
10 Section 14. Recovery of Triple Damages and Attorney Fee;
11 Correction of Contract; Holder Defined.--(a) Any buyer injured
12 by a violation of this act may bring an action for the recovery
13 of damages. Judgment may be entered for three times the amount
14 at which the actual damages are assessed plus reasonable
15 attorney fees.
16 (b) Notwithstanding the provisions of this act, any failure
17 to comply with any provision of this act may be corrected within
18 30 days after the execution of the contract by the buyer, and,
19 if so corrected, neither the seller nor the holder shall be
20 subject to any penalty under this act, provided that any
21 correction which increases any monthly payment, the number of
22 payments, or the total amount due, must be concurred in, in
23 writing, by the buyer. "Holder" includes the seller who acquires
24 the contract, or, if the contract is purchased by a financing
25 agency or other assignee, the financing agency or other
26 assignee.
27 Section 15. Violation of Provisions; Offense; Injunction;
28 Duty to Institute Actions.--Any person who violates any
29 provision of this act relating to health or dance studio
30 contracts shall be guilty of a misdemeanor of the third degree
19750H0161B0166 - 7 -
1 and shall, upon conviction, be sentenced to pay a fine not
2 exceeding $2,500 or undergo imprisonment not exceeding one year,
3 or both. Any court of this Commonwealth shall have jurisdiction
4 in equity to restrain and enjoin the violation of any of the
5 provisions of this act relating to dance studio contracts.
6 The duty to institute actions for violation of such
7 provisions of this act, including equity proceedings to restrain
8 and enjoin such violations, is hereby vested in the Attorney
9 General and district attorneys. The Attorney General or any
10 district attorney may prosecute misdemeanor actions or institute
11 equity proceedings or both.
12 Section 16. Bond; Amount; Filing.--Every health center and
13 dance studio shall maintain a bond issued by a surety company
14 admitted to do business in this Commonwealth. The principal sum
15 of the bond shall be in such amount as determined by the
16 Attorney General or his designate to adequately provide for the
17 refund of moneys paid in advance for services of the health
18 center's or dance studio's gross income from their studio
19 business in this Commonwealth during the seller's last fiscal
20 year, except that the principal sum of the bond shall not be
21 less than $10,000 in the first or any subsequent year of
22 operations. A copy of such bond shall be filed with the
23 Department of Justice.
24 Section 17. Bond; Persons Protected.--The bond required by
25 section 16 shall be in favor of the Commonwealth for the benefit
26 of any person who, after entering into a contract for health or
27 dance studio services with the health center or dance studio, is
28 damaged by fraud or dishonesty or failure to provide the
29 services in performance of the contract. Any person claiming
30 against the bond may maintain an action at law against the
19750H0161B0166 - 8 -
1 health center or dance studio and the surety.
2 The aggregate liability of the surety to all persons for all
3 breaches of the conditions of the bonds provided herein shall in
4 no event exceed the amount of the bond.
5 Section 18. Cash Deposit In Lieu of Bond.--In lieu of
6 furnishing the bond required by section 16, the health center or
7 dance studio may deposit with the Department of Justice a cash
8 deposit in a like amount. This cash deposit may be satisfied by
9 any of the following:
10 (1) Certificates of deposit payable to the Department of
11 Justice issued by banks doing business in this Commonwealth and
12 insured by the Federal Deposit Insurance Corporation.
13 (2) Investment certificates or share accounts assigned to
14 the Department of Justice and issued by a savings association
15 doing business in this Commonwealth and insured by the Federal
16 Savings and Loan Insurance Corporation.
17 (3) Bearer bonds issued by the United States Government or
18 by this Commonwealth.
19 (4) Cash deposited with the Department of Justice.
20 Section 19. Exclusions from Sections 16 to 18.--Sections 16
21 to 18, inclusive, do not apply to any health center or dance
22 studio which by January 15 of every even-numbered year files a
23 declaration, executed under penalty of perjury by the owner or
24 manager of the dance studio, with the Department of Justice,
25 stating that the dance studio does not require or in the
26 ordinary course of business receive prepayment for services. For
27 purposes of this section, payment for services received on the
28 day in which the services are to be rendered does not constitute
29 prepayment. Any health center or dance studio commencing
30 operations after January 15, 1976, shall file a declaration
19750H0161B0166 - 9 -
1 pursuant to this section prior to commencing operations and
2 thereafter shall file an updated declaration no later than
3 January 15 of every even-numbered year. Any health center or
4 dance studio which has filed a declaration pursuant to this
5 section and which intends to begin requiring or receiving
6 prepayment for lessons or other services shall comply with the
7 provisions of sections 16 to 18, inclusive.
L9L11RC/19750H0161B0166 - 10 -