Prepayment plans can create serious trouble for both the business owners and consumers, as witnessed by recent news coverage on the difficulties encountered by a well-established seller of home heating oil that couldn’t meet demand during a particularly long, cold heating season.  Regulators’ and consumers’ temperatures rise when a heating business breaches its contract during sub-zero temperatures.

Prepayment plans may look like a great idea, but it’s important to know the laws that govern them.  NH RSA 339:79 (2009) requires the following for any contract that offers a guaranteed price plan requiring prepayment by consumers:

• The contract must be in writing;
• All terms and conditions of the plan must be disclosed, including the total amount to be paid by the consumer, the amount of fuel committed for delivery, the price per unit of measure, the payment terms, duration, a statement of contract security and the remedies the dealer may have against a consumer for non-payment;
• The contract cannot commit the consumer for more than one heating season;^[1]
• The contract cannot be offered prior to January 1 for the following heating season.
• A reimbursement clause guaranteeing consumers payment within 30 days after the end of the contract for any undelivered pre-purchased units; and
• A clear explanation of how the dealer will meet the contractual obligations, including supplier agreements, futures contracts, bonding, or a line of credit.

 Offers for prepayment plans must also be in writing and contain all the terms and conditions.

Businesses offering pre-payment plans must provide a statement of contract security demonstrating that the following have been obtained within seven days of the contract acceptance: either a surety bond or letter of credit made payable to the attorney general or a futures contract that guarantees the dealer’s ability to purchase sufficient heating fuel at a fixed price.

Failure to observe the requirements of RSA 339:79 can result in either a felony or misdemeanor criminal charge for unfair or deceptive practices. Consult a New Hampshire attorney if you are considering offering a prepayment plan or if you have questions regarding a pre-payment plan offer.

 Attorney Sarah N. Rubury is ready to help you with your home heating oil contract questions.

[1] A heating season is defined as 12 months beginning no earlier than May 1.