Cooling off period has two meanings. The first one happens in an agreement which allows the buyer to back out from the contract within a stipulated time, as mentioned in the agreement without paying any penalty. This stipulated time is known as cooling off period.
It happens with all kinds of agreements be it with investors, business peers, clients, or employees. The second type of cooling period is where parties in disputes resolve to solve their problem within a certain time period. This time span is also known as cooling off period.
In the first case, cooling off period has many advantages. It gives a second opportunity to the buyer of the contract to rethink the decision and finally move ahead with the contract. It makes the agreement more flexible as is mostly preferred by buyers.
Also, as buyers need not pay any penalty amount even after signing the agreement or buying the contract, there’s no economic cost and therefore it has 0% risk-another unique feature. All such aspects make cooling off period more convenient and free of risks.
When it comes to dispute settlement, cooling off period enables both the parties to come to a consensus and determine a resolution within a fixed time span. As most arguments linger on and on, thereby hampering business and workflow, such circumstances call for a dispute redressal mechanism.
Cooling off serves as a perfect trade-off between the parties by introducing a time period to come to a solution and brings both the parties to the same platform. As a result, unsettled disputes are solved at a faster pace and both sides collaborate to improve the situation instead of doing something that actually aggravates the hostility for example going on a strike.
Examples of Cooling off period
1. Factory Managers Vs Trade Unions
Disputes between trade unions and management team in factories are nothing new. In most cases, managers fail to understand the requirements of the workers and the latter too fail to convince their superiors. This creates a situation of unrest where the workers’ union gets into a tussle with the company. As a fallout, workers go for a strike and turn rebellious. Often, managers also don’t pay much heed in the initial stages, which leads to the dispute.
By means of the cooling period, the factory can fix a certain span of time within which it can take steps to address the concerns and grievances of the workers and ensure that their requirements are met. Workers too can take this opportunity to meet peacefully, tell their problems and convince the management without being defiant.
Adopting the cooling off period policy will keep both the workers and the managers under pressure to resolve the matter within the timeline. Hence, a quicker resolution will have arrived at that will satisfy both the ends. The situation will improve and laborers will not resort to illegal or unfaithful means to get their demands accepted. Both sides collaborate, makes certain compromises and ultimately comes to a conclusion. Thus, in this case, cooling off period delivers a remedy, accepted by the union and the management.
2. HR Vs Employees
It mainly takes place in the service sector. The employees clash with the HR department on a number of occasions related to payroll, extra hour incentive and many other reasons. What happens is that the employees’ record of extra-hour work or leave and attendance does not match with the HR data. Hence, the worker gets lowly paid and is deprived of the actual amount. This gives rise to a tussle with the department and the organization as a whole and affects proper flow of work.
By bringing a cooling off period, the organization decides to take some amount of time and clear the issue. During this time span, the concerned persons meet, discuss and try to resolve the problem without creating a tensed atmosphere. It further gives equal chance to the employee and the HR to speak in harmony and resolve the dispute within the set time. In this way, cooling off period develops the situation, reduces chances of arguments and advocates quicker dispute settlement.
The other instance of cooling off period is also the application for employees, though not to a larger extent. There are only a few companies in the world which allows employees to back out from their job contracts within a specified period of time without paying any charges. In such cases, whether the company pays the salary for the number of days worked is also questionable. Nevertheless, such situations do happen, although it is not common.
3. Company Vs Investors
Agreements with investors are nothing new for organizations. In fact, it is something that has been in place since the organization came into being. Adding a clause of cooling off period gives the investors a breathing space whereby they can rethink their decision and move away from the contract. They also take this time as an opportunity to see company’s performance and how it generates revenue.
After signing a contract and being with the organization, investors get a real-life picture. This gives them more clarity. Thus, if they feel that the organization is not up to their mark, they can immediately withdraw from making any investment without incurring any losses. As it does not involve any risk, cooling off period is a bane for every investor.
4. Company Vs Client
Lastly, the lot of deals and contracts are made with clients. As clients are the most important revenue earning sources, companies will take every possible measure to satisfy them.
By means of cooling off period, organizations, therefore, give an opportunity to their clients to take some more time before moving ahead with the agreed project. In this time period, clients closely observe the functioning of the company and get a practical exposure to its working methodology. This helps them to take a final call about doing business with the concerned organization.
Besides this aspect, companies also advocate cooling off period to solve disputes and confusions with their clients. In the event of any misunderstanding, both the buyer and the seller sit together and try to sort out things and avoid activities which can intensify the hostility between the two. Rightful use of cooling off period further helps the business-side and the client-side personnel to enhance their understanding and work together for a higher achievement in the near future.