Pare, Edward D., Jr.

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1996 Survey of Rhode Island Law: Legislation: Corporate Law. An Act Relating to Businesses and Professions - Health Clubs

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Roger Williams University Law ReviewVolume 2 | Issue 2 Article 19Spring 19971996 Survey of Rhode Island Law: Legislation:Corporate Law. An Act Relating to Businesses andProfessions - Health ClubsEdward D. Pare Jr.Roger Williams University School of LawFollow this and additional works at: http://docs.rwu.edu/rwu_LRThis Survey of Rhode Island Law is brought to you for free and open access by the Journals at DOCS@RWU. It has been accepted for inclusion inRoger Williams University Law Review by an authorized administrator of DOCS@RWU. For more information, please contact mwu@rwu.edu.Recommended CitationPare, Edward D. Jr. (1997) "1996 Survey of Rhode Island Law: Legislation: Corporate Law. An Act Relating to Businesses andProfessions - Health Clubs," Roger Williams University Law Review: Vol. 2: Iss. 2, Article 19.Available at: http://docs.rwu.edu/rwu_LR/vol2/iss2/19514 ROGER WILLIAMS UNIVERSITY LAW REVIEW [Vol. 2:514Corporate Law. An Act Relating to Businesses and Professions-Health Clubs. Requires health clubs to register with the AttorneyGeneral, to obtain surety bonds for their operations, and to adhereto truth-in-advertising standards. Imposes statutory terms andconditions on health club contracts, and allows for voidability bythe consumer under certain circumstances. Effective, August 5,1996. 1996 R.I. Pub. Laws ch. 154.This legislation (the Act) repeals a relatively short chapter ofthe Rhode Island General Laws,' and substitutes a more compre-hensive regulatory chapter. 2 While some provisions of the re-pealed chapter are retained, the new chapter is much moreoperative and regulatory in nature.The Act requires health clubs, as defined in section 5-50-1 ofthe Rhode Island General Laws,3 to register with the AttorneyGeneral4 and to obtain surety bonds for their operations.5 The Actalso requires health club contracts 6 to contain certain terms andconditions, while prohibiting others.7Changes in the definition section include the elimination of anexemption for self-defense instruction facilities." Also, the Act de-fines "disability" as "a condition which will exist for more thanforty-five (45) days and prevents a buyer from utilizing the healthclub to the same extent the buyer did before the commencement ofsuch condition."9The operative provisions of the Act require health clubs to reg-ister with the Attorney General by filing a registration statement,a non-refundable one hundred dollar registration fee, and an an-nual renewal fee of fifty dollars. 10 The registration statement in-cludes the name of the operation, names and addresses of the1. PlI. Gen. Laws §§ 5-50-1 to -7 (1995) (repealed 1996).2. Id. §§ 5-50-1 to -11 (Supp. 1996).3. Id. §5-50-1.4. Id. §§ 5-50-1 to -2.5. Id. § 5-50-3.6. Id. § 50-50-1(3). This provision defines a health club contract as a writtenagreement between a natural person and a health club which entitles the person tohealth club membership for more than seven days. Id.7. Id- § 5-50-4.8. Id. § 5-50-1(3) (1995) (repealed 1996); id. § 5-50-1(1) (Supp. 1996).9. Id. § 5-50-1(6).10. Id. § 5-50-2(B). Material changes in the required registration informationmust be filed within ten days. Id.SURVEY SECTIONofficers, directors and major stockholders, the square footage of thefacility, a copy of the membership contract, including costs, andany pending or completed litigation within the past three years. 1Health clubs are required to obtain a surety bond, proof ofwhich must be presented at registration or renewal, based uponthe square footage of the facility.' 2 Exempted from this require-ment are non-profit organizations, and weight loss and controlservices that do not provide exercise facilities, and that do not obli-gate the customer for more than thirty days, or charge an initia-tion fee. 13For consumer protection, the Act requires all health club con-tracts to be in writing and to contain a provision for cancellationwithin ten business days. 14 Also, contracts may not be offered orentered into for a term longer than twenty-four months, but maybe renewed for a duration up to that period.' 5 Pre-opening salesare regulated under section 5-50-7 of the Rhode Island GeneralLaws,' 6 and health clubs are precluded from entering into con-tracts with buyers more than twelve months prior to the intendedopening of the club.' 7 In addition, financing agreements may notexceed one month more than the term of the health club contract,and level monthly payments are required under such agree-ments.'8 The Act prohibits any provision in a health club contractthat would prevent the buyer from asserting his rights against the11. I& § 5-50-2.12. Id § 5-50-3(a). The minimum amount of bond coverage is $10,000 for fa-cilities with less than 10,000 square feet of a permanently covered non-court sportexerciselaerobictfitness area. Id. The maximum amount of bond coverage is$30,000 for facilities with greater than 25,000 square feet of space, as describedabove. Id.13. I& § 5-50-3(a).14. Id. § 5-50-4(A)-(B). The notice of cancellation must be in writing and maybe delivered in person or sent by mail. Proof of cancellation in person may beaccomplished by the health club representative writing "cancellation" and the dateon the contract. Id- § 5-50-4(B).15. Id. § 5-50-5(A).16. Id. § 5-50-7.17. Id, Under this provision, a club that is not established but wants to con-duct a pre-opening sales campaign must obtain a permit from the Director of theDepartment of Business Regulation and must comply with other regulations inthis section, as well as any regulations that may be promulgated by the Depart-ment of Business Regulation. Id.18. Id. § 5-50-5(B).5151997]516 ROGER WILLIAMS UNIVERSITY LAW REVIEW [Vol. 2:514health club, its transferees or assignees,' 9 and both the buyer andthe Attorney General may enforce the provisions of the Act.20Cancellation after the ten day grace period is allowed undercertain circumstances, such as the disability of a member for morethan three months.21 In addition, the contract may be canceled ifthe buyer relocates further than fifteen miles from a comparablefacility owned by the health club operator,22 or if the facility relo-cates or fails to maintain a facility within fifteen miles from itscurrent location. 23 Also of major importance is a provision that al-lows the buyer to void a health club contract in the event of achange in health club ownership.24Lastly, the Act provides that any health club contract not incompliance with the chapter is voidable at the option of thebuyer.2 5 Remedies available under the Act include injunctive re-lief and civil monetary penalties of up to one thousand dollars foreach violation in an action brought by the Attorney General. 26 Ad-ditionally, buyers who have a right to cancel for a material viola-tion of the provisions of the Act may recover triple the amountactually paid under the health club contract and may also receivereasonable attorney's fees. 27 Injunctive relief may be sought in su-perior court by the Attorney General or any interested person.28Edward D. Pare, Jr.19. Id. § 5-50-5.20. Id § 5-50-9.21. Id. § 5-50-4(C)(4). The Act refers to significant physical or medical disabil-ity, and allows a "disabled" member to be relieved of liability for payment duringthe disability. The member may either get a refund for any prepaid membershipor extend the contract for a period equal to the duration of the disability. Thehealth club may require a doctor's certificate as verification of the disability. Id.22. Id. § 5-50-4(C)(1).23. Id § 5-50-4. If the health club fails to open a planned facility, perma-nently discontinues, or substantially changes the operation, the buyer is relievedof all obligations and is entitled to a refund of any prepaid membership under thecontract. Id.24. Id. § 5-50-4(C)(6).25. Id. § 5-50-4.26. Id. § 5-50-9.27. Id. § 5-50-9(A).28. Id. § 5-50-9(B)-(C).

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1996 Survey of Rhode Island Law: Legislation: Corporate Law. An Act Relating to Businesses and Professions - Health Clubs

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