Michael Watkins is 81 and, like many retirees, is keen to do a little light exercise to – as he puts it – "keep the old bones working". That is why he approached his local branch of gym chain LA Fitness last December to see whether he could sign up to a class or session that, because of his age, he could cancel at any time he needed to.

Unfortunately, what should have been the beginning of a gentle exercise regime turned into a nightmare that culminated in threatening legal letters and an outstanding debt of £960.

His interest in exercise started 13 years ago when he went down to a four-day working week. "On a Friday there was an over-50s exercise class at my local LA Fitness gymnasium and a few of my friends persuaded me to go along with them," he says. "I went for a few months and paid on a pay-as-you go basis, so when I wanted to stop I just gave a month's notice."

Last year Mr Watkins decided that, having retired from his job as an engineer and having had a good experience with the gym chain previously, he would see what his local branch, near Gatwick in Sussex, now had to offer.

"I told the manager there about my history with LA Fitness and explained that what I wanted was, as before, something that would allow me to do some occasional light exercise."

He says he was offered access to all of the gym facilities during working hours and was quoted a monthly fee. He says that at no time was it made clear to him that the package he was signing up for was a two-year contract that he would not be able to cancel.

"The fee sounded reasonable and I assumed it was as before where I could stop my monthly payments at any time," he says. "I was asked to go to what the lady called a Membership Kiosk and sign on an electronic screen. I was then handed a bit of paper."

He continues: "I do not recall seeing anything that indicated what I was signing up to and no attempt was made to explain this to me verbally. In part this is because I am not wholly familiar with these types of computerised systems so I relied upon the manageress to take me through it. She was very busy and, as I had to then head off to Gatwick airport myself, I did not read the paperwork that she handed to me."

The next day Mr Watkins checked his emails and realised he had inadvertently signed up to a two-year contract. He contacted the gym to say he did not want this, cancelled his direct debit and, eight days later after Christmas, he visited the branch to check that it had indeed been cancelled. There, he says, a lady on reception was sympathetic and said she would sort it out for him. That never happened and in the course of a number of subsequent conversations with members of staff, Mr Watkins was told he could not cancel the contract as the terms did not include a cancellation period.

The Distance Selling Regulations, which give a seven-day "cooling off" period, only apply to contracts agreed by phone, over the internet, or away from the firm's premises. Contrary to what many believe, you have no right to cancel a contract signed on the firm's premises unless it specifically includes a cooling-off period.

So Mr Watkins enlisted the services of a solicitor friend who penned a strongly-worded letter on his behalf to the gym chain, pointing out the alleged lack of clarity over the contract at the point of inception, the fact of Mr Watkins' age, and that this made it quite possible he would not want or be able to complete the two-year term, plus a reference to the Ashbourne court case.

The Ashbourne case, as highlighted in Guardian Money on 27 January 2012, is the high court case brought by the Office of Fair Trading (OFT) against Ashbourne Management Services, a company that draws up agreements and collects payments from gyms.

Ashbourne's contracts had minimum membership periods of between one and three years and Ashbourne routinely stated that consumers could not terminate their membership. After a four-day hearing the judge ruled that, among other things, a contract was unfair if it was for longer than 12 months and did not allow the consumer to cancel with 30 days' notice and pay a moderate sum in compensation.

The ruling only applied to Ashbourne, but the OFT warned at the time that it would have wider implications for the gym industry and announced last month that is investigating all major gym chains and looking closely at their contracts.

Guardian Money highlighted the Ashbourne case to LA Fitness in January, after it refused to end the contract of a reader, Hannah, who was heavily pregnant, whose husband had lost his job and who was about to be made homeless. The couple had 15 months to run on their gym contract and were finding it impossible to pay. Eventually, amid an outraged response from readers, the gym chain backed down and terminated the couple's contracts.

So what response did Mr Watkins get from his calls and his solicitor's letter to LA Fitness? "I received a threatening letter saying that if I didn't pay immediately [the gym chain] would pursue me for the total cost of my contract, £960, through its debt collection agency. On top of this it said it had added a further £40 as a late payment charge."

Mr Watkins then turned to Guardian Money and, within 24 hours of us contacting the gym chain, it had agreed to cancel his contract. A spokesman did say it believed Mr Watkins had been aware of what he was signing up to.

In a follow-up letter to Mr Watkins, the gym chain's head of member services said: "Please accept my sincere apologies for the trouble and confusion over the matter and any distress caused and hope we can now bring the matter to a close."

Guardian Money asked LA Fitness why it was still signing people up to two-year contracts, especially in light of the Ashbourne recommendations.

"We offer two-year contracts because there is a demand for them from our customers and they offer very good value for money," it said.

"In this case Mr Watkins signed up to our two-year membership deal, which offers the most competitive rates we have. While he would have been asked a series of questions and to read/approve our terms and conditions, given the circumstances we've cancelled his membership at no charge with immediate effect. A letter has been sent to Mr Watkins informing him as such – and we're always happy to discuss shorter-term options if that's more appropriate."

So how does Mr Watkins feel about LA Fitness now? "In its letter to me it effectively says it hopes we can now forget all about what happened. Well I am not inclined to forget about it. I want other people to know about what I consider to be an absolute scandal."

Mr Watkins is now attending exercise classes at the Kings Centre in East Grinstead, run by his local authority, on a pay-as-you-go basis. "I can sign on and pay monthly. I can stop going any time I like," he says.