While the festive season is generally the time to pick up a lay
by, this past festive season has seen retailers focussing on lay by
agreements for a wholly different reason. The commencement of the
Competition and Consumer Act 2011 (Cth) (the
Act) on 1 January saw (among other changes) the
introduction of a number of new laws focussed solely on lay-by
agreements. All retailers that have lay-bys policies must be aware
of these laws and ensure compliance with them.
Until 1 January 2011 lay-by agreements were dealt with on a
state by state basis pursuant to the relevant fair trading laws.
With the introduction of the Act lay-by agreements are now dealt
with under the one Federal Act. This is likely to be advantageous
to most franchisors that have national networks as it will allow
them to prepare one standard form lay-by agreement for use in all
states and territories in Australia.
A "lay-by agreement" is defined, for the purpose of
the Act, as an agreement between a supplier and a consumer for the
supply of consumer goods on terms which provide that:
the goods will not delivered until the consumer has paid the
total price of the goods, and
the price of the goods is to be paid by either 3 or more
instalments or, if the agreement specifies that it is a lay-by
agreement, 2 or more instalments.
The Act now requires that all lay-by agreements be in writing,
be given to a consumer upon the consumer entering into the
agreement and that the agreement be "transparent". The
Act also specifies the circumstances in which a lay-by agreement
can be terminated. Specifically, a lay-by agreement may be
terminated by a consumer at any time before the goods the subject
of the agreement are delivered. If the agreement is terminated in
these circumstances the supplier must return all monies paid. The
supplier may, in such circumstances, be entitled to charge a
termination charge (provided that it is not in breach of the lay-by
agreement) however the termination charge must not be more than the
supplier's reasonable costs in relation to the agreement.
Suppliers also have rights to terminate: however they are
limited. A supplier may only terminate a lay-by agreement if the
consumer who is a party to the agreement has breached the
agreement, the supplier is no longer involved in trade or commerce,
or the goods to which the lay-by agreement relates are no longer
available. If a lay-by agreement is terminated, the supplier must
refund all amounts paid under the agreement other than any
Failure to comply with the provisions of the Act may result in
pecuniary penalties. Accordingly, franchisors that use lay-by
policies in their networks should familiarise themselves with the
relevant provisions of the Act and revisit their lay-by policies to
ensure that they comply with the new legislation.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The Sportscraft refunds and returns policy limitations went beyond consumer's rights under the Australian Consumer Law.
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