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If you approach consumers directly in their homes or over the phone to sell your goods, the sale might be an uninvited direct sale agreement and there are obligations you need to comply with.

The rules also apply to any agents you engage or sales representatives you employ who sell in this way. It is your responsibility to make sure that they know the rules and stick to them.

The rules about uninvited direct sale agreements cover what you have to tell consumers when you are negotiating the sale, what information you have to disclose and how. There are also rules about how and when the customer can cancel the agreement and when you can enforce it.

What is an uninvited direct sale?

An uninvited direct sale is a sale made if:

  • you approach a consumer uninvited at their home, workplace or by phone, and negotiate to sell them goods or services; and
  • the goods or services cost $100 or more (or the price is uncertain at the time of supply).

A sale could be an uninvited direct sale even if:

  • a consumer provides you their contact details for one purpose (such as a competition entry) and as a result you contact them in order to sell other goods or services;
  • a consumer responds to an unsuccessful attempt to contact them (such as returning a missed call or responding to a calling card);
  • a consumer enters into negotiations with you after they receive an unsolicited quote or estimate.

Rules for uninvited direct sales

You must give consumers information when you are negotiating an uninvited direct sale.

When negotiating a sale you or your sales representative must:

  • tell the consumer about their right to cancel the agreement within 5 working days and how to exercise that right - this must happen before the customer enters into the agreement
  • provide the consumer with a written copy of the agreement when it is entered into. If the agreement is made over the phone the consumer must receive a written copy of the agreement within 5 working days.

The agreement must be clear and include specific information.

Any uninvited direct sales agreement must be:

  • in writing
  • expressed in plain language so that it is easily understood
  • legible and presented clearly.

The front page of the agreement must include:

  • a clear description of the goods or services that are being supplied
  • a summary of the consumer’s right to cancel the agreement
  • the supplier’s name, street address, telephone number and email address
  • the consumer’s name and street address.

The agreement must also clearly state:

  • the date
  • the total price to be paid under the agreement.

Consumers have a right to cancel

A consumer can cancel an uninvited direct sales agreement within 5 working days of receiving the agreement. They may be able cancel at any time if you do not provide the information set out above.

If the consumer cancels the agreement, you must:

  • immediately repay all the money paid by the consumer under the agreement;
  • arrange to collect (or ask the consumer to return) any goods you've already supplied at your expense;
  • if the services already supplied altered or damaged the consumer’s property you must reinstate the consumer’s property to its previous condition if they ask you to. You are not entitled to compensation for the services already supplied under the agreement.

Consumers also have obligations when cancelling uninvited direct sale agreements such as taking reasonable care of any goods you have already supplied and allowing the supplier to collect these goods.

When you can enforce an uninvited direct sales agreement

You cannot enforce an uninvited direct sales agreement until the cancellation period has expired. In other words, you cannot insist a consumer makes payments until the 5 day cancellation period has passed.

After that time, an agreement will only be enforceable if it contains the necessary information and you have provided it to the consumer. For example, an agreement that is not dated and not written in plain language in a clear and legible format may not be enforceable.

If the agreement is not clear or does not provide the right information, but the issue is only minor and does not prejudice the consumer (such as providing a written copy of the agreement a day late) then the agreement may still be enforceable. However, we recommend that all businesses comply fully with the information disclosure provisions to avoid doubt.

Example: A telemarketer calls Daniel offering a special price to switch his electricity supply services to another supplier for a 12 month period. The telemarketer doesn’t record Daniel’s address details correctly. As a result, Daniel doesn’t receive a copy of the written agreement within 5 days. Daniel eventually receives a copy of the agreement three weeks later but in the meantime has decided to stay with his existing supplier. The supplier failed to provide Daniel with a copy of the agreement in time so has not complied with the information disclosure requirements. The agreement would not be enforceable and Daniel could cancel at any time.

Do these rules apply to renewal agreements?

No. Where a business has an existing agreement with a consumer that is renewed through an uninvited approach (for example, where a salesperson calls a customer to discuss extending their current plan), it is not considered an uninvited direct sale under the Fair Trading Act. These agreements are called renewal agreements.

Tips for businesses

To ensure sales staff and sales agents are following the rules we recommend that you:

  • implement a comprehensive training programme so staff and agents understand and carry out their legal obligations
  • monitor staff performance to make sure they are complying with the law and to identify any issues
  • check your sales agreements to ensure they contain all of the necessary information required by law.