Layby can be a convenient way for your customers to purchases goods, but there are some important rules that you must follow if you offer layby sales.
What is a layby sale?
The main features of a layby sale are:
it relates only to goods (not to services)
the purchase price of the goods is less than $30,000
payment is made in three or more instalments (or two instalments if the agreement specifies it is a layby) – a deposit is counted as an instalment
the customer doesn't take possession of the goods until all, or a specified amount, of the total price of the goods has been paid for
the risk in the goods remains with you until the customer has received them or until the customer has paid for them. So if you let the customer take the goods before they have paid in full and the goods are damaged, you are responsible.
If you are selling goods or services and they are being paid for in instalments, but fees (other than a cancellation fee) or interest are included, then as well as being a layby sale, this may also be a credit contract.
When you enter into a layby sales agreement, you must provide the customer with a written copy of the agreement.
The agreement must be in plain language, legible and clearly presented. The front page must include:
a clear description of the goods
your name, street address, phone number and email address
a summary of the customer's right to cancel the agreement
information about any cancellation fees that will be charged, including the amount of the fee (if it is a fixed fee) or a clear description of how the fee will be calculated.
The layby sales agreement must also include:
the total price payable
the date that the layby is entered into.
If the contract is also a credit contract you might have to provide additional information.
During the layby
The customer can request a written statement of their layby sale account at any time. You must provide this free of charge within 5 working days of receiving the request.
The statement must clearly set out all of the following:
the total purchase price
the amount paid by the date of the statement
the amount of any cancellation charge applying at the date of the statement
any outstanding amount owing, and when and how the customer needs to pay it.
Can I cancel the agreement?
Yes. Either you or the customer can cancel the layby sales, but there are different rules depending on who is cancelling it.
You can cancel the agreement only if:
the customer breaches an important term of the agreement
due to circumstances beyond your control, the goods are no longer available and there is no satisfactory substitute
you have ceased trading and the goods do not form part of the assets of the your bankruptcy, receivership, liquidation or voluntary administration.
The customer can cancel the layby sale agreement at any time, for any reason, before they take possession of the goods.
If the goods were purchased as part of a door-to-door or telemarketing sale there are additional rules and extra information you must provide. The customer can cancel the agreement during the "cooling off" period – up to 5 working days after you provided a copy of the contract This applies even if the customer has taken possession of the goods. You must tell the customer of this right to cancel before you enter into the agreement. If the customer cancels you have to refund all the money the customer has paid. Read more about selling door-to-door.
To cancel the contract the customer just needs to make it clear to you that this is what they want to do.
Can I charge a cancellation fee?
Yes. But only if:
the customer has cancelled or breached the layby agreement
the agreement states that a cancellation fee can be charged
you have not breached the agreement.
The cancellation fee can't be for an amount more than your reasonable cost arising directly from the layby agreement.
You also cannot charge a cancellation fee if you have sold the goods door-to-door or as a telemarketing sale and the customer has cancelled during the 5 day cooling off period.
What happens if the agreement is cancelled?
You must refund the customer all the money they have paid so far, less any cancellation fee. If the customer hasn't paid enough money to cover the cancellation fee, you can recover the balance of this from the customer.
