Refunds for services
‘No refund’ and other signs
Signs that state ‘no refunds’ are unlawful, because they imply it is not possible to get a refund under any circumstance – even when there is a major problem with the goods or service.
For the same reason, the following signs are also unlawful:
- no refund on sale items
- exchange or credit note only for return of sale items.
Signs that state ‘No refunds will be given if you have simply changed your mind’ are acceptable.
What if a consumer changes their mind?
You do not have to give a refund when a consumer simply changes their mind about the service.
But you can have a policy to offer a refund or credit note when this happens. If so, you must abide by this policy.
Who has to fix a problem with a service?
When goods fail to meet a guarantee, the consumer has a right to a remedy – an attempt to put the situation right. Common remedies include repair, replacement and refund.
As a supplier, you must give a remedy when your services are not provided:
- with due care and skill
- which are fit for any specified purpose
- within a reasonable time (when no time is set).
Whether you offer a repair, refund or other remedy depends on whether the problem is:
- major – it cannot be fixed or too difficult to fix
- minor – it can usually be put right.
Consumer guarantees apply to both.
When services fail to meet a consumer guarantee, the consumer can also claim for consequential losses – compensation for costs to the consumer in time and money because something went wrong with the goods or services.
Handling major problems with services
A major problem with services is when:
- a reasonable consumer would not have acquired the services if they had known the nature and extent of the problem. For example, a reasonable consumer would not have a jacket dry-cleaned if they knew the dye would run and jacket would streak
- the services are substantially unfit for their normal purpose and cannot easily be made fit, within a reasonable time. For example, a carpet-cleaning service changes the colour of the consumer’s carpet in some places
- the consumer told the supplier they wanted a specific purpose but the services, and any resulting product, do not achieve that purpose and cannot easily or within a reasonable time be made to achieve it. For example, a consumer tells a pay TV company they want to watch the Olympics. They sign up to a 24-month contract but the Olympics are over before the company installs the service
- the consumer told the supplier they wanted a specific result but the services, and any resulting product, do not achieve that result and cannot easily or within a reasonable time be made to achieve it
- the supply of the services has created an unsafe situation. For example, an electrician incorrectly wires wall sockets in a consumer’s new kitchen, which makes the electrical outlets unsafe.
When there is a major failure with a service, the consumer can choose to:
- cancel the service contract and get a refund, or
- keep the contract and get compensation for the difference in the service delivered and what they paid for.
The consumer gets to choose, not you.
For example, a consumer has signed a building contract that sets out the specifications for her new house. When the house is completed, the consumer notices a few windows are not in the right place. Because the builder has not met the standard required by the contract, the consumer is entitled to compensation.
Handling minor problems with services
For minor problems that can be fixed, the consumer cannot cancel and demand a refund immediately.
They must give you, as the supplier, an opportunity to fix the problem. You must do this:
- free of charge, and
- within a reasonable time. This depends on the circumstances.
For example,a reasonable time to fix a problem with a haircut would be much shorter than the reasonable time to fix a problem with a landscaping project.
If you refuse to fix the problem or take too long, the consumer can:
- get someone else to deliver the service and ask you to pay reasonable costs, or
- cancel the contract and get some or all of their money back, if they have already paid. A consumer who has not yet paid, or only partly paid, can refuse to pay for the defective services at all, or pay less than the agreed price.
A reasonable cost would be within the normal range charged by suppliers, and include:
- the cost of the repair
- any other associated costs.
What must a consumer do to cancel a service?
A contract for services is cancelled when the consumer tells you they intend to cancel the services – verbally, in writing or, if this is not possible, by any other means.
A consumer can cancel a contract for services at any time.
Refunds for cancelled services
Cancelling a contract for services gives the consumer the right to a refund.
The amount will depend on whether some or all of the services provided were unsatisfactory, or provided at all.
For example, a hairdresser has cut and permed a consumer’s hair. The cut is good but the perm has fallen out after a day. The consumer must pay for the cut but not for the perm, as another hairdresser will not need to cut her hair to fix the problem.
Goods connected with cancelled services
When a consumer cancels a contract for services that includes goods, these are also rejected. The consumer is entitled to a refund of any money or other type of payment made for the goods.
To get a refund, the consumer must return the goods to the supplier. If this involves significant cost to the consumer, the supplier must collect the goods at their own expense.
When is the consumer not entitled to a remedy?
A consumer is not entitled to a remedy when you do not meet one of the consumer guarantees due to something:
- someone else said or did (excluding your agent or employee), or
- beyond human control that happened after the goods or services were supplied.
This exception does not apply when you have not provided the service with due care and skill.
For example, it takes a qualified painter three weeks to paint a house but the job has taken four weeks. The sole reason for the delay was the weather, which is outside the painter’s control. The consumer would not be entitled to a remedy.
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