What is a lay-by agreement?
A lay-by agreement is when you:
- pay for the goods in at least two or three instalments, and
- do not receive the goods until the full price has been paid.
Any deposit you pay is also considered to be an instalment. For example, ordering a Christmas hamper in advance and agreeing to pay for it by weekly instalments is a lay-by agreement.
Lay-by agreements must be in writing and must specify all the terms and conditions, including any termination charge. You must take a copy of the lay-by agreement.
The business can charge a termination fee if you decide to cancel a lay-by agreement, unless they’ve breached the agreement. The amount of the fee must not be more than the ‘reasonable costs’ relating to the agreement. For example, if you lay-by a winter coat in June but decide to cancel the agreement in August, it may be more difficult for the store to sell the coat at the end of winter. The termination charge could take into account any need to discount the coat.
If you cancel a lay-by agreement
The business must refund all payments, except for the termination charge. If the lay-by payments paid do not cover the termination charge, they’ll ask you to pay more.
Suppliers cancelling a lay-by agreement
A business should not cancel a lay-by agreement unless:
- you have breached a term of the agreement, such as missing a scheduled payment
- they are no longer trading, or
- the goods are no longer available due to circumstances outside the trader’s control.
Jeremy had a pair of shoes on lay-by for three weeks. He decided to cancel the lay-by because he had seen another pair of shoes that he preferred in a competitor's store. He approached the shop's manager, asking for a complete refund of the money he had paid so far. The manager told Jeremy that he could only have a part refund because he would be charged a fee for cancelling the lay-by. Jeremy took the matter to NSW Fair Trading and was advised that he was only entitled to a partial refund because he was provided with this information up-front.