Lay-by sales
What is a lay-by sale?
A 'lay-by' is a contract between you and a customer. You agree to hold the goods until they have paid the total selling price in instalments within a fixed period.
Offering sales by lay-by may help you make sales that you may not have made otherwise.
As a lay-by is a legal and binding contract on both parties, you should be aware of your rights and responsibilities when entering into this type of agreement.
Terms and conditions
There is no specific 'lay-by legislation' in Western Australia, so you can determine the terms and conditions you wish to apply. Here are some things to consider:
- The amount of deposit required.
- The length of the lay-by period.
- When instalments will be due.
- What happens if the contract is cancelled?
While there is no lay-by legislation, the transaction is still subject to Fair Trading and Trade Practices laws.
You should store goods on lay-by separately and identify them clearly.
What you need to tell customers
Explain that a lay-by agreement is a legally binding contract. Cover such matters as, when instalments are to be paid, and what happens if they change their mind or do not complete the payments.
Give the customer a copy of the lay-by conditions before you accept a deposit.
When customers change their mind
If the customer changes their mind or does not make payments, you have the right to claim "fair damages". If you do this, the amount should be enough to cover storage costs and the costs of reselling the goods.
You may also claim your "loss of profit" on the sale. In each instance, you would have to be able to justify your claim.
Usually, if a person does not go through with the lay-by, you would be entitled to retain at least the deposit.
However, if a customer has paid a large portion of the price they may be entitled to some refund, depending on your losses.
Generally, stores tend to be quite flexible in these circumstances.
For the sake of goodwill, and to allow for people's circumstances, it may be worthwhile treating each case on its merits and avoid making hard and fast rules.
If a customer is late making payments
Where dates or intervals for payments are set out in the agreement, a customer who fails to pay at the correct time breaks the agreement. They lose the right to buy the goods and you can claim "fair damages".
If no payment schedule is specified, you must give the customer a reasonable length of time to pay. Try to come to a suitable arrangement for a payment schedule.
If you can't supply the item
If you are unable to supply the goods when all payments have been made, you are in breach of the contract. The customer is then entitled to a refund of money paid.
A customer could also claim costs incurred as a result of you not fulfilling the contract. For example, they could claim the extra cost of obtaining the same item elsewhere.
Can the price of the goods change?
No. The price of goods is fixed once the lay-by contract is made.
Price changes for identical goods during the lay-by period do not affect the agreement. For example, if a sale item is placed on lay-by, the 'contract' price for the lay-by remains the same after the store sale is finished. This also works in reverse – if the price of the other identical goods is reduced, the lay-by price will remain the same.
Keeping records
To help maintain good customer relations and help the smooth running of lay-by transactions, keep records of the agreements, including:
- The customer's name, address and telephone number.
- A description of the goods, and the price agreed.
- The date of the transaction.
- An identification mark or number of the sale.
- Details of the deposit, instalments paid and the balance remaining due.
Each time a customer makes a payment give them a receipt. This helps them keep track of the lay-by and remember when payments are due.
Make sure your lay-by record system records when the sale was completed.
Finalising the sale
When payments are completed and the customer calls to collect the goods, allow them to inspect the goods to ensure that they are the items they chose, and that they are in sound condition. This may help you if there is a later dispute over the type or quality of the goods.
If the goods are not those purchased or have been damaged in some way, you have to replace them. If this is not possible, the customer is entitled to a refund.
If the goods are not collected by the date specified, you are entitled to place them back in stock and claim "fair damages". However, to maintain goodwill it would be worthwhile contacting the customer to ask that the payments be finalised.