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senseict
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If they’ve ordered and are returning an item because of their incorrect purchase, then I’d expect the customer to pay for the return (if they are accepted, there is no legal requirement to accept mistaken purchase returns).

In the event that the business sent the wrong product, I’d recommend the business pay for both legs of the shipping.

However, if the product is defective and is too large, it’s the business’s responsibility to cover shipping, as stated here:

https://www.accc.gov.au/consumers/consumer-rights-guarantees/repair-replace-refund

You are entitled to return a product if you believe that there is a problem. You are generally responsible for returning the product if it can be posted or easily returned. You are entitled to recover reasonable postage or transportation costs from the business if the product is confirmed to have a problem, so keep your receipts.

When a product is too large, too heavy or too difficult to remove, the business is responsible for paying the shipping costs or collecting the product within a reasonable time of being notified of the problem.

Essentially it’s mostly goodwill aside from some excessive things.

Whatever your policies say, ACL cannot be excluded or overridden, so if you put crap in your policies, they’ll be overruled and may even be considered completely null & void (seek legal advice).

The best thing I can really advise on here is to seek legal advice before posting any policies. You can even get templated policies specific to Australian law on sites like lawlive.com.au which are generally pretty useful, however, when you do implement them, you have to read and understand them so you understand your obligations under your own policy.

I hope that helps and sheds a bit of light on the issue.