Repair, replace or refund? Your obligations to your customers
Everyone wants to get a refund but no one wants to offer a refund. Do you know what your obligations are? Are you required to provide a refund, replacement or repair?
Regardless of whether you’re a product-based or service-based business, the question of refunds is always going to come up. Your refund obligations as a business are not always clear so I’m going to attempt to give a good overview via a selection of case studies.
CASE ONE: I’m an importer, do I have to provide a refund?
Lee opened an online business selling electronics that were imported from China. His manufacturer sent him product via monthly shipments to Australia. One of Lee’s customers phoned one day to tell Lee that the hairdryer she’d bought on his website the month before had overheated and blew up, burning her hair and damaging her bathroom sink which had to be replaced.
Lee told his customer she had to make any claims directly to the manufacturer who he believed was responsible. The customer went to the ACCC to complain and Lee was fined as well along with having to pay damages for the bathroom, burnt hair and hairdryer replacement to the customer. He was also required to lodge a report to advise of the dangerous product and post a recall notice to customers on his website as well as contacting them directly.
If you are selling goods or services to an Australian consumer, you are responsible, as a supplier, for abiding by consumer guarantees. If the manufacturer is overseas, you are directly responsible and cannot send customers to the manufacturer for any claims.
"The moral of the story is that everyone who sells goods or services to customers in Australia has refund, repair or replacement obligations. Make sure you know what these responsibilities are."
If the manufacturer is in Australia, in some cases you may be able to either share liability, pass on defect responsibility or claim back costs and fines from the manufacturer.
CASE TWO: Refunds are not appropriate to my products, what should I do?
Elise has a bathing suit business selling her goods both online and via physical shops. She has a policy of no return or refund for reasons of hygiene. Generally this is fine to not offer a refund for hygienic purposes and protection.
However, one customer claimed she washed her bathing suit as per the instructions and it started to fall apart. Is Elise required to give a refund or replacement?
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Generally, if the customer has a receipt and can show they purchased the item from either Elise’s online shop or through one of her supplier shops, they are entitled to a refund or replacement for items that are, or would be considered, faulty. There are a number of guarantees that are required to be provided by sellers including that the goods be fit for purpose or a replacement or repair of faulty goods or services that do not meet reasonable use must be offered.
When customers have used items in an abnormal way or for a long period time, they not necessarily entitled to a replacement or refund. You cannot use a toaster for years and expect a refund or replacement when it stops working. It must work for a ‘reasonable’ period but not forever!
CASE THREE: I sell secondhand goods, surely I don’t have to replace or refund?
Sally has a classified website selling secondhand goods. One of the buyers came back and said the mobile phone they bought was scratched and wanted their money back.
Secondhand goods have the same refund rights as new items but you have to take into account the age, price and condition at time of sale. Also if the item says new but is clearly used, this is misleading and a full refund must be offered.
CASE FOUR: I run regular sales, do I have to refund sale items?
It doesn’t matter if it was on sale. You cannot post a ‘No refund on sale items’ sign. This is illegal. You must still provide the same guarantees and refund terms as non-sale goods.
So the moral of the story is that everyone who sells goods or services to customers in Australia has refund, repair or replacement obligations. Make sure you know what these responsibilities are so you can ensure your suppliers, manufacturers or classified advertisers agree to back you up in your terms!
Do you offer refunds on your products and services? Do you know if you need to?