Customers may want to exchange a product they have bought for many reasons. As an online business, you should understand when you can choose to offer exchanges and when you must provide for exchanges. It is best practice to have an exchange policy to set out if, when and how your business will provide exchanges. This article explains whether you need an exchange policy and when you must offer exchanges to customers.

When You Must Provide Exchanges

The Australian Consumer Law (ACL) automatically applies to businesses that sell goods, including when those goods are sold online. The ACL requires that businesses provide remedies to customers when the goods they purchase do not meet specific ‘consumer guarantees’.

Some of the consumer guarantees under the ACL provide that products must:

  • be of acceptable quality;
  • match the descriptions made by advertising; and
  • meet representations made as to performance, condition and quality.

The remedies your business provides when consumer guarantees are not met will vary depending on whether the problem is ‘major’ or ‘minor’.

 

Major Problems – When Customers Are Entitled to an Exchange or Replacement

A product has a ‘major’ problem if it:

  • has a defect which would have prevented the customer from purchasing the product;
  • is dangerous or unsafe;
  • differs significantly from the product description; and
  • does not have the functionality it should have.

If the product has a major problem, then the customer is entitled to return the product and request a refund or replacement from the business they purchased the product from. The customer can also keep the product and choose to receive compensation for the reduced value. As a business, you cannot side-step your obligations by directing the customer to the manufacturer.

 

Minor Problems – When You Can Choose to Provide an Exchange

 

If the problem is minor and fixable, your business can decide to fix the problem within a reasonable time. You can do this instead of offering a replacement or exchange.

When You Do Not Need to Provide an Exchange

In other circumstances, you can choose whether you will allow customers to return items and exchange them for something else. The benefit of an exchange policy is it will clearly explain to customers the circumstances in which you will allow this.

You may choose to allow or not allow customers to return products for an exchange or replacement in cases such as when a customer:

  • changes his or her mind and would like a different product instead;
  • orders the wrong product;
  • finds a cheaper product elsewhere;
  • no longer has use for the product;
  • is aware of a fault when buying the product; or
  • damages the product by accident or by his or her misuse.

Should I Have an Exchange Policy?

It is best practice to have a comprehensive exchange policy set out in your sale terms and conditions. The policy should clearly state if and when you will offer exchanges for change-of-mind returns. If you have decided you will, you should set out the:

  • required proof of purchase;
  • period during which returns must be made; and
  • who is responsible for the costs of sending back returns.

For exchanges relating to defective products, you may also ask for evidence of the alleged defect.

Furthermore, you should include a disclaimer that you are not responsible for ensuring the products will be appropriate for the customer’s circumstances. In addition to this, you should exclude warranties and guarantees to the extent that you can, subject to the ACL.

It is also useful to have a well-drafted exchange policy to ensure you are not illegally misrepresenting consumer guarantees with statements such as:

  • “no refunds or exchanges on sale items”;
  • “exchanges only available for returns within 30 days from the date of purchase”; and
  • “refunds and exchanges only allowed on items returned in their original packaging”.

Key Takeaways

It is important your business has an exchange policy in its sale terms and conditions. It should set out the circumstances in which you will offer exchanges for defective products and change-of-mind purchases. Make sure that your policy complies with the ACL requirements and that you know when to offer exchanges. If you have any questions, contact LegalVision’s e-commerce lawyers on 1300 544 755 or fill out the form on this page.

Sophie Mao
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