Reading time: 3 minutes

Christmas is just around the corner, and your customers are scavenging for the best gifts for their loved ones. Many shops offer customers an option to pay for goods in instalments, known as lay-by. It allows customers to purchase goods at a given price but make the payments over a period rather than upfront. If your business offers this arrangement, you need to ensure that you comply with the rules of lay-by terms.

When is it Considered a Lay-By Agreement?

A lay-by agreement exists where your business allows the customer to pay for an item in at least two installments, and the customer won’t receive the goods until they have paid the full price. Even if you do not call it a lay-by agreement, if the payment arrangement meets those two requirements, it is likely that you will have obligations to comply with the law surrounding lay-by agreements.

What are the Requirements?

You must provide your customer with a written copy of the lay-by agreement. This agreement must include all the terms and conditions under which the agreement is formed. Your agreement must also address the termination fee. 

Make sure that the agreement is written in clear, plain language so that your customers understand what they agree to.

What if the Customer Wants to Terminate the Lay-By Agreement?

Your customer can terminate the lay-by agreement at any point before they receive the goods. If the customer does decide to cancel the lay-by, then you must refund all the amounts that the customer paid, except for the termination fee. As long as the lay-by agreement clearly describes the termination fee, it can be taken out of the payments that the customer has already made. 

You can charge a termination fee if the customer changes their mind about the goods. However, the termination fee cannot be an unreasonable amount and should not be more than the amount of your reasonable costs associated with the lay-by agreement. For example, what are the costs involved to provide the lay-by arrangement, such as storage and administration.  The termination fee is all that you can recover from a cancellation of the lay-by agreement. You cannot recover damages or other remedies from terminating the agreement.

When Can You Terminate a Lay-By Agreement?

You can also terminate the lay-by agreement if the customer beaches the agreement’s terms. For example, if they fail to pay the instalments by the set date.

If your business is no longer trading, or the product is not available anymore for reasons beyond your control, you are also able to terminate the agreement.

Conclusion

Make sure that your lay-by agreements satisfy the legal requirements. If you are unsure about your current agreement, you should get a lawyer to have a look at it. If lay-by is something you are considering for this Christmas season, get in touch with a lawyer to have them draft a lay-by agreement. Offering your customers a payment plan is one way you can make those Christmas sales!

Questions? Get in touch on 1300 544 755. 

Webinars

Redundancies and Restructuring: Understanding Your Employer Obligations

Thursday 7 July | 11:00 - 11:45am

Online
If you plan on making a role redundant, it is crucial that you understand your employer obligations. Our free webinar will explain.
Register Now

How to Sponsor Foreign Workers For Your Tech Business

Wednesday 13 July | 11:00 - 11:45am

Online
Need web3 talent for your tech business? Consider sponsoring workers from overseas. Join our free webinar to learn more.
Register Now

Advertising 101: Social Media, Influencers and the Law

Thursday 21 July | 11:00 - 11:45am

Online
Learn how to promote your business on social media without breaking the law. Register for our free webinar today.
Register Now

Structuring for Certainty in Uncertain Times

Tuesday 26 July | 12:00 - 12:45pm

Online
Learn how to structure to weather storm and ensure you can take advantage of the “green shoots” opportunities arising on the other side of a recession.
Register Now

Playing for the Prize: How to Run Trade Promotions

Thursday 28 July | 11:00 - 11:45am

Online
Running a promotion with a prize? Your business has specific trade promotion obligations. Join our free webinar to learn more.
Register Now

Web3 Essentials: Understanding SAFT Agreements

Tuesday 2 August | 11:00 - 11:45am

Online
Learn how SAFT Agreements can help your Web3 business when raising capital. Register today for our free webinar.
Register Now

Understanding Your Annual Franchise Update Obligations

Wednesday 3 August | 11:00 - 11:45am

Online
Franchisors must meet annual reporting obligations each October. Understand your legal requirements by registering for our free webinar today.
Register Now

Legal Essentials for Product Manufacturers

Thursday 11 August | 11:00 - 11:45am

Online
As a product manufacturer, do you know your legal obligations if there is a product recall? Join our free webinar to learn more.
Register Now

About LegalVision: LegalVision is a commercial law firm that provides businesses with affordable and ongoing legal assistance through our industry-first membership.

By becoming a member, you'll have an experienced legal team ready to answer your questions, draft and review your contracts, and resolve your disputes. All the legal assistance your business needs, for a low monthly fee.

Learn more about our membership

Need Legal Help? Submit an Enquiry

If you would like to get in touch with our team and learn more about how our membership can help your business, fill out the form below.

Our Awards

  • 2020 Innovation Award 2020 Excellence in Technology & Innovation Finalist – Australasian Law Awards
  • 2020 Employer of Choice Award 2020 Employer of Choice Winner – Australasian Lawyer
  • 2020 Financial Times Award 2021 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review
  • 2021 Law Firm of the Year Award 2021 Law Firm of the Year - Australasian Law Awards
  • 2022 Law Firm of the Year Winner 2022 Law Firm of the Year - Australasian Law Awards