Customers may return goods they have bought for a host of reasons. The customer may have bought goods that are faulty. Your customer may have changed their mind since they purchased your product. Equally, your customer may have purchased the wrong item by accident. Alternatively, your customer may have purchased an item from your store based on a product description that was not entirely accurate. Australian Consumer Law (ACL) states a customer has the right to return a product and promptly receive a remedy. In certain circumstances, your customer may be entitled to a refund. Likewise, depending on the situation, they may not be able to seek a refund. As the store owner, you must exercise discretion in how you respond to a customer’s request to return to you the goods they purchased. This article looks at refunds and the circumstances under which the customer has a right to return a product.
When a Customer Has the Right to Return a Product
The ACL outlines certain consumer guarantees that your business is legally required to provide to your customers. These guarantees protect your customers if the products they buy do not function as expected.
If your products do not meet these consumer guarantees, your business may have to:
- provide a refund;
- conduct repairs;
- offer a replacement; or
- provide compensation to your customers.
The remedy your customer is entitled to depends on whether the issue with your product is major or minor. As such, the distinction between a major or minor issue is pivotal.
What Are ‘Major’ Problems?
If there is a major problem with your product, your customer has a right to return the product. Your customer also has the right to seek an appropriate remedy. The following situations are considered major problems:
- the product differs significantly from the description or sample product;
- a reasonable customer would not have bought the product if they had known about the problem;
- the product does not do what your customer was told it would, or what it is supposed to do, and it cannot be fixed quickly or easily; or
- the product is unsafe.
If there is a major problem with a product, then your customer has the choice of:
- returning the product to you and obtaining a refund or replacement; or
- keeping the product and asking you to compensate them for the reduced value of your product.
Case Study of a Major Problem
Suppose you are on holiday in Brisbane, and you book a night at a hotel using your credit card. You arrive at the hotel and are informed that the hotel cannot provide you with accommodation. Your hotel has made an error and has double-booked the room. Unfortunately, they cannot provide you with any other rooms.
In this situation, the hotel must give you a refund. Your hotel not being able to give you a room constitutes a major problem.
What Are ‘Minor’ Problems?
A minor problem is fixable. Your customers should give you an opportunity to fix the problem within a reasonable timeframe. At which point, you can choose which course of action you want to take. You may decide to:
- give your customer a refund;
- repair the item; or
- replace the item.
When a Customer Does Not Have the Right to Return a Product
In certain situations, your customer does not have the right to return a product. Although, you are still able to offer your customer a refund. Alternatively, you may see whether your customer wishes to exchange the product. You are not required to accept your customer’s return of the product if your customer:
- changes his or her mind;
- orders or buys the wrong product;
- finds a cheaper or better product at another store;
- is aware of the fault before buying the product;
- damages the product because he or she misused the product; or
- the product experiences general wear and tear.
This guide will help you to understand your corporate governance responsibilities, including the decision-making processes.
Key Takeaways
Your customers may return your products to you for a variety of reasons. The product your customer wishes to return to you may have either a ‘major’ or ‘minor’ problem. In either case, you may decide to give your customer a refund. However, depending on the situation, you may offer your customer other remedies. For instance, you can offer to repair the product. You could offer to completely replace the product. Alternatively, you could offer your customer store credit which they could use for future purchases. Importantly, your business may have its own refund policies. In which case, you need to strictly abide by your own policies. Otherwise, you may face future legal issues.
If you are still unsure when you have to provide your customers with refunds, contact our experienced consumer lawyers as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
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