As Christmas and the busy sales season approach, it is essential to be prepared for the common questions that arise around refunds, returns, and consumer rights. Here, we answer three key questions that retailers are likely to face over the next few months.
Q: If a customer wants a refund on an item, do I have to refund cash or can I give them a gift card, or a credit note instead?
A: The short answer is that it depends. The way you handle refunds varies based on where and how the purchase was made, and whether the item is faulty or simply unwanted.
In-store purchases (unwanted items): if your customer bought the item in-store and changed their mind, they have no statutory right to a refund. While many retailers offer a returns policy as a gesture of goodwill, this is not a legal requirement. If you do have a returns policy though, you need to follow it. If your policy allows you to issue a gift card or credit note for returns, you can do that.
Online purchases (unwanted items): the rules differ for online purchases. Consumers can cancel their order from the moment that it is placed and (for most but not all items) have a 14-day window, starting from the day they receive their goods, to cancel their order and return unwanted items, even if there is nothing wrong with them. If the goods are returned within this cancellation period, you must process the refund back to the original payment method, unless the customer expressly agrees otherwise. The 14-day cancellation period applies only if you have provided the consumer with the required pre-contractual information. If the correct pre-contractual information has not been provided, the cancellation period will be extended. Don’t get caught out by this.
Faulty items: if an item is faulty, broken or not as described, the consumer has a right to reject it and request a full refund within 30 days, regardless of your returns policy. The 30-day period starts on the day that the customer takes possession of the item (the day it is delivered, the day the customer walks out of the store with the item or, in the case of something that needs to be installed, the day you notify them that they have access). However, during this 30-day window, the consumer also has the option to request a repair or replacement. If they choose to take this route, the clock on the 30-day right to reject is paused while the consumer is waiting for the repair or replacement.
The consumer will still have rights after 30 days. If a fault is discovered within six months of purchase, it is presumed that the fault existed at the time of sale unless you can prove otherwise. If you have not proven otherwise, the consumer will be entitled to a repair or replacement and, failing that, a refund. After six months, the burden of proof shifts to the consumer to show that the fault was present when they purchased the item.
In all instances where the consumer is entitled to a refund due to the item being faulty, broken or not as described, you cannot insist that they accept a credit note or gift card.
Q: Are there any sale items that cannot be returned, or which should have shorter return times?
A: Some unwanted items cannot be returned whether they are sale items or not. This includes items like perishables, made-to-order items, worn or used items (particularly those that present hygiene issues like earrings, underwear, makeup etc.) and items where the packaging is no longer sealed (computer software, for example).
Retailers will often exclude sale items from their returns policy or have shorter return times for sale items. This is fine. If you have a returns policy which excludes sale items, you do not have to accept returns on unwanted sale items.
Consumers retain the same rights mentioned above both for unwanted goods bought online and faulty items. Sale goods must reach the same legal standard as non-sale goods and consumers have the same refund rights mentioned above.
The only exception is where a customer was told that the item was faulty before they bought it. The fault may have even been the reason why the item was on sale. If they were told of the fault before purchasing the item, they cannot request a refund.
Q: What if a product fault causes injury or damage? Can I limit my business’ liability to our customers?
A: Things get trickier where limiting liability is concerned. Limiting your liability is possible, but the law imposes strict conditions on how far you can go. Limitation of liability clauses for business-to-consumer contracts need to be very carefully drafted as legislation restricts the ability of businesses to limit their liability to consumers.
Some clauses are prohibited or ‘blacklisted’. You cannot limit your liability for fraud, misrepresentation, death or personal injury caused by negligence.
Additionally, you need to ensure that your limitation of liability clauses is fair, clear, and presented in plain English that consumers can understand. Such clauses must also not create an imbalance between you and the consumer to their detriment.
If your limitation of liability clause does not meet the requirements, it may be deemed invalid. A party with an invalid limitation of liability clause risks being exposed to unlimited liability. If you have any doubts over whether your limitation of liability clause would meet the strict statutory requirements, it is worth consulting a lawyer.
