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A layby sale is a contract
between you (the seller) and a customer with the following
conditions:
- the seller holds the goods until the total price is paid
- the seller holds the goods until a specified proportion of the
price is paid
- the price is paid in instalments or is to be paid at the end
of a set period
- the price of the goods is $7,500 or less
All sales that meet the conditions listed above are layby sales,
even if you do not use the term "layby". All sales that meet these
conditions are covered by the terms of the Layby Sales Act.
You can access the Layby Sales Act online at the government
legislation website
(there is no charge for viewing legislation on this website).
When you use layby, the seller agrees to hold the goods for you.
You agree to pay for them in instalments, and you both agree how
long it will take. When you make the last payment you can collect
the goods.
Terms and conditions of layby
What deposit can I ask for?
The amount of the deposit is decided by you and the customer. It
is not specified in the Layby Sales Act.
How long should I give the customer to finish making payments?
You and the customer decide the term of the layby including the
frequency of instalments. It is not specified in the Layby Sales
Act. You should make sure that customers know how long they have to
complete the layby and how often they are required to make payments.
Holding the goods
You must hold the goods chosen by the customer until the payments
are completed and you give the goods to the customer, or until the
contract is cancelled.
If you sell the goods to someone else, you must provide the
customer with replacement goods. If this isn't possible, you must
provide the customer with a refund of all the money that has been
paid. The customer can also claim any increase in price if they have
to go to another shop to obtain the same goods.
Customer's right to request a written statement
The customer is entitled to request and receive a written
statement every 30 days. The law says that a customer should request
the statement in writing and pay 25 cents for it and that you must
provide the statement within seven days. Normally, retailers will
provide a statement for a customer who calls in to the shop.
The statement must show:
- the price of the goods
- what the customer has paid so far
- the current balance owing
- the current retail value of the goods and any consequent loss
in value that has occurred since the goods were put on layby
- the selling costs
- the amount of the refund if the layby is cancelled.
You will need to keep a record of payments made by the customer
to be able to supply a statement when requested.
Recording payments
Each time a customer makes a payment you should give a receipt,
or record it on a payment record slip given to the customer. This
will assist your customers to keep track of their layby and to
remember when payments are due.
Layby sale cancellation
The customer can cancel a layby at any time, and does not have to
give a reason. The customer can cancel verbally or in writing. They
may be entitled to a refund as specified in the Layby Sales Act.
Seller's right to cancel
You can cancel the layby whenever the customer does not stick to
the terms of the agreement. The right of the seller to cancel the
layby is not in the Layby Sales Act, you are entitled to cancel the
layby because the customer has breached their layby contract with
you.
For instance, if they do not make payments as often as requested
or do not complete payments within the specified time. BUT you must
tell the customer that you are cancelling the layby. If you do not
tell them, the layby contract is still in effect.
The refund should be calculated using a specific formula. It is
up to the customer to come and claim the refund.
Right to retain deposit
You cannot simply decide that you will keep the deposit in every
case. You should calculate what refund the customer is entitled to
according to the Layby Sales Act.
Calculating refunds
When customers cancel a layby they are usually entitled to a
refund. You may choose to refund all of their deposit plus the
payments they have made. Alternatively, you may wish to calculate
the exact refund they are entitled to by using the following
formula.
AMOUNT PAID (Deposit + Payments) minus
DEDUCTIONS (Selling costs + Loss in value)
equals REFUND/DEBT
Selling costs
Selling costs are the actual costs associated with the layby
sale, such as the cost of storing the goods and the staff time taken
in preparing receipts. These costs may be calculated in several
different ways, but the simplest method is to assign an amount to
each of these items.
eg, you might estimate that the sale took
5 minutes and that the customer making two payments took another
10 minutes. You can then calculate the cost of 15 minutes of the
shop assistant's time and add to this any storage costs.
In a court case in 1985, the judge ruled that if a retailer's
estimate of selling costs is challenged, he or she must be able to
show that the estimate is a reasonable one that takes into account
only the actual selling costs associated with that particular sale.
Loss in value
Loss in value is the loss in the retail value of the goods. For
example, goods may lose value because they are no longer in season
or because a new model has been produced.
Example of loss in value
A customer puts a $90 winter jersey on layby in April and then
cancels the layby in August. The shop has started stocking it's
spring range of clothes and all winter jerseys are on sale. Winter
clothing in other shops is now on special so the jersey has lost
value. If the sale price is now $60, then the loss in value is $30.
Assuming that the customer paid a $20 deposit and made payments
of a further $20, the refund calculation in this example would look
like this:
AMOUNT PAID (Deposit + Payments) minus
DEDUCTIONS (Selling costs + Loss in value)
($20 + $20) minus ($5 + $30)
REFUND equals $5
The customer has paid $40 towards the cost of the jersey but will
only be entitled to a refund of $5. In this situation the customer
may prefer to continue to pay off the layby.
Example of no loss in value
A customer has put a leather belt on layby and cancels it after 6
weeks. The retailer has put all belts on sale as they no longer wish
to stock accessories. The belt has not lost retail value as other
shops are still selling similar belts at the normal price. In this
situation the retailer cannot deduct a loss in value from the refund
Layby cancelled within one month
When a layby is cancelled within one month it is assumed the
goods will not have lost value and the retailer will only deduct
selling costs. However, if you can prove that a loss in value has
occurred, you can deduct it.
Does the refund have to be in cash?
The refund should be given in cash or as a cheque. The customer
does not have to accept a credit note or buy other goods. Having a
sign in the shop or a note on receipts that says "no cash refunds"
does not alter this.
What if the customer owes me money
It is possible that a customer will owe you money if they cancel
the layby when there has been a loss in value in the goods.
A customer puts a $600 tape deck on layby
and pays a deposit of $50 and only one payment of $20. Four months
later she wants to cancel the layby. The tape deck has lost value
as a new model has been released in that brand with a "new-look"
style. The remaining old model stock has been reduced in PRICE by
$100.
The refund calculation would look like this
AMOUNT PAID (Deposit + Payments) minus
DEDUCTIONS (Selling costs + Loss in value)
( $50 + $20) minus ($5 + $lOO)
DEBT OWING equals $35
If the customer goes ahead and cancels she will owe you $35. This
situation is probably unusual as you would normally have advised the
customer that the layby would be cancelled because she was not
making regular payments.
Deposit only paid - special case
A special case applies when the customer has only paid the
deposit and has made no other payments. If a loss in value has
occurred and the calculation shows that the customer owes you an
amount equal to or greater than the deposit, then you can choose to
keep the deposit. However, you cannot ask the customer for any
further amount to cover the loss in value.
Faulty goods
Customers who pay off the goods on layby then return them because
they are faulty, may be entitled to a remedy under the Consumer
Guarantees Act. The remedy available will depend on the seriousness
of the fault. Check out our section for
Suppliers of Goods - CGA.
Business closes down
If your company has gone into receivership, or "gone bust" and
your customers are up-to-date with their layby payments they have
the right to pay for and collect the laybys.
If you do not have enough goods in stock to give to your layby
customers your company will owe them money.
If your company is choosing to close down or sell the shop notify
all your layby customers in advance that the store is closing or
changing hands. If a customer does not pay off the layby you can
choose to cancel the layby.
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