If you buy on layby, you get some special protections under the Fair Trading Act, including the right to cancel the sale at any time before you take the goods home.
What is a layby sale?
In a layby sale, you pay a deposit on an item and the shop puts it aside while you pay off what you owe within a certain time. The shop keeps the goods and still owns them until you pay off the full price (or an agreed part of it). You don’t pay any interest while you’re paying off the item, but you don’t get to take possession of it until you’ve paid it off.
The special protections for layby sales only apply if:
- the sale agreement states or implies that you don’t get to take the goods away (“take possession”) until you’ve paid the full price or the agreed part of it, and
- the agreement states or implies that you’ll pay the price in at least three instalments or, if the agreement explicitly says it’s a layby sale, in at least two instalments (a deposit paid at the outset counts as an “instalment”), and
- the price of the goods is not more than $15,000.
If the agreement has all three of those features, it is a “layby sale”, whether or not it describes itself as one.
If you are buying goods, and are paying by instalments, and fees (other than a cancellation fee) or interest are included, then this may also be a credit contract. (See “Credit Contracts” in Credit and Debt chapter.)
Requirements for the content and form of layby sale agreements
The seller must make sure that the layby sale agreement is in writing and that it’s clear, able to be read, and in plain language. You must be given a copy of the agreement when you enter into it.
The agreement must state the total price you’ll have to pay, and the agreement must be dated. The following information must be on the front page:
- a clear description of the item you’re buying
- a summary of your right to cancel the sale (see below, “Your right to cancel a layby sale”)
- whether you’ll have to pay a cancellation charge if you do cancel, and how much this will be or how it will be calculated
- the shop’s name, street address, phone number and email address.
If a seller breaches these requirements, the Commerce Commission can issue them with an infringement notice requiring them to pay an infringement fee (a fine), as an alternative to bringing criminal charges.
If the contract is a credit contract, you may have to provide additional information. (See “The information you must be given” in Credit and Debt chapter)
Finding out how much you’ve paid or have left to pay
In a layby sale, you have the right to ask the seller at any time for a written statement that clearly sets out:
- the total purchase price
- the amount you’ve paid, as at the date of the statement
- the amount you have left to pay, and when and how you must pay it
- the amount of any cancellation charge you must pay.
The seller must provide the statement within five working days. They can’t charge you for providing it.
You can ask the seller for these details at any time – at the time you enter into the agreement, or while you’re paying off the item, or after you’ve cancelled the agreement. For example, you might want to see the statement if you’re considering cancelling the layby and want to know how much you’ve paid, how much you owe, and how much the seller would want to charge you for cancelling (see “Your right to cancel a layby sale” below).
If the seller doesn’t provide you with the statement as it’s required to, the Commerce Commission can issue them with an infringement notice.
Your right to cancel a layby sale
You can cancel a layby at any time before you take possession of the goods. You don’t have to give a reason for cancelling.
To cancel, you don’t have to follow a particular process or use a particular form or a particular set of words. You can do it in any way that shows you intend to cancel or withdraw from the agreement. This could be in writing or by telling the seller verbally.
You must communicate with the seller using their contact details given on the agreement, or in any other agreed way.
If you cancel, the seller must immediately repay you all the money you’ve paid under the layby, less any cancellation charge. You may have to pay a cancellation charge if the agreement says that one is payable (see below, “How much can I be charged for cancelling?”).
How much can I be charged for cancelling?
The amount of a cancellation charge can’t be more than the seller’s reasonable costs arising directly from the layby arrangement. Their reasonable costs will include, for example:
- the loss in value of the goods since the date of the agreement (for example, if you put summer clothes on layby and it’s now winter and so the clothes will be harder to sell)
- the reasonable costs of storing and insuring the goods, and
- their reasonable administration costs, such as offices expenses, salaries and wages.
Will I get a refund if I cancel the layby?
Whether you’re entitled to a refund, and how much you get, will depend on how much you’ve paid and the amount of any cancellation charge. If the amount you’ve already paid isn’t enough to cover the cancellation charge (if there is one), you’ll owe the seller the amount of the difference. However, the seller can’t then claim any further damages, compensation or other remedy from you.
If you’re entitled to a refund, the seller must give it to you in cash, not a store credit.
If you have a problem you can’t resolve with the shop, you can take it to the Disputes Tribunal (see the chapter “The Disputes Tribunal”).
Can the seller cancel the layby sale?
The seller can cancel the layby only if:
- you don’t keep to the terms of the contract – for example, if you miss payments, or
- for reasons outside the seller’s control, the goods are no longer available and a satisfactory substitute can’t reasonably be obtained, or
- the seller has stopped trading – but not if they’ve gone into bankruptcy, liquidation or receivership (see below, “What if the seller goes out of business?”).
If the seller cancels, your right to a refund, and the seller’s right to any further payments, will be the same as if it had been you who cancelled (see above, “Will I get a refund if I cancel the layby?”), except that the seller can only charge a cancellation charge if they cancel because that you didn’t keep to the terms of the contract, not if they cancel for one of the other reasons.
Who owns the goods while I’m paying them off?
While you’re paying off the goods, the seller still owns them and they remain at the seller’s risk. This means that if the goods are destroyed, for example, in a fire, the seller has to bear the loss, not you. In that case, they’d be required to provide you with a matching item or to refund you all the money you’ve paid.
What if the seller goes out of business?
If the seller is declared bankrupt or is put into liquidation or receivership, and they still have the goods, you have the right to complete the sale by paying what you owe under the agreement within a reasonable time. However, you don’t have the right to complete the sale if you’ve breached the agreement by not making any payments in the last three months.
If there aren’t enough goods to satisfy all layby buyers, the buyers who contracted with the seller first will get the goods. Buyers who miss out will have a chance of getting a refund of what they have paid.