> Business advice  > Selling to customers  > Lay-bys

On this page

• Record of payments
• Cancelling the lay-by
• Warranties
• Implied conditions
• Warranties applied to service
• Manufacturer's obligations
• Merchantable quality
• Fitness for purpose and supply
• Good title
• Customers' obligations
• Limiting traders liability
• Can retailers be protected?
• Faulty or incorrect goods

Some of your customers may not want to use credit or pay cash up-front for goods, so you may offer a lay-by service. Common law contract conditions apply. Lay-by arrangements are free of interest on the outstanding debt.

Record of payments

When organising a lay-by, you should provide your customer with a copy of the lay-by docket or a receipt that sets out clearly the conditions of the lay-by including:

• description of goods
  
• date of transaction
  
• lay-by number
  
• record of the deposit or payments made
  
• when the final payment is due and the goods handed over
  
• the period of time over which payments are to be made
  
• what happens if the customer fails to pay on time
  
• the procedure you follow to cancel the contract.

Cancelling the lay-by

If your customer does not meet the conditions of the lay-by, such as making periodic payments as agreed, you can cancel the contract.

To do this:

• you should write to the customer giving them 14 days notice of your intention to cancel the contract
  
• you should inform the customer of any cancellation fees.

If a customer cancels the lay-by, you can return the goods to stock and can refuse a refund or credit for any money already paid, but only sufficient to cover genuine costs you have incurred.

Warranties

A sound guarantee policy is a powerful marketing tool. Providing guarantees, whether written or oral, demonstrates to your customers faith in the products you sell.

Whether you are a manufacturer, retailer or repairer, you have certain obligations when setting warranty conditions.

Briefly you must:

• check that your product is suitable for the purpose for which it is sold
  
• make sure that the product is not faulty
  
• make sure that the product performs to an appropriate standard and achieves the requested result
  
• as a manufacturer, stand by your warranty and make spare parts available for a reasonable time
  
• it is your legal responsibility to ensure that every product you sell or service is suitable for the purpose for which it is sold.

Implied conditions

Goods also must do their job properly, bearing in mind their price and the way they were described. This requirement is a legal obligation, whether or not you then decide to provide a written warranty or guarantee.

Goods, and services performed, must last for a reasonable time regardless of the warranty period set by the manufacturer. What is ‘reasonable' depends on the price paid and the type of product.

Warranties applied to service

As a general rule, you must carry out services with due care and skill. The service should achieve the result or the purpose that was agreed upon prior to work starting. The materials you supply also must be fit for that particular purpose and must be of a quality that reasonably will achieve the result the customer wants.

Manufacturer's obligations

As a manufacturer, you must stand by your own warranty or guarantees and ensure a reasonable supply of spare parts or repair facilities when you supply goods that are for personal or household use.

Merchantable quality

You need to make sure that the goods you supply are not faulty in design or construction, and/or that you have pointed out any defects to your customers prior to purchase. This requirement applies to both manufacturers and retailers.

You are not liable if:

• the goods become damaged after leaving your control
  
• the defect was brought to the customer's attention prior to purchase.

Fitness for purpose and supply

Fitness for purpose means that the goods must be fit for the purpose the customer describes to you at the time of purchase. The goods you supply must also be as you have described them and must match the sample you have given the customer. For example, a refrigerator must defrost automatically if that is the way it is described.

Remember, you are the expert in your field and the customer is entitled to expect your advice to be reliable and accurate, and to rely on your skills.

Good title

Your customers also must become the outright owners of goods they purchase. Any legal restrictions to ownership must be explained fully and clearly by you before purchase.

Customers' obligations

Customers have obligations too. To obtain redress, the customer must ensure the goods are not:

• damaged by being used in an abnormal way or by being neglected
  
• disposed of, lost or destroyed
  
• reduced in value by delaying their return.

Customers also must return the goods or give you details of the problem within a reasonable time after they have had a reasonable chance to inspect or use them.

Limiting traders liability

If a customer returns a faulty item which you sold, you share the liability for the problem with the manufacturer, but it is ultimately your responsibility to resolve the complaint.

As a supplier, retailer or manufacturer, you cannot limit your liability by excluding, modifying or restricting the legal rights and remedies available to customers for goods that are normally acquired for personal or household use.

Any attempt to alter these legal rights is unlawful and you run the risk of prosecution for making statements that are false or that may mislead customers about their rights.

Can retailers be protected?

As a manufacturer, you may be liable to reimburse a retailer who has had to compensate a customer for a breach of any statutory obligation where the fault is yours.

However, for goods that ordinarily are not acquired for personal or household use, you are liable to reimburse the retailer only for:

• the cost of replacing the goods, or
  
• the cost of obtaining equivalent goods, or
  
• the cost of repairing the goods.

You are liable only for the lowest amount, unless you can show that it is not fair or reasonable in the circumstances for you to be responsible for the whole of that amount.

Faulty or incorrect goods

In most circumstances, manufacturers or suppliers will remedy problems found in goods supplied to retailers or distributors.

However, if you are a retailer and are unable to obtain satisfaction from the manufacturer, you:

• should refer to the conditions of the contract, or supply agreement, that you have with the manufacturer
  
• could seek legal advice.

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