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How Do I Legally Do Laybys?


Laybys are a convenient way for customers to buy our products by paying in instalments over a set period of time. As a seller it is your responsibility to make sure that you are complying with the Fair Trading Act, which covers all new laybys from 17th June 2014.

What Is A Layby?

A layby is when you sell a product to a customer who pays in at least three or more instalments over a set period of time, or in two instalments if your agreement states that it is a layby. They usually pay a deposit and that can be counted as an instalment. When they have paid in full you can give it to them, but until then the product is your responsibility. The total cost of the layby must be no more than $15,000, you can’t charge interest and there must be a written agreement between you and your customer.

What Do I Need In A Layby Agreement?

When the layby is started, you must give your customer a written copy of it. It must be in plain language, easy to read and presented clearly. The front page must have:

  • Your name, street address, telephone number and email address on it
  • Describe the product in clear detail
  • Explain how your customer can cancel the agreement
  • State if you charge a cancellation fee, what it is and how you work out what the fee will be

The agreement must also state:

  • The total price they need to pay
  • The date the layby is started

It is strongly recommended that you also include:

  • How and where payments are to be made
  • Payment conditions such as any minimum payment amounts and how often payments must be made
  • The date your customer needs to have paid you in full by, if there is one
  • What happens if your customer does not fully follow the agreement

What Happens During The Layby?

The product which is on layby remains your responsibility, so you need to make sure that it is stored safely and insured. It is good practice to help your customer by providing them a written record of their payments by giving them a receipt or a statement. They are legally able to ask you for a statement of their payments, which you must give them within five working days of them asking for one. The statement must include:

  • The total price they need to pay
  • How much they have paid so far as of the date of the statement
  • Any cancellation fee which have to be paid if your customer was to cancel the layby at the date of the statement
  • How much more they need to pay and how and when they need to pay it by

Can The Layby Be Cancelled?

Yes, both you and your customer can cancel the layby. Your customer can cancel the layby at any time before they get the product by giving you either written or verbal confirmation that they want to do so. They do not have to give a reason to cancel it. They can also cancel it if it is during the five day cooling off period if it was an uninvited sale, such as a door to door or telephone marketing sale. They cannot cancel the agreement if they are in possession of the goods or it is after the five day cooling off period for an uninvited sale.

You can only cancel the layby agreement if:

  • Your buyer does not follow the terms of your written agreement. This includes if they don’t pay as often as the agreement says or if they don’t pay in full before the final date of the agreement.
  • If by no fault of yours, the product is no longer available and you can’t get a suitable replacement
  • You have stopped trading, but are not in receivership, bankruptcy, liquidation or voluntary administration

If you cancel the agreement, you need to tell your customer you are cancelling the agreement and give them a written statement if they ask for one. You will also need to immediately refund the customer’s money regardless of who cancelled the agreement, minus any cancellation fees.

Can I Charge A Cancellation Fee?

Yes, you can charge a cancellation fee if all of these things are present:

  • The written agreement states that you may charge a cancellation fee
  • You have not breached the agreement
  • Your seller has cancelled or breached the agreement

The amount you can charge must only cover any reasonable costs which have occurred from having the agreement. This includes:

  • Reasonable administration costs, such as office expenses or staff salary which is directly related to administering the layby
  • Any loss in value of the product from the date of the start of the agreement to the date of cancellation
  • Reasonable costs of storing and insuring the product during the agreement

If the amount they have paid up to the cancellation date does not cover the cancellation fee, you are able to recover the rest as a debt, but you cannot charge any interest or other fees.

Disclaimer: The information on this page is general information only and must not be relied on as legal advice. Legal Beagle is not a law firm or a substitute for a law firm. We are unable to provide any kind of advice, explanation, opinion, or recommendation about possible legal rights, remedies, defences, options, selection of legal documents or strategies. 




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Legal Beagle is not a law firm or a substitute for a law firm. We are unable to provide any kind of advice, explanation, opinion, or recommendation about possible legal rights, remedies, defences, options, selection of legal documents or strategies.
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