Lay-By Agreements Under the ACL

Lay-by agreements are regulated under Part 3-2 Division 3 of the ACL.

Breaches of these provisions constitute offences under ACL Part 4-2 Division 3.

What is a lay-by agreement?

For the average person a lay-by agreement is just an arrangement where you pay for an item in a number of small payments.

The shop you are buying the item from holds the goods until you’ve paid them off.

The definition in the ACL essentially just sets this out.

As with other sections in the ACL for the Act to apply the lay-by must be between a consumer and a business and does not apply to private sales.

The definition in the ACL also adds the following two points:

• The goods will not be given to the consumer until the total price of the goods has been paid; and
• The price of the goods is to be paid by three or more instalments; or, if the agreement specifies that it is a lay-by agreement – 2 or more instalments.

Both ‘consumer goods’ and ‘consumer’ are defined in Section 2.

‘Consumer’ is the same definition as for consumer guarantees and ‘consumer goods’ are defined to mean goods that are intended to be used, or are of a kind likely to be used, for personal, domestic or household use or consumption.

The seller’s obligations for lay-bys

The seller must provide a written copy of the agreement to the customer and must ensure that the agreement is transparent under Section 96(1) and (2).

Any deposit paid by the consumer must be treated as an instalment Section 96(4).

Consumer’s right to terminate

The consumer may terminate the lay-by agreement at any time before delivery of the goods Section 97.

The supplier can charge a termination charge if the consumer terminates so long as the supplier was not in breach.

The agreement provided for the termination charge and the charge can only reflect the reasonable costs to the supplier of the consumer terminating the agreement.

The supplier must otherwise return all payments Section 99.

The information above is not legal advice. If you are engaged in a legal dispute over a lay-by you should consider getting legal advice before taking legal action.

Supplier’s right to terminate

If the consumer is in breach of the agreement the supplier can terminate it.

However, if the supplier terminates the agreement the payments made by the consumer must be returned, as stated in Sections 98 and 99.

It appears that the supplier cannot charge a termination charge in this circumstance because Section 97(2) only allows a termination charge if the consumer terminates the agreement.

The supplier can also terminate if the supplier ceases business or the goods the subject of the agreement are no longer available.

A supplier considering terminating a lay-by agreement should consider seeking legal advice.