Do customers have a right to refunds due to COVID-19?

Commercial Directions

If businesses have been forced to cancel the provision of any good or service, do they have an obligation to provide refunds?

The short answer: It depends. The longer answer: The things it depends on are:

  • The reason for the customer no longer requiring the good or services. In other words, whether the business can no longer provide the good or service, or whether the customer has simply elected not to proceed with the transaction can impact on whether a business has an obligation to provide a refund.
  • The terms and conditions of the sale of the good or service stated at the time it was purchased. If the terms and conditions stated that a refund was offered if the customer changed its mind or if the business couldn’t provide the good or service, then these contractual terms will need to be complied with.
  • Any pre-contractual representations made by the business in connection with the supply of the good or service and on which the customer relied as an inducement to entering into the transaction. While this may not entitle the customer to a refund, if such representations are not honoured, it could expose the business to claims for misleading or deceptive conduct or false or misleading representations under Australian Consumer Law.
  • Whether the failure amounts to a major or minor defect under the Australian Consumer Law. A major defect entitles a customer to require a refund be paid, while a minor defect may not require the business to provide a refund.
  • The terms of any legislation relevant to the provision of the good or service. Some may require a business to provide a refund in the circumstances.

Even if a business is not obliged to provide a refund, it may be required to provide a credit note. It’s also worth noting that for certain goods or services (such as holidays or event tickets), insurance purchased in relation to that good or service may provide a customer with rights to claim for reimbursement of their loss, even in the absence of a refund from the business.

Of course, if the business and the customer can agree on an alternative but mutually acceptable way to resolve the inability of a business to provide (or a customer’s decision not to continue with) the sale of a good or service, this should be documented in clear terms to eliminate any confusion about either party’s obligations going forward.

If you have been forced to cancel the provision of any good or service, you should seek advice on your obligations to provide any refunds or credit notes to your customers.

For further information and assistance on the issues raised in this article please speak to the authors, Tina van Epen – Partner, Emily Gagliardi – Lawyer, or your usual Moray & Agnew contact.

The above content is commentary rather than legal advice and was prepared on the basis of applicable legislation, government programs and initiatives that were in place as of the date of publication. Given the ongoing evolution of both the COVID-19 pandemic and frequent consequential changes to the various laws and programs within all Australian states and territories, readers should seek legal advice on the current situation as applicable to their specific circumstances before taking any action in relation to the above.


Related Articles

Security of Payment Act benefits companies in liquidation – but not for long

Commercial Directions

The decision of the NSW Court of Appeal in Seymour Whyte Constructions v Ostwald Bros Pty Ltd (in liq) [2019] NSWCA…

Continue reading

Changes affecting short-term holiday letting in NSW

Commercial Directions

An Act has successfully passed NSW Parliament which will ensure that local communities continue to gain economic benefits of short-term holiday…

Continue reading

Deal or no deal? Omitting work and terminating for convenience

Commercial Directions

As the economic worm turns and principals become increasingly nervous about entering into long term and high value contracts, many are…

Continue reading