Rules for lay-by agreements

A lay-by is an agreement between a consumer and a business where:

  • the goods will be paid for over a period of time
  • the consumer agrees on a fixed sale price and payment conditions
  • the consumer does not take the goods until the payments are finalised.

Make sure you read the terms and conditions before signing anything or paying any money.

The lay-by period could be one week, up to many months. The business must then hold the goods for that period of time.

An agreement is classed as a lay-by if:

  • the goods are paid for in three or more instalments; or
  • the business calls the agreement a lay-by, even if the consumer pays in only two instalments.

When a business starts a lay-by agreement, a business must ensure the customer knows about the terms and conditions

Agreements must be in writing and should contain:

  • what goods are being sold
  • how much they cost
  • how much deposit the customer paid
  • how long the lay-by will last (maximum)
  • what cancellation and refund policies apply.

Cancelling a lay-by

If you cancel a lay-by agreement, the business must refund the money paid. The business may charge a termination fee if it was a term of the agreement.

There is no set amount or percentage for a termination fee, but it must not be more than the business’s ‘reasonable costs’ relating to the lay-by agreement (for example, storage and administrative costs that apply to the lay-by agreement). What is ‘reasonable’ will depend on the circumstances and a business needs to be prepared to justify those costs.

Besides the termination charge, a business is not entitled to damages or any other remedy for the termination of the lay-by agreement.

A business is not allowed to break a lay-by agreement unless:

  • the consumer breaks one of the terms of their agreement; or
  • the business closes down; or
  • the goods are no longer available for reasons the business can’t control (they can’t choose to remove the goods from sale).

You are entitled to a full refund if:

  • the business closes down; or
  • the goods are no longer available for reasons they cannot control.

Related information

Last updated: 29 Nov 2022

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