Advice to retailers on returns, refunds and replacements

Rachel Stewart examines the law in relation to refunds, repairs and replacements from a retailer’s perspective.
 
The Sale of Goods Act 1979 covers a broad range of retailers and goods.  As a retailer you need to be fully aware of your customers' rights and how to deal with customer complaints, refunds and returns so that your customers are satisfied and you remain on the right side of the law.

Under the Act customers have a legal right to a refund, repair or replacement if an item purchased does not match the description, is not of satisfactory quality or is not fit for purpose.  Each of these circumstances means that the item does not conform to contract and can therefore be described as faulty.

If a customer wishes to reject - or not accept - faulty goods, you are entitled to ask the customer to prove the goods were faulty when they bought them from you. If they are able to do this, they will be entitled to a full refund.

Under the Act, if you are considering asking a customer to prove that an item was faulty when they purchased it from you, it is important to think about the proof an impartial person in a court might feel was required. For example, a simple customer statement saying that their item did not work correctly might be acceptable as sufficient proof.
 

What if your customer has requested a repair or replacement?

If a customer has accepted the goods and is requesting a repair or replacement because the goods are faulty, responsibility for proving the fault depends on how long ago the item was purchased.
 

If the customer purchased the item fewer than six months ago, s/he does not have to prove the item was faulty when they bought it from you. If you disagree then it is up to you, the retailer, to prove the fault did not exist at the time of sale.
 

If the customer purchased the item more than six months ago, you the retailer are entitled to ask the customer to prove the item was faulty when they bought it from you. If they are able to do this they will be entitled to a repair or replacement.

Does the customer always need to produce a sales receipt?
If a customer returns an item and complains, you are entitled to check that the item was bought from you on the date claimed. It is the customer's responsibility to prove that the item was purchased from you.  A sales receipt is a good way of checking.  If the customer has lost their receipt but is able to offer other evidence such as a bank or credit card statement or packaging, then you must accept this if it demonstrates the goods were purchased from you.

Although sales receipts are not legally required, you should ensure you provide them for customers as a safeguard for both sides, in the event of a complaint.

What if a customer suffers personally because of a problem with an item?

In this case the customer may be able to claim damages, known as consequential loss. An example would be if a customer had to pay out more money, perhaps to hire another item, because of a faulty item that you sold them.  A more serious example would be if the customer suffered injury or damage because of a faulty item.
 

A customer who claimed damages for consequential loss would be expected to try to resolve the issue with the retailer first.  Such claims do not normally a sum for distress, inconvenience or disappointment.

If a customer is entitled to a refund as a result of faulty goods, what method of payment should be used?
If the customer paid by credit card, you can insist that the refund is to the credit card used for the payment. This is because the credit card company paid you originally, and therefore you are entitled to refund them, not the customer directly.

If the customer paid by debit card, you can offer to make the refund to the same debit card. Alternative methods of refund, such as cash or cheque, can be offered and may be requested by the customer.

If the customer paid in cash, refund can be by cash or cheque.

What if someone wants to return a faulty item which they did not purchase?
This can happen if they have received the item as a gift or they may be returning the item on behalf of a family member or friend.

When you sell an item, a contract is formed between you and the customer who buys the goods.  Contractual rights under the Act are therefore given to the customer.  This means that someone who receives an item as a gift does not legally have the same rights as the customer, except in limited circumstances. However, most retailers deal with someone returning faulty goods received as a gift as an act of goodwill.

The situation may be different if you issue a gift receipt or if you tell a customer that the person they are buying the gift for can return the item. This is because you may have impliedly accepted that the person who receives the gift item purchased from you obtains rights under the contract, or because the promise that the person who receives the item can exchange it or receive a credit note, if the item is unsuitable, may be a term of the contract.

Contractual rights can be extended to third parties in other ways by your conduct. Often retailers who issue gift receipts state that such receipts only entitle the person who receives the gift to an exchange or to receive a credit note. This does not affect the original purchaser's rights to a refund if the goods are faulty.

Rachel Stewart, Director in the Litigation department at Hughes Paddison Solicitors, can explain the services which Hughes Paddison provides to retailers involved in a sale of goods dispute and can give a breakdown of the costs involved. She can be contacted on 01242 574244 or at ras@hughes-paddison.co.uk.