Within the retail industry it is a common business practice for retailers to sell products to consumers through lay buy agreements. This practice allows a consumer to pay for the desired product over a period of time with the retailer keeping the product until the full amount is paid. This practice provides an opportunity to even the disadvantaged consumers to purchase products they would not ordinarily afford should they be required to pay cash up front. Payment method for lay-by is interest free.
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What Is a Lay Buy Payment?
It is an agreement where the supplier agrees to sell a product to a consumer and accepts period payment for those goods while keeping them until the full amount is paid. The supplier has a responsibility to keep the goods at own risk until they are delivered to the consumer. Any deposit paid by the consumer is an instalment and remains the property of the consumer until goods are received in good, working order and fit for purpose.
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Business requirements for layby agreements
For a lay buy agreement to be valid, a supplier must ensure it complies with the following:
- in writing;
- in plain and simple language;
- specifies all terms and conditions, including any termination charge;
- supplier must provide a copy of the lay buy agreement to the customer.
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Termination / Cancellation of a lay buy agreement
A supplier may terminate/ cancel a lay buy agreement if:
- the customer has breached a term of the agreement (such as missing a scheduled payment);
- the goods are no longer available due to circumstances outside of the supplier’s control, in which case the supplier must at the option of a consumer
- supply equivalent or superior goods;
- refund all monies paid plus interest; or
- from the date of the first payment calculated in accordance with the Prescribed Rate of Interest Act No. 55 of 1975.
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When to charge a termination / cancelation penalty
A supplier may charge a termination / cancelation penalty if:
- a consumer cancel the agreement before fully paying for the goods; or
- fails to complete the payment for the goods within 60 business days after the date of completion of the contract.
A supplier may charge 1% of the total amount of goods bought under a lay buy agreement. After deducting the cancelation penalty, a supplier is obligated to refund the balance back to the consumer.
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When not to charge a termination/cancelation penalty
A supplier may not charge a cancellation penalty if the consumer’s failure to complete payment was due to hospitalization or death of the consumer or if the supplier failed to inform the consumer of the cancellation penalty before entering into the lay-by agreement.
In order to resolve a complaint, please contact us at:
Kings & Queens Pty Ltd
93A Lavender Rd, Wonderboom, Pretoria, Gauteng, 0017
South Africa
Phone: 081 214 3088
