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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?

A lay-by agreement is an agreement between a supplier of consumer goods and a consumer for the supply, in trade or commerce, of the consumer goods on terms (whether express or implied) which provide that:

  • the goods will not be delivered to the consumer until the total price of the goods has been paid; and
  • the price of the goods is to be paid by 3 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

The seller must provide a written copy of the agreement to the customer and must ensure that the agreement is transparent (s96(1) and (2)). Any deposit paid by the consumer must be treated as an instalment (s96(4)).

Consumer’s right to terminate

The consumer may terminate the lay-by agreement at any time before delivery of the goods (s97). 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 reflected the reasonable costs to the supplier of the consumer terminating the agreement. The supplier must otherwise return all payments (s99).

Supplier’s right to terminate

If the consumer is in breach of the agreement the supplier can terminate it in which case the payments made by the consumer must be returned (ss98 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.

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