When you sell goods and services online, you have certain obligations to consumers just like a brick-and-mortar business. You need to be aware of these requirements to legally conduct your operations and uphold consumer protections. One of these obligations is handling customer complaints and offering returns as part of that process. Although you must meet a minimum threshold when dealing with customer returns, you can offer greater protections if you wish. This article outlines the minimum legal requirements that an online returns policy must have, to help your business comply with your legal obligations.

My Legal Obligations as a Business

If your e-commerce store sells goods or services to consumers, you need to uphold certain guarantees. These guarantees generally require that your products must:

  • be of acceptable quality and fit for purpose;
  • match the description you give;
  • match any samples or demonstrations you give;
  • be sold at a reasonable price, if you did not agree on a price with your customer beforehand; and
  • be capable of being sold legally.

For example, if your customers choose to purchase a product based on an image on your website, the product that you deliver must match the relevant picture.

You need to make sure that you deliver products: 

  • within the agreed time; and 
  • in acceptable condition.

You should also have spare parts available and a way to offer repairs for the products you sell. 

For example, if you sell electronics, you should have: 

  • the ability to fix faulty products yourself; or 
  • an agreement with your manufacturer or repair service, where they agree to fix it on your behalf. 

If you do not offer repairs, you must let the customer know before you complete the sale.

Finally, it is a good idea to outline your returns policy on your website so that customers know what they have to do if they want to return a product.

When Do I Have to Provide a Remedy for Customers as Part of My Returns Policy?

When a customer returns a product, you do not need to provide them with an immediate remedy. You should promptly investigate the issue and inspect the returned items to ensure that they are actually faulty.

This is because you are only legally required to provide a remedy to customers where you have failed to meet one of the consumer guarantees listed above. In these circumstances, you must offer a:

  • repair;
  • replacement; or
  • refund.

The kind of remedy you give your customer will depend on whether you can fix the problem and the effort required to do so. If the problem is a minor fault, you get to choose the appropriate remedy. This means that you can seek to repair the item, which will likely come at a lower cost than offering a replacement or refund. But if the fault is serious, the customer gets to decide which of the three remedies they want.

A problem is serious when:

  • the product is significantly different from how you described it;
  • a reasonable customer who knew about the fault would not purchase the product;
  • the product is not appropriate for its original purpose and you cannot easily make it fit for purpose; or
  • the product is unsafe.

For example, if you sold a laptop knowing its battery died after only two hours of use, a reasonable customer that knew that fact would not buy the laptop.

When Do I Not Have to Provide a Remedy for Customers?

You are not required to provide remedies for customers in every situation. This applies when the customer:

  • simply changes their mind;
  • does not use the product correctly or altered it, e.g. by not reading the instructions;
  • damages or disposes of it after delivery;
  • knows about the fault when they buy the product;
  • takes an unreasonable time to return the product; or
  • experiences a problem that is out of your control, like the interference of a third party.

What Does This Mean for My Returns Policy?

Fulfilling these consumer guarantees and providing these remedies when something goes wrong is the legal minimum. You should nevertheless outline these processes in your store’s return policy, so that customers know what their options are.

Consumer law does not put a specific time limit on how long customers have to return products, but you have to allow a reasonable amount of time for customers to do so. 

For example, a week may be too short a time for customers to return a faulty product. Many businesses allow 30 days for returns.

You may also consider extending your own guidelines beyond these minimum requirements, to give your customers greater confidence in your products.

For instance, you do not legally have to provide customers with a refund if they change their minds about a product. But, given the nature of online shopping, customers may be more likely to buy from you if they know they have that option.

There are other issues you should consider in your returns policy, including:

  • the instances in which you will provide a store credit;
  • whether the customer must return the item in original condition;
  • which party will be responsible for shipping costs;
  • whether the customer must return the product with its original packaging; and
  • how refunds will be dealt with when the customer returns sale items.

Key Takeaways

Under consumer law, you must fulfil certain guarantees when selling goods and services, like making sure that products are not faulty and that they match their descriptions. When these guarantees fall through, then you are legally required to give customers a remedy of either a:

  • repair;
  • replacement; or
  • refund.

You should clearly outline these obligations in your returns policy so that customers know what their options are. However, you may also choose to include further consumer protections if you wish. If you would like more information or help drafting your returns policy, contact LegalVision’s New Zealand ecommerce and online business lawyers on 0800 005 570 or fill out the form on this page.

FAQs

What is a returns policy?

A returns policy is your business’ rules about how you handle returns. It has to comply with consumer law, but you can adjust it to suit your business needs outside of those strict obligations.

Do I need to have a returns policy?

It is a good idea to have a returns policy so that customers know what to do if they want to return a product they bought. Your consumer law obligations still apply whether or not you have one, but it is generally good practice to write one up anyway.

Can a customer return a product if they change their mind?

Under NZ consumer law, you do not need to provide a customer with a replacement or refund simply because they changed their mind. However, your business may choose to extend this option to your customers. This is because customers may be more inclined to shop with a business that allows for change of mind returns.

Can I refuse to give a refund?

You cannot outright refuse a refund if a customer comes back with a faulty item that they purchased from you. If there is a problem with the product, then you have to either repair or replace it or give them a refund. If it is a serious problem, then the customer gets to choose what happens.

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