For businesses that sell goods electronically, or by mail or phone orders, having an appropriate returns policy is important in order to manage stock and financial risk.
What is ‘distance selling’?
Distance selling includes any sales made online, mail orders, phone orders etc. Essentially, all arrangements which are not made face to face. Many businesses that sell goods via distance sales will sell to other businesses, consumers or both. It is important to know the differences between the return rights of a customer acting in the course of their business and a customer who is a consumer.
Refund and return rights in Business to Consumer sales
Business to consumer (“B2C”) sales are governed by more stringent rules from the seller’s perspective when it comes to returns. B2C customers have more of a right to a refund/return than those customers acting in the course of business.
- When making purchases online, B2C customers have the right to cancel their order during a limited ‘cooling off’ period (the statutory minimum being 14 days), even if the goods are not faulty.
- A refund must be offered to B2C customers in this instance, provided that they inform the selling business that they want to cancel their order within 14 days of receiving the goods.
- The B2C customer then has a further 14 days to return the goods to the selling business, after informing the selling business that they will be returning it.
- The B2C customer must then be refunded by the selling business within 14 days of receipt of the returned goods.
In these circumstances, the B2C customer does not have to provide a reason for refund or cancellation. This would therefore limit a B2C customer’s return period to 28 days (assuming that there is no issue with the quality of the goods).
Returning faulty goods in Business to Consumer sales
- If the goods are in any way ‘faulty’, a B2C customer has the right to reject the goods within 30 days of receiving them and be refunded.
- After this 30-day period has lapsed, if any fault is subsequently found within the first 6 months after receipt of the goods, B2C customers would only be entitled to a replacement (unless the goods cannot be replaced for any reason, in which case a B2C customer can then ask for a refund).
- After this 6-month period has lapsed, a B2C customer would have to prove that the fault was present at the time that they took ownership of the goods, which could be quite hard for the B2C customer to prove.
Refund and return rights on personalised goods
One point to note is that a refund for personalised goods only has to be given if the goods are faulty. This means that B2C customers who have purchased personalised goods via a distance sale do not get the benefit of the initial 14 day ‘no fault’ return option.
Refund and return rights in Business-to-Business sales
Business to business (“B2B”) sales are governed by less stringent rules from the seller’s perspective. This means that B2B customers have less of a right to a refund for goods purchased via distance sales.
Do note that B2B customers do not have to be companies and could be individuals too. The key point is that B2B customers are not deemed to be ‘consumers’ by law due to the fact that they act in the course of their business.
- In these circumstances, where someone acting in the course of their business has purchased goods by way of distance sale, they have a right to reject the goods without reason during a 14 day ‘cooling off’ period.
- Beyond this, B2B customers only have the right to reject goods bought via a distance sale (and therefore get a refund) in other certain scenarios where there is ‘an issue’ with the goods. Whether B2B customers can trigger this right depends on the following:
- Whether the goods sold correspond with their description.
- Whether the goods are of a satisfactory quality.
- Whether the goods are sold by sample.
- Whether there are any other goods’ conditions offered in the sale contract.
Unless a breach of any of the above is so slight that it would be unreasonable for the buyer to reject the goods, it could result in the customer having the right of return/rejection. Any ‘fault’ returns must be fair.
A B2B customer loses their right to reject the goods if they accept the goods and they do not intimate to the selling business that they have not accepted the goods before reasonable time has lapsed. What is reasonable is dependent on circumstances.
It must be noted that there are also rules regarding returns if the amount or weight of the goods delivered is incorrect but, again, this would be an ‘issue’ with the goods provided.
As long as a selling business’s returns policy reflects the above, this should prevent B2B customers from returning goods after 14 days simply because they have changed their mind, and prevent returns of goods which may have been stored with the B2B customer for months for example. It should also stop B2C customers (i.e. members of the public) from returning goods out of time without the goods being faulty in any way.
A selling business may choose to allow B2B customers to return goods if they do change their mind with prior written consent and/or within a certain time frame. This is at the selling business’s discretion, however it may be beneficial from a reputational perspective.
Drafting your return and refund policies
Selling businesses may wish to have one returns policy which covers both B2B and B2C transactions. This is acceptable and may be more practical but would mean that the selling business would have to be more lenient with regards to returns to B2B customers than required by law.
Alternatively, a business may wish to have two separate returns policies, one for B2C customers and one for B2B customers.
If you require any assistance or advice regarding returns policies, or any other commercial documentation, please don’t hesitate to contact the Roythornes Corporate and Commercial team.