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Cancelling your contract to purchase goods from a door to door salesperson is harder than you may think

Non-delivery of goods

In August 2013, Sonya signed a contract to purchase a television from a door to door salesman working for To Your Door Limited. Sonya was to receive a free tablet, a free mobile phone and a free memory card with the television.


The contract Sonya signed with To Your Door said that she would receive the goods 10-15 working days, that is, 3 weeks, after she had made 13 weekly payments. By the end of November 2013 Sonya had made the required 13 payments, but by early 2014 she had not received the goods. As a result, Sonya cancelled the contract with To Your Door.


At the end of February 2014, To Your Door wrote to Sonya and said she would be receiving a refund of $1,790 which was the total amount she had paid ($2,500), less a cancellation fee/selling costs of $710.


The complaint

Sonya complained to FSCL that To Your Door had not upheld its side of the contract when it did not deliver the goods to her in time, resulting in her cancelling the contract. Sonya said To Your Door had no right to charge the cancellation fee because it had not delivered the goods in the time stated.


We looked at what rights Sonya had to cancel the contract at law, at the time (that is, prior to June 2014, when there were major changes to consumer laws).


The law

Under the Sale of Goods Act 1908, Sonya would have a right to cancel the contract if To Your Door’s breach of the contract went to the root of, or was essential to the contract.


It its full terms and conditions, To Your Door had a specific clause that said it would try and deliver goods within 15 working days of To Your Door receiving the minimum number of weekly payments. The clause went on to say that any time stated for delivery is an estimate only, and that To Your Door would not be liable for any delay in delivery. Further, the clause said that customers would not be entitled to cancel the contract as a result of any delay in delivery.


This meant the 10-15 working day period for delivery was not an essential part of the contract. If Sonya had put To Your Door ‘on notice’ that time was of the essence and that it had to deliver the goods within a specified time otherwise she would cancel, Sonya may have then had the right to cancel if the goods were not delivered in that time.


We were also of the view that Sonya may have been able to cancel under the Consumer Guarantees Act 1993 if she had given To Your Door a reasonable amount of time to remedy the problem, and then the problem was not resolved in that time.


However, Sonya had not put To Your Door ‘on notice’ of any time period for delivery. Unfortunately, and understandably, she just cancelled the contract when the goods did not arrive.


Layby sale a financial service?

We were also of the view that the contract Sonya entered into with To Your Door could be classed as a layby sale agreement. We thought Sonya was entitled to cancel the contract under the Layby Sales Act 1971 (“the LSA”) (which was still in force prior to 17 June 2014). Under the LSA a layby sale could be cancelled at any time before the goods were received, and a refund received.


Refund amounts under the LSA are calculated by taking the amount paid, less the selling costs and less the loss in value. We considered that there would have been no loss in value of the goods as they were never received by Sonya. This meant that the amount of the refund would come down to whether the selling costs of $710 were reasonable or not.


However, as a layby sale was not, at the time, considered to be a credit contract[1], (and therefore not within the definition of a ‘financial service’ under the Financial Service Providers (Registration and Dispute Resolution) Act 2008), we could not investigate whether the selling costs charged by To Your Door were reasonable. We strongly suggested that Sonya speak to a local community law centre about her complaint and consider taking the dispute to the Disputes Tribunal.

[1] See recent changes to the Fair Trading Act 1986 brought about by section 82 of the Credit Contracts and Consumer Finance Amendment Act 2014.