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Show me the money: Coronavirus, Cancellations and Refunds

Cancellations and refunds

Since the beginning of lockdown, the Competition and Markets Authority (CMA) has received thousands of complaints from consumers in relation to businesses implementing unreasonable cancellation and refund practices. For example, the CMA has found that some businesses have:

  • made the refund process complex; and/or
  • charged high cancellation or administration fees; and/or
  • put pressure on consumers to accept vouchers instead of cash refunds.

5 things every business should know when dealing with cancellations and refunds: 

  1. If your business is unable to provide or your customers are unable to receive any services/goods as a result of lockdown laws: in such event, the contract may be considered ‘frustrated’ and where the customer has paid money in advance for services/goods that they have yet to receive, they will generally be entitled to a full refund.
  2. If your business is unable to provide some of the services/goods: where a customer has paid for the services/goods in advance, the customer will normally be entitled to at least a refund for the services/goods that have not been provided.
  3. Where your business provides regular services/goods in exchange for regular payments as part of an ongoing contract: your business may be able to retain or request that the customer makes a small contribution to your costs until the provision of the services/goods is resumed. However, you will only be able to do so where the contract terms set this out fairly and clearly and the customer is free to end the contract if they do not wish to pay these fees.
  4. Alternatives to refunds: whilst you can offer your customers vouchers, credits or re-bookings, it is imperative that the customer is not misled or pressured into accepting one of these as an alternative to a refund. Your customers should be able to receive a refund as quickly and as easily as the other options available to them.
  5. Timing of refunds: you should ensure that the expected timescales for dealing with refund requests is made clear to the customers and in any event, a refund should still be processed in a “reasonable time”.

While the points discussed apply to B2C contracts, the effect is felt in B2B contracts as well. It is therefore important to consider the contractual issues facing many businesses and individuals as they try to manage cancellations and refunds due to coronavirus.

If you need specialist advice, guidance or support from our team of legal experts, please email or call us on 02920 224433. 

Please contact Mark Loosemore, Senior Partner and Head of Commercial at Loosemores or Adam Munn, Commercial Solicitor to find out more. 

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