How to buy goods on layby
A layby sale is one where the goods are sold at retail, but the buyer does not take delivery of the goods until the whole of the purchase price is paid. It is an easy and relatively cheap method of paying for goods by instalments - it is cheaper than buying by hire purchase (now called a "credit sale": see How to get out of a loan contract, credit sale (hire purchase agreement) or other consumer credit contract) as you do not pay interest as the goods are left in the store.
If the amount you paid for the goods is not more than $7,500 there are safeguards contained in the LAYBY SALES ACT 1971 that protect the parties against unfair loss (see below).
How does layby work?
Initially you will be required to make a deposit (usually 10 to 20 percent) and enter into an agreement with the seller as to the amount of the instalments and the dates on which they are due. The layby will need to be paid off over a fixed period of time.
At any time during the arrangement you will be able to receive a statement outlining your remaining obligations.
Can I cancel the layby sale before I pay the full amount?
Under the LAYBY SALES ACT 1971 you have a right to cancel the layby sale at any time before the purchase price has been paid, by giving notice to the seller. You will be able to recover the deposit and instalments that you have paid, less any deductions that the seller is entitled to make.
The seller will be able to deduct any losses caused, for example, by the item going out of fashion and the seller having to drop the price to sell it. The seller may also deduct any expenses that he or she incurred in setting up the agreement. In calculating the amount that the seller may deduct there is a rebuttable presumption that, if the layby is cancelled within one month of the sale, the retail value at the time of the cancellation is the same as the retail value at the time of the sale.
Who bears the risk in the goods before I take delivery?
Under the Act, the seller bears the risk of the goods, until they are transferred and delivered to you. This means that the seller will be responsible for the goods if they are damaged or lost.
What if the seller goes out of business?
You have some protection if the seller becomes bankrupt or (if a company) goes into liquidation or receivership. If you paid an instalment within the three months before the bankruptcy petition was filed, or before the liquidator or receiver was appointed, you are entitled to pay the balance owing on the goods and take delivery of them.
If you have not made a payment within three months you will be classed as a preferential creditor, which means you will be paid ahead of all other secured creditors. The same applies if the sale can't be completed because of a shortage of goods caused by the bankruptcy, liquidation or receivership.
- If you have any dispute with the seller you should go to the Disputes Tribunal (see How to take a claim to the Disputes Tribunal). In the Tribunal the parties represent themselves, but you may wish to consult a lawyer to help you prepare your case.