Is It Legal to Not Offer a Refund?

Last updated: 14 April 2021

You have started your new business and set up a website selling your products. All is going well until you receive your first request for refund. Do you have to provide a refund?

Take this case example: You are in the business of selling electronic software programs. The customer has purchased your software which is delivered electronically (i.e. by email, shopping cart link, etc.). They have successfully downloaded it and are now claiming they want a refund as it’s not quite what they wanted.

You may be thinking: they already have the software; you cannot get it back; they can still use it. So you don’t want to give them a refund. Do you have to refund? Can you ignore them and walk away?

Legal issues with refunds

You have both legal and commercial issues you should consider when deciding how, when and to whom to issue a refund in your business.

In terms of legal responsibilities, you may not have a choice. All businesses have legal responsibilities to consumers which you cannot avoid and you need to be aware of. Your obligations under Australian Consumer law are very specific when it relates to refunds, returns, guarantees and warranties.

In relation to the sale of any goods, these include guarantees that:

  • the goods are of acceptable quality
  • the goods are fit for any disclosed/advertised purpose
  • the goods will match any description under which they are sold
  • the goods will have spare parts available for a reasonable time, and
  • all express warranties offered will be honoured

So what should you do? Before you do anything or make any decisions, find out (preferably in writing) the reason for the refund request from your customer. This can be valuable information which you can use to improve your products or business as well as clarify the customer’s understanding of your Refund Policy.

Check your Refund & Return Policy

Ensure your Refund & Return Policy is easy to find on your website, easy to understand and visible to consumers before they make a purchase.

In the case of some goods, they may not able to be easily returned for practical reasons (e.g. lingerie, swimwear, perishable products, software, apps, etc.). So if this is the case and you do not or are not able to accept returned items, you must make this very clear in your Refund policy.

Your Refund Policy must comply with the Australian Consumer Law. You cannot, for example, state that you do not permit refunds at all and not honour a refund if the goods are faulty. You can, however, state that you will not offer a refund or return on some goods in the event customers change their mind.

Commercial issues with refunds

Sometimes it is just best to cut your losses, not spend the time or effort, just issue the refund and call it a day!

You can end up spending more time trying to troubleshoot, trying to repair an issue or listening to a complaint. Just by smiling, apologizing and refunding, you can move on to more important issues: growing your business.

You also need to consider your business reputation (and loss of sleep) if you argue or try to ‘save a sale’. With a quick and efficient refund policy that apologises to the customer (even if its their fault and they are wrong), you may find they come back again to purchase or even recommend your business to their friends.

So maybe it’s time to re-think your Refund & Return Policy. Make sure it’s included in your website Terms & Conditions. And balance your legal obligations, commercial considerations and how to make your customers happy.

About Vanessa Emilio

Vanessa Emilio (BA Hons, LLB, ACIS, AGIA) is the Founder and CEO of Legal123.com.au and Practice Director of Legal123 Pty Ltd. Vanessa is a qualified Australian lawyer with more than 20 years experience in corporate, banking and trust law. Follow this link to read the full bio of Vanessa Emilio.