Good contracts create good relationships, especially during Covid-19 lockdowns

It feels like we’re playing a challenging game of Covid-19 whack-a-mole in Australia right now. As a result, I’ve had MANY small business owners reach out for advice about lockdown-related cancellations and refunds.

I’ve had my own personal experience of navigating an event refund policy recently. My gorgeous granddaughter’s first birthday celebrations were cancelled in the wake of Brisbane’s most recent snap lockdown. It’s hard on service providers and the customers alike.

Each lockdown, I speak with concerned business owners and managers regarding their requirements to provide refunds when services are required to stop because of a government-mandated lockdown. The process for managing a Covid-19 or Lockdown-related refund request can make or break your business.

 

The ACCC Guidelines

Whether you are obliged to provide a refund depends on how your Client/Service Agreement deals with refunds and cancellations. Assuming you have these agreements in place. Because Covid-19 and lockdown circumstances are unusual, and we have not experienced this type of business interruption before, the Australian Competition and Consumer Commission, ACCC, has issued the following guidance:

“If you are unable to provide goods or services during this time, you have the opportunity to work with your customers to find a mutually agreeable alternative arrangement. This could include providing a partial refund, a credit note or voucher, or rescheduling to supply the services at a later date where this is possible.”

There are ACCC COVID-19 specific guidance facts sheets for:

  • travel cancellations,
  • event cancellations,
  • product price increases,
  • product returns and exchanges,
  • delivery delays,
  • gym memberships,
  • local sporting clubs,
  • wedding cancellations,
  • material changes to services,
  • telecommunication services,
  • business closures,
  • third-party booking sites, and
  • buying hand sanitiser.

I suggest any small business dealing with Covid-19 challenges review and implement the recommendations provided in these fact sheets. We have been managing the challenges of Covid-19 for well over a year. Consumers are becoming more savvy and less forgiving where less-than-clear cancellation policies exist.

 

Refunds and Cancellations in Practice

In practice, under Australian Consumer Law, if you have taken a deposit from a customer (non-refundable if client cancels), you should be in a position to refund the deposit in many cases.  The law assumes you should not use the deposit for anything other than providing the goods or service to the client who paid the deposit!

When it comes to full or partial payments, your contract may be voided, and you may have to provide a refund of fees you have been paid if a specific delivery date is an “essential clause” clause in your Service Agreement.

This means you must deliver on that date, or your contract is void unless an alternative arrangement is provided for in the contract that voids the “essential clause”.

All other situations regarding a Pandemic or Lockdown refund and cancellation requests are managed by a ‘Force Majeure’, ‘Pandemic’ or ‘Government Regulatory Prevention’ clause your Service Agreement that specifically addresses Covid-19, Pandemic or lockdown related refund and cancellation requests.

Specific Covid-19 policies should also address ‘change of mind’ circumstances. This could occur where a ticket holder decides the risk of attending an event due to Covid-19 concerns are too high, without the event being cancelled.

Other circumstances to be covered could include:

  • cancellations in anticipation of a lockdown being extended,
  • increased pricing on the delivery of products or services,
  • return policies,
  • delivery delays, and
  • anything else relevant to your business operations and Covid-19.

 

What Steps Should You Take NOW?

Your best option is to ensure your Service Agreement is well planned and legally drafted. It should specifically address pandemic and lockdown-related cancellations, refund requests, and processes to support an outcome that is mutually beneficial to both you and your client. It should also allow you to continue to deliver your service and maintain good client relationships.

If you have been managing these challenges without the appropriate, written terms and conditions in place, it’s time to implement them in your business now. Good contracts create good relationships, especially in times of uncertainty.

Please make an appointment to discuss your specific Covid-19 policy requirements and take one less problem off your plate.

Stay safe and stay in business.

Shalini

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