• Samantha von Sayn

COVID-19 and Contracts—What about Refunds?

COVID-19 has rapidly turned our world upside down. Such an extreme change to our daily lives, social interactions and businesses was unthinkable just months ago, when most of us were planning our yearly vacations, concerts and maybe even a wedding. Now that all of those events can’t take place, what happens to the deposits or upfront payments?


Since there is no direct law that governs refund, return or exchange policies, business may generally set their own refund policies in accordance with BC’s Business Practice and Consumer Protection Act. The Act prescribes that a legally binding contract must contain the following information:

  • the supplier’s name, business address and telephone number;

  • the date of the contract;

  • a detailed description of the goods or services to be supplied;

  • an itemized purchase price;

  • other costs payable by the consumer, including taxes and shipping;

  • customs duties, brokerage fees or other additional charges, if applicable;

  • a detailed statement of the terms of payment;

  • the total price under the contract;

  • a description and dollar value of any trade-in, if applicable;

  • if credit is arranged by the supplier, a description of the any security interest;

  • a notice of the consumer’s right of cancellation, if applicable;

  • any other restrictions; and

  • any other prescribed information.


Future Service Contracts


The Act further defines contracts for planned events that haven’t happened yet as Future Service Contracts. For example, contracts for wedding photography or wine tours in the upcoming months. In addition to the required information above, Future Service Contracts must also contain:

  • the supply date;

  • the date on which the supply will be complete; and

  • the amount of each of the periodic payments, if applicable.


Furthermore, the consumer must receive a copy of the Future Service Contract within 15 days of the date the contract was entered into.


Such contracts may be canceled within one year of the date that the consumer received a copy of the contract, if the contract does not comply with the requirements set out above. Once the consumer gives notice of cancellation of the Future Service Contract, the Act requires the supplier to refund all funds paid within 15 days.


If the contract complies with all the requirements under the Act, then the supplier’s own refund policy applies.


Continuing Service Contracts


Continuing Service Contracts, such as gym memberships or skiing lessons, require all of the same information as Future Service Contracts, plus the period of time, over which the consumer can expect to receive the services. This period of time must not be more than 2 years.


Consumers may cancel a Continuing Service Contract:

  • if there has been a material change in the circumstances of the consumer or in the services provided by the supplier; or

  • within 10 days of receiving a copy of the contract.


Examples of a material change include:

  • relocation of the consumer for the remainder of the duration of the contract, so that the distance between the consumer and the supplier is more than 30km greater than at the time the contract was formed; or

  • services being no longer available, or no longer substantially available as provided in the contract, because of a substantial change in operation.


COVID-19 arguably has led to a material change that would allow consumers to cancel their Continuing Services Contracts. When doing so, the supplier must refund all the funds paid under the contract, except for services that have already been provided. For example, if you canceled your year-long gym membership after three months, you should receive a refund for any moneys paid for the outstanding nine months on your contract, as you have already received services for the first three months.


Considerations


As COVID-19 is putting a strain on all of our professional and social lives, Canadians all over the country have shown great spirit and togetherness. So before resorting to giving notice of cancellation, contact your supplier and discuss options for a resolution that is fair to both parties. Some businesses offer future credit in an amount greater than the initial payment, if the consumer is willing to accept credit instead of a refund. And if you can afford to allow your wedding photographer to keep your deposit until your wedding can take place or your local ski hill to issue you a credit for lessons next season, it may be worth taking that route and helping businesses to stay afloat.

778.738.1258 

106-460 Doyle Ave

Kelowna  BC  V1Y 0C2

  

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