Do You Take Returns? Do You Do Repairs? Set your policy now!
from The Crafts
Report, May 2003. by Richard Stim
Article Richard Stim is an attorney and author of "Your Crafts Business:
A Legal Guide," published by Nolo (www.nolo.com)
You should make your return and refund policy conspicuous
to the buyer before the sale.
Craft artist Pam Corwin of Paper Scissors Rock in Olympia, Wash., had
been selling her work to a California store for many years when, without
warning, a package arrived with 46 of Corwin’s whimsical clocks
and a request for a refund of $570. In 22 years of business, it was
her first request for a refund — not simply an exchange.
Adding to the confusion was the fact that the returned merchandise
wasn’t from one particular order but instead was spread over five
orders and much of it was purchased over a year earlier.
Unsure how to handle the situation, Corwin considered flatly refusing
to refund the money on the basis that a sale is a sale and she had no
legal obligation to refund the money. But she suspected there was more
to the situation than the returned clocks.
Instead of shipping the clocks back and announcing, “All sales
are final,” Corwin decided to write the store owner a note. She
wouldn’t provide a cash refund, she said, but offered credit for
other merchandise. The storeowner contacted her, apologized, and the
dispute was resolved quietly.
“One thing I learned,” says Corwin, “was that my
return policy needed clarifying. I’ve always offered a lifetime
warranty for my clock mechanisms and I’ve advised people that
damaged merchandise must be reported within seven days. But I realized
I needed to create a clear policy on returns and to make it available
to all buyers.”
As Corwin learned, even if you don’t enforce your legal rights,
it’s important to know them. Here are summaries of some of the
rules regarding returns.
Display your return policy prominently.
If you want to provide refunds and impose conditions on when merchandise
can be returned, you should make your return and refund policy conspicuous
to the buyer before the sale. Your state law may require this type of
posting. But even if it’s not the law in your state, it’s
a good practice in the event there is ever a dispute. If you’re
taking orders at a show, for example, place a sign near where you write
your invoices and include the policy on the invoice, as well.
If selling directly or taking wholesale orders online, make the policy
conspicuous at your Web site before checkout.
What constitutes a prominent display?
A prominent display means that the return information is conspicuous
and easily noticed. New York law, for example, sets guidelines for stores
and any one of these displays will suffice:
• on signs at each cash register and sales counter;
• at each public entrance;
• on tags attached to each item sold under that policy;
• on the retailer’s order forms, if any;
• if you sell via a Web site, post the policy (or a conspicuous
“Return Policy” hyper-link) so that it is visible before
the buyer completes the sale.
Many merchants include the policy on the sales receipt but this should
not be the only way that the buyer learns about it. The key to enforcing
your policy is to demonstrate that it was observable before the purchase.
What kind of conditions can you impose?
Typical conditions for return might require the customer to bring back
the merchandise within a certain number of days, or that the merchandise
must be unused, or that the customer must submit a receipt or other
proof of purchase.
Or, if sending items back by mail or online, that the return must be
authorized. You can require that a buyer who exchanges for a less expensive
item must spend the remainder of the money in your store.
Are restocking fees legal?
Yes, if they are conspicuously displayed prior to purchase so that
they become part of the sales contract. (Note, Hawaii, does not permit
restocking fees except in certain instances.)
Although legal, a restocking fee must be reasonable and bear some relation
to the actual expense involved in restocking — commonly 10-15
percent of the sale price. A court will not enforce an outrageous restocking
fee — say 40 percent — if it seems more like a penalty than
a business expense.
What does it mean to offer a money-back guarantee?
Under the law, a money-back guarantee means that you will return the
full purchase price upon return of the goods.
What about consigned goods?
Galleries and stores that sell consigned or special orders should never
offer returns for those goods unless they’re flawed; all sales
of such items should be final.
When do you have to accept returns?
There are two situations when you will always have to accept returns:
• If there has been a significant breach of the sales contract,
for example, your crafts goods were defective or seriously flawed, or
• If you had an agreement with the customer allowing a refund.
Find Your State's Refund Law. To find your state's rules about
refunds and returns, check with your state government Web site. To find
any state's Web site, type "www.state." followed by your state's initials
and ".us"- for example, www.state.ca.us. Laws regarding sales are usually
found under headings such as "Consumer Rights" or "Consumer Affairs".
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