Cancelled contracts and COVID-19: ACCC Guidance

On 18 March 2020, the Australian Competition and Consumer Commission (ACCC) released guidance on their expectations regarding contracts that are cancelled as a result of COVID-19 restrictions and lockdowns.

The contract cancellations discussed are those that relate to:

• travel;

• events;

• gym memberships;

• food delivery services; and

• weddings.

We will discuss the impacts on weddings in a separate article here.

Travel and Events

The ACCC have stated that for travel or event cancellations, refunds, credits or vouchers are expected to be provided to consumers and businesses are expected to treat consumers “fairly”.

While the terms and conditions of the ticket will be relevant, if the cancellation occurred as a result of government restrictions, a consumer’s rights under the consumer guarantees set out in the Australian Consumer Law (ACL) may be adversely affected.

Additionally, there may be some circumstances where a consumer will be entitled to refunds for related expenses (such as accommodation bookings), though this is unlikely to apply if the event or travel was cancelled as a result of government restrictions.

While the ACCC is encouraging fair treatment of consumers that cancel their booking as a result of a COVID-19 related health concern, consumers need exercise care as doing so may constitute a “change of mind”, which may impede the ability to obtain the benefit of the consumer guarantees.

Gym Memberships and Food Delivery Services

The ACCC correctly noted that the ACL prevents the taking of payments for goods or services “where there are reasonable grounds to believe” that the supply will not occur. As such, regular payments (such as those for a gym membership) must be suspended if those services are closed as a result of COVID-19 restrictions.

If payments have already been deducted, businesses may be obliged to refund those payments. This applies to lump sum payments paid up-front for use of the service to the extent that the refund relates to the closure period.

Additionally, the ACCC stated they expect that “holding” or “freezing” fees that may ordinarily be charged in situations where a membership or subscription is paused/suspended are either not charged at all, or if already been charged, are refunded to consumers.   

Pricing

The ACCC stated that, in a general sense, they cannot prevent excessive pricing, though “where the product is critical to the health or safety of vulnerable consumers”, the ACCC may pursue actions against suppliers for unconscionable conduct. 

Summary

Ultimately, consumers are being encouraged to contact businesses and request a refund, and businesses are being encouraged to act fairly given the circumstances.

The terms and conditions of the relevant contract will be key in determining the nature of the rights that will accrue as a result of the cancellation of the contract.

Additionally, there may be some circumstances where the ACL or common law may provide additional protections (to either consumers or businesses). 

If you are a supplier or consumer with concerns regarding the cancellation of any contract, please do not hesitate to contact: 

Paul Gray
Principal
T: 03 5225 5231
E: pgray@ha.legal

Alexander Gulli
Lawyer
T: 03 5226 8573
E: agulli@ha.legal