Do businesses need to refund customers for cancelled bookings?

If you own a business that has had to cancel customer bookings due to COVID-19 lockdowns or other restrictions, you may be wondering whether you need to provide a refund or other compensation to your customers.

Do businesses need to refund customers for cancelled bookings?

There is no blanket legal requirement on businesses to provide a full refund in the event of cancellation, including in the event of government-mandated lockdowns or other restrictions. This applies to all types of businesses including accommodation providers, event organisers, or any other business that takes bookings and deposits or payment up front.

However, it is important to be aware of the Australian Consumer Law and the requirements it imposes on your business.The Australian Consumer Law requires you to treat your customers fairly. The Australian Competition and Consumer Commission (‘the ACCC’) has provided some guidance on this in the context of COVID-19, stating that businesses must act in accordance with their terms and conditions at the time of booking.

As a business owner, you should therefore ensure that your terms and conditions are up-to-date and contain a clear cancellation policy. You should also ensure that your terms and conditions are clearly brought to your customers’ attention at the time of booking, such as on your website, on booking webpages and in booking confirmation emails.

Review your terms and conditions

You must adhere to your terms and conditions at the time of the customer’s booking, so it is important to review these and check they fit with your intentions. If your terms and conditions state that you will provide a full refund in the event of cancellation, then you must do so.

Consider whether your current terms and conditions include any of the following provisions:

  • Specific COVID-19 cancellation terms – these would provide the best protection to you as a business and help to reduce any misunderstandings between you and your customers. Specific COVID-19 cancellation terms should set out the customer’s entitlement in the event of a lockdown or other government restrictions, such as entitlement (or lackthereof) to a full refund, partial refund, credit note or voucher.
  • General cancellation terms – these might set out the customer’s entitlement (or lack thereof) to a full refund, partial refund, credit note or voucher in the event of any cancellation. Also consider whether the customer’s entitlements in the event that they cancel the booking voluntarily differ from their entitlements in the event of a cancellation by the business itself.
  • Force majeure – a force majeure clause may specify what should happen in the event that certain unforeseeable circumstances occur. If you have a force majeure clause in your terms and conditions, it would need to expressly cover events such as pandemics or government intervention to have effect in the context of COVID-19 related cancellations.

If you are unsure what to offer customers in the event of cancellation, Business Victoria has provided guidance on cancellation policies, credit notes and fees that you may charge in the event of cancellation.

Importantly, you must make sure that your terms and conditions are fair, otherwise they may be unenforceable. For more information about unfair contract terms, see our article Changes to Unfair Contract Terms.

Seek professional advice

If your terms and conditions are unclear or do not include specific COVID-19 cancellation terms, we recommend that you update them to ensure that your business is best protected and to prevent disputes with customers.  You may also consider ensuring that your terms and conditions cover other relevant aspects of your business which are outlined in our article here. A lawyer can assist in reviewing your terms and conditions and drafting new terms and conditions to ensure that your businesses interests are best protected should any problems arise.

How Sharrock Pitman Legal can help?

Our team of Accredited Specialists in Commercial Law are experienced in drafting terms and conditions for a variety of businesses across a wide range of industry sectors. Please feel free to contact us on 1300 205 506 to discuss your business’s needs.

The information contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. Any legal matters should be discussed specifically with one of our lawyers.

Liability limited by a schemeapproved under Professional Standards Legislation.

For further information contact  
Mitchell Zadow

Mitchell is the Managing Principal of our law practice.

He is an Accredited Specialist in Commercial Law (accredited by the Law Institute of Victoria). He also deals with areas of Employment Law, Wills & Estate Planning and Probate. For further information, contact Mitchell on his direct line (03) 8561 3318.

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