It is not uncommon to experience the sting of an unexpected service fee and nor is it uncommon to ask whether businesses are allowed to do so in the first place. Do you have to pay these fees? Or alternatively, do you have any rights to challenge such fees?
Cancellation fees and policies
Generally speaking, agreeing to pay for a service (whether it be via booking an appointment or booking a service such as a hotel room) equates to entering into a verbal contract. As with any contract, these agreements come with terms and conditions to which you are bound, including any cancellation policy.
If a business has a cancellation policy in place, especially one involving cancellation fees, it is their responsibility to bring the policy to your attention at the time of booking their service. It is important that you make yourself aware of all terms and conditions of their policy prior to agreeing to pay for any such service.
Is it legal to have such policies?
The Australian Consumer Law requires that the terms and conditions of any contract with a consumer must be fair and not unreasonable. This means that businesses can legally have a cancellation policy requiring customers to pay cancellation fees under certain circ*mstances, so long as the fee is not extravagant or unreasonable.
Generally, cancellation fees must be capped to the amount of the damages actually sustained as a result of the cancellation, and consequently businesses are only entitled to claim ‘liquidated damages’ (an agreed fixed sum).
What is the court’s definition of ‘reasonable fees’?
The courts have taken a broad approach as to the definition of ‘reasonable fee’ and classify anything that is not ‘extravagant, exorbitant or unconscionable’ to be a sufficient standard of what is reasonable.
The courts have determined that businesses can take into account both financial and non-financial factors when considering what is a reasonable fee.
This encompasses factors such as:
- Whether the appointment was rescheduled
- Whether the business has been able to re-book the appointment that was missed
- Whether the business incurred any additional costs as a result of you not making the appointment
- Whether the cancellation has impaired business cash flow
- Whether a cancellation fee would encourage or discourage customers from returning to the business and/or maintaining their appointment, and
- The length of time, prior to the appointment, in which the cancellation of the service occurred.
It is likely that the interpretation of what amounts to a reasonable fee will be effected by the context of the COVID-19 pandemic.
What does this mean for you?
If you have been charged a relatively small fee, such as 10% of the cost of the service and have made the cancellation outside the terms of the cancellation policy without any extenuating circ*mstances, then usually you will be obliged to pay their cancellation fee.
However, there are certain factors that can create a more complex situation and may give rise to actionable consumer rights, such as:
- A very hefty fine
- You were never made aware of the cancellation policy
- A cancellation policy did not exist, or
- There were extenuating circ*mstances outside of your control, which gave you no choice but to cancel the service.
Where you find you have to cancel a service due to COVID-19 related circ*mstances, you may be able to rely on the last factor listed above to seek a reduction or waiver of the cancellation fee. An inability to proceed with the service due to government restrictions is likely to provide a strong basis for a reductions waiver; in contrast, it is unlikely that financial hardship alone will be sufficient to establish extenuating circ*mstances outside of your control.
How can Sharrock Pitman Legal assist?
If you believe you have been wrongly charged with a cancellation fee for a service under such circ*mstances, please feel free to contact our Litigation team on 1300 205 506. Our Litigation lawyers will provide you with advice regarding your rights, in addition to guiding you through the steps for recovery that might be possible in your circ*mstances.
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 scheme approved under Professional Standards Legislation.
Written by a member of our Legal Team,
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FAQs
Generally, cancellation fees must be capped to the amount of the damages actually sustained as a result of the cancellation, and consequently businesses are only entitled to claim 'liquidated damages' (an agreed fixed sum).
Are cancellation fees enforceable? ›
Yes, a business can charge you to schedule or cancel an appointment. But the law limits these fees. Prevent these policies from catching you by surprise. Carefully read a business's appointment scheduling and cancellation policies.
Do you legally have to pay a cancellation fee? ›
Consumer law may help you
A business can only keep the payments you've made in advance or ask you to pay a cancellation charge if it's fair to do so. A charge is not fair just because it's included in the contract you signed.
Can you dispute a charge for cancellation fee? ›
If you run into this, a simple chargeback request to your credit card company may do the trick, Prof. Tsai said. With that route your issuer will referee your dispute according to the terms and conditions of the credit card contract, which has some potential drawbacks.
What are my cancellation rights? ›
The 14-day cancellation period starts the day the goods are in the physical possession of the consumer (or when the last item in the order is in the consumers possession in the case of multiple goods). Weekends and public holidays are included in the 14 days.
What is the cancellation fee rule? ›
Cancellation charges are per passenger. If a confirmed ticket is cancelled within 48 hrs and up to 12 hours before the scheduled departure of the train, cancellation charges shall be 25% of the fare subject to the minimum flat rate mentioned in the above clause.
Can a business charge a cancellation fee without notice? ›
Then there's the term “cancelation fee” that's used in the business world—for example, many electricians use it. The only way to be charged a cancelation fee is if you schedule a service appointment, then cancel it without sufficient notice or fail to be present at the designated time.
How do you prove cancellation law? ›
(1) Prove the cancellation law in N: if x, y, z ∈ N satisfy x + z = y + z, then x = y. Statements about natural numbers have to be proved by induction (what else?). Thus take x, y ∈ N and set S = {z ∈ N : x + z = y + z =⇒ x = y}. Then clearly 0 ∈ S since x +0= x and y +0= y.
How do I get around cancellation fees? ›
If faced with a cancellation charge, request that they try to re-let the room to avoid charging you for it. If the room is not re-let then you may also request that they rebook the room for a different date which many hotels will do with no cancellation charge.
What is the cancellation policy? ›
A cancellation policy is a set of terms and conditions that outline the process and requirements for terminating a subscription or service, including any potential penalties or refunds.
Generally speaking, a cancellation fee is not unlawful when (1) it is a fair and reasonable in amount, (2) properly noticed to the consumer, and (3) reflects actual damages suffered by the party charging the amount. But your state's law may differ.
Can you sue a company for charging after cancellation? ›
If a subscription information service makes it difficult or impossible for you to opt out, or if they are charging you more than what you agreed to (e.g. hidden fees), you may consider suing for: Violation (breach) of the billing or cancellation agreement.
Why do companies charge a cancellation fee? ›
While reservations and cancellation fees prevent businesses from losing money, it can also cause ill will between customers and the business. Eddleston said these policies are not in place to harm customers, but to protect businesses and ensure the space they save for these customers will actually be filled.
What is the cancellation clause in law? ›
Therefore, a cancellation clause is an entry in an agreement that defines who can cancel the contract as well as why and how. A good and common contract cancellation clause example is in insurance contracts, as it details how a policyholder can cancel their contract with the insurer.
What is proof of cancellation? ›
A Certificate of Cancellation is a document commonly used in business that legally cancels a prior agreement between parties.
What are the three types of cancellation? ›
Here are the different main types of cancellations are short rate cancellations or pro-rata cancellations, flat cancellations. In comparison to short rate cancellations or pro-rata cancellations, flat cancellation is different, being classified as the simplest and easiest way to terminate an insurance policy.
What happens if seller doesn't accept cancellation? ›
If a seller denies your cancellation request, the sale is final.
Can a seller refuse a cancellation? ›
While you can ask a seller to cancel they're never required to do so.
Do I have to accept buyer cancellation? ›
As the seller, you have every right to accept the request from the buyer to cancel the confirmed order, but if you do so, the order is cancelled without recourse back to the buyer. The contract is simply voided altogether.
