Consumers often find themselves wanting certain goods that they cannot afford at a particular point in time in their lives. Some consumers will often choose to purchase the goods on credit in fear of the specific items running out of stock. However, this is not the only option to secure such desired goods. The Consumer Protection Act 68 of 2008 (“CPA”) provides an additional avenue for consumers, by allowing consumers the option to enter into a lay-by agreement with a supplier of goods.

Although lay-by agreements have become a common concept in recent times, the following questions will help consumers better understand their rights and obligations around such agreements.

What is a lay-by agreement and how should payments be made?

  • A lay-by agreement is an agreement where a supplier, such as a retailer, agrees to sell goods to a consumer on condition that the consumer makes periodic payments for the goods.  
  • No interest is charged on the payments and a consumer simply pays toward the displayed purchase price.
  • In addition to this, the money paid by the consumer cannot be used by the supplier until the full purchase price has been paid by the consumer and the goods have been delivered. This means that the money paid remains the property of the consumer until full payment is made.
  • Consumers should always make sure that they read the terms and conditions of the agreement, which will usually either be provided in either a separate document or reflected on the slip provided by the supplier.

Does the consumer immediately receive the goods?

  • No, the goods remain with the supplier until the consumer has paid the full purchase price.
  • Once the full purchase price has been paid, the supplier must then deliver the goods to the consumer.
  • While in possession of the goods, the supplier remains responsible for the safekeeping of the goods until they have been delivered to the consumer. Should there be an incident, such as a fire or theft, the consumer will not incur any additional charge and the amount paid will not be affected.

What happens if the supplier fails to deliver the goods to the consumer after full payment?

  • The supplier must supply the goods to the consumer after full payment has been made.
  • If the supplier is unable to supply the goods, the supplier must at the option of the consumer either:
  • supply the consumer with the same amount of goods that are comparable or superior to the goods requested by the consumer; or
  • refund double the amount paid by the consumer; or 
  • refund the payments paid by the consumer, with interest, if the inability to supply the goods is due to circumstance beyond the supplier’s control.
  • Circumstances beyond the supplier’s control do not include shortage of stock, for example, where the supplier accidentally sells the item to another consumer as a result of failing to take proper stock count of the goods left in its possession. 

What happens if the consumer no longer wants the goods or fails to make payment?

  • A consumer is entitled to cancel the lay-by agreement and request a refund before making full payment of the purchase price.
  • In response to a consumer’s cancellation, a supplier may charge a penalty fee before refunding the balance to the consumer.
  • A penalty fee may also be charged by a supplier where a consumer fails to complete the payment for the goods within a period of 60 business days after the agreed date of completion.
  • The Regulations under the CPA provides that the penalty fee may not exceed 1% of the full purchase price.
  • A supplier may, however, not charge a penalty fee if the consumer’s failure to complete payment was due to the death or hospitalisation of the consumer.

What happens where a consumer was not informed of the penalty fee?

  • A penalty fee may only be charged if a supplier informed the consumer of the fact and extent of the penalty before the consumer entered into the agreement. Penalty clauses are common in most lay-by agreements and are often specified in the agreement (or the slip provided to the consumer).
  • Where a consumer has not been informed of penalty, the penalty may not be charged and a full refund of the amount paid by the consumer under the agreement must be made.

What can a consumer do if a supplier refuses to make a refund?

  • Where it is evident that, after approaching the supplier, they refuse to make a refund or there is any unresolved dispute relating to the lay-by agreement, a consumer may refer the dispute to the Consumer Goods and Services Ombudsman (“CGSO”) for investigation.
  • A complaint to the CGSO can be lodged through the following link:
  • Should a consumer be unable to resolve the complaint through the CGSO, a compliant may be lodged with the National Consumer Commission (“NCC”). A copy of the NCC complaint form, as well as the complaint process can be from the NCC website (