The Ins and Outs of Warranties and Returns Policies for Ecommerce Stores

Today our guest writer Leah Hamilton, at TermsFeed, is going to clarify a few important aspects of legal policies that ecommerce business owners need to be aware of.

When setting up your ecommerce store, you’re most likely concerned about how you’re going to market and price your product, what your website and branding will look like, and setting up various kinds of software, such as shopping carts and payment processing.

The last thing on your mind is probably legal policies, especially ones concerning problems or customer returns. But these policies are very important: setting up good warranties and a returns policy that’s in line with the law can save you a lot of strife once your shop is up and running.

In this post, I’m going to go through what these documents are, what they should cover, and how to make sure yours are in line with the law. This article is intended to provide general advice only. If you have any specific questions relating to your business, speak with a lawyer.

Now let’s begin! First, let’s take a look at warranties and returns policies, and then we’ll go through the key sections that need to appear in each.

What are Warranties and Returns Policies?

Warranties

At its most basic, a warranty is a promise you make about a particular item, such as how long it will last or what condition it will be in when you receive it. Warranties fall into two categories: express and implied.

Express warranties are used around the world to explicitly promise how goods will perform and their condition. In an express warranty, you might tell your customers that you will repair or replace an item if it breaks within 1 year of sale. Or you might guarantee that the baby carriers you sell can hold up to 20kg. These are both examples of express warranties. If your customer relies on this statement as part of their purchase, you are legally bound as the store owner to ensure that your products respect the warranty conditions.

In the US, all new goods come with two implied warranties: the warranty of merchantability (which promises that the goods are what they’re advertised to be); and the warranty of fitness for purpose, (which promises that the goods do what you said they would do). These implied warranties can be excluded by way of a disclaimer, such as:

“The seller undertakes no responsibility for the quality of goods except as otherwise provided in this contract.”

Or …

“The seller assumes no responsibility that goods will be fit for any particular purpose for which you may be buying these goods, except as otherwise provided in the contract.”

Laws and Regulations on Warranties

The Magnuson-Moss Warranty Act requires store owners to include implied warranties if any other written warranty is offered. This means that if you make any express warranty that the goods will last for a particular period of time, or offer any repairs or refunds, you cannot disclaim the implied warranties of merchantability and fitness for purpose. If you exclude the implied warranties and do not give provide any express warranties, you are not giving your customers much reason to trust you, and this may dissuade them from buying your products. “As is” warranties are not permitted in several states.

In the UK, you must offer a full refund if an item is faulty, not as described or doesn’t do what it’s supposed to, and customers have up to 6 years to make a claim for an item they’ve purchased. However, the likelihood of the customer being able to get that type of refund dramatically reduces 6 months after they’ve purchased the item: past the initial 6 months, it falls on the buyer to prove that an item was faulty at time of purchase.

A customer has the same right to free repairs or a replacement whether they have a warranty or guarantee, or not. So you may still have to repair or replace goods if a customer’s warranty or guarantee has run out - or even if you didn’t give a warranty. It’s a good idea to define a clear policy outlining what warranties you offer and do not offer, and ensure that you comply with local laws.

Returns Policy

A returns policy might be combined with your warranties, or it might be a separate document. Usually the warranty sets out what is covered, while the returns policy simply defines how you will deal with customer returns and refunds.

The reasons for returns and exchanges are many and varied: a customer may not like the product, or perhaps the product arrived broken, or didn’t perform as advertised. If a product’s warranty is violated (e.g. you sold some spray deodorant cans but none of the sprayers worked, so they weren’t fit for purpose) US law requires that the warranty be honored with a repair or replacement.

Now let’s take a look at what you need to cover when you set up your warranties and returns policy.

How to Draft a Warranty

You should first ensure that your goods comply with the implied warranties of merchantability and fitness for purpose. If you want to exclude these implied warranties, you can do so by using a disclaimer.

Your warranty should cover:

• What products are covered by the warranty and what products are not
• The length of the warranty period
• How you will respond if the goods are not fit for purpose or merchantable
• Options for the customer to send or bring in the item for repair, replacement or refund

You can offer longer-term or more comprehensive warranties as a way to build goodwill and show excellent customer service.

Let’s take a look at an example from Apple.

Image: Apple iPhone Warranty (https://www.apple.com/legal/warranty/products/ios-warranty-document-us.html)

You can see that Apple puts consumer law considerations at the top of their warranty, so that the buyer is immediately informed that the warranty does not limit their rights under applicable laws. The warranty also clearly defines what is covered and what is not covered. Often customers are required to have met certain conditions before the warranty will be upheld. For example, you could require your customers to provide proof of purchase before you agree to provide warranty service.

Here’s an example of Apple’s terms where they also address customer responsibilities and what Apple will do if the warranty is breached:

Image: Apple iPhone Warranty (https://www.apple.com/legal/warranty/products/ios-warranty-document-us.html)

What Your Returns Policy Should Cover

Your Returns Policy will need to cover a number of things, such as time limits, amount that you are willing to refund (e.g. full purchase price), types of refunds (such as direct refund, store credit or replacement), and who covers the cost of delivery. Different jurisdictions have different laws on these issues - the UK differs from the US, and within the US laws differ state by state, and so on.

Your Returns Policy should cover both returns and refunds, and establish:

• Which items can be returned or refunded, and which can’t (e.g. digital downloads can’t be returned, but can be refunded)
• Any time limits on returns or refunds (this will tie in to any warranty periods)
• What form the refund will take (e.g. cash, exchange, store credit)
• Who is responsible for the shipping cost of physical items

Here’s a visual example of the Apple Returns Policy:

Image: Apple Store Returns Policy (http://www.apple.com/shop/help/returns_refund)

Your policy should reflect the laws you are required to abide by in your jurisdiction. For instance, in the UK you must give your customer a refund if your product is broken or faulty, does not match the product description, or doesn’t do what it’s supposed to. So there’s no point writing a policy in the UK that says “No refunds for faulty products” when by law you are required to give a refund.

The UK also has “distance selling” laws that say you must provide a refund if the customer requests one within 14 days of receiving the product, for any reason.

There are also laws that dictate how to display your policy.

For example, California law requires you to clearly display your return and refund policies unless you offer full cash refund, exchange or store credit, within seven days of the purchase date. If you don’t display your policy customers are allowed to return the goods for a full refund within 30 days, no matter what your policy says.

In Florida, you must clearly display your Return/Refund Policy if it does not allow refunds; if you don’t, customers may return goods for a full refund within 20 days of purchase.

Conclusion

Having good warranties and a returns and refunds policy for your ecommerce store is important for keeping your sales practices in line with the law. Ensure that you know your local legal obligations and display any policies and warranties prominently and clearly for your customers.

If you don’t currently have a Returns and Refunds Policy for your ecommerce store, visit TermsFeed to create one. TermsFeed allows you to create custom legal agreements online, for your ecommerce website or app. The agreements are completely free, but TermsFeed also offers premium options if you wish to use them. TermsFeed’s agreements are drafted by professional lawyers from around the world, and each agreement goes through a rigorous quality certification process. Check out their agreement generators and testimonials!

To add your Warranties and Returns and Refunds Policy to your footer, you’ll need to add CMS pages to your PrestaStore. Have a look at this handy guide for how to do so.