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QUESTION:
Hi Ken,
First off thank you for your excellent advice and your contracts (that we use). My question is. Are we contractually obligated to refund a customer when they over pay. For example: we have a customer who is annual, and has been for the entire time of the contract. They paid annual for 3 years (on a 2 year contract) and then 6 months into the 3rd year cancels. Now 6 months later they are calling for a refund of the 6 months they didn't use.
Are we responsible for reimbursing them? I've done it for one other customer years ago, but I'd like to know if there is a way I can avoid paying out during these uncertain times.
I don't know that I would want this posted publicly as it may sound like I'm greedy. But I'm not certain that I have found the exact language in our contracts that would cover this point.
Thank you,
Heidi
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ANSWER:
You should be looking to the terms of your contract for both your rights and your subscriber's rights when the issue of refund comes up. If your contract requires a periodic payment in advance, which is typical, then you don't owe a refund if the subscriber terminates under the term of the contract. The answer might be different if the term has expired and the subscriber is on month to month [look to the renewal provision in that case].
Your question states the advance payment is annual, and I assume that the contract is still within its term. Therefore the subscriber owed you the 12 months in advance. If there is a provision that you added for this subscriber, for example permitting cancellation in the event the house is sold, or business premises vacated, then you would most likelyl have to return the overpayment because the contract term was shortened. If the subscriber's cancellation is nothing more than a breach of the contract then not only do you retain the advanced payment, but the subscriber owes for the term of the contract.
And don't feel greedy. It's one thing to decide that for whatever reason you want to refund charges, or permit early termination, but as a general rule you should enforce your contract rights. You and your subscriber made a bargain and you have a right to expect full performance, as does your subscriber.
You can read previous articles on this topic and discussion on our Public Newsletter Archive by going to this link:
http://community.icontact.com/p/kenkirschenbaum/newsletters/alarmcontracts