THE LEGALITY OF “NO REFUND” POLICIES IN COMMERCIAL CONTRACTS IN NIGERIA
The elements of a valid contract are – offer, acceptance, consideration, mutual intention to create a legal relationship, and the contractual capacity of the parties to the contract. The popular English case of Carlill v Carbolic Smoke Ball Co established these elements beyond refutation. The consummation of a contract is a sequential activity – an offer is made, which is accepted, and consideration furnished to perfect the contract. After an offer is made, revocation is possible and effective at any time before acceptance: up to this moment ex hypothesi no legal obligation exists. However, in advanced-selling situations such as purchase of air tickets, car rentals, concerts, and purchase of goods through online retail stores, a consumer may elect to revoke or rescind the contract after payment (consideration) has been made and accepted by the retailer. In e-commerce where “payment validates an order”, a contract is complete upon payment even when the purchaser has not physically seen or inspected the product. Many service providers like airline companies and hotels include a non-refund clause in their contract terms. Recently, the courts in Nigeria have been called upon to uphold consumers’ right to the refund of their payment where the contract is rescinded due to non-performance, misrepresentation, or breach of contract by the vendor/service provider.
No refund policy
In Nigeria, it is common to find the phrase “no refund once payment is made” on payment receipts, bus tickets and e-commerce sites. A “no refund” policy is simply a business policy that expressly states that once payment is made for goods or services rendered or proposed to be rendered, the purchasing party cannot get a refund of such payment, even if he revokes the contract or no longer requires the goods/services. The policy may be varied in its import. Some businesses allow purchasers to get other/similar products with the payment made, some offer shopping vouchers in return while some offer no respite for the purchaser. Some airlines and hotels usually exercise a partial refund policy by allowing consumers to terminate pre-purchased services with a cancellation fee while crediting the balance of the advance payment to the purchaser. Some stores offer a refund policy that is valid only for a short period of time after purchase especially where the product is found by the purchaser to be defective.
Consumers may elect to terminate the pre-paid service where, for instance, a latent defect or fault in the goods in discovered, or where the service provider fails to provide the agreed services or where a supervening circumstance (death, incapacitation, force majeure) took place. In an online or advanced-sale scenario, purchasers are wont to return defective products and demand for refund of the purchase price since they did not have the opportunity to inspect the products before payment. Where the Service Provider has a “no refund” clause as part of its contract terms, purchasers have sought the help of the Court and Consumer Protection Agencies in asserting their rights to a refund. With the increase in online commercial transactions in Nigeria, it is important to know a purchaser’s rights to demand for refund when the product is defective or where service is not rendered timeously as agreed between the Parties.
Legal Provisions and Judicial Decisions on the “No Return/Refund” policies.
The Federal Competition and Consumer Protection Act 2018 (the “FCCPA”) is the primary Legislation for consumer protection in Nigeria and applies to all undertakings and all commercial activities in or having effect within Nigeria. The FCCPA established the Federal Competition and Consumer Protection Commission (the “Commission”) as well as the Competition and Consumer Protection Tribunal. The objectives of the FCCPA, among other things, are to
- protect and promote the interests and welfare of consumers by providing consumers with wider variety of quality products at competitive prices, and
- prohibit restrictive or unfair business practices which prevent, restrict, or distort competition or constitute an abuse of a dominant position of market power in Nigeria
Section 167 of the FCCPA also criminalises the contravention of Consumer right by any Service Provider in Nigeria. The Act defines a Consumer to include any person (a) who purchases or offers to purchase goods otherwise than for the purpose of resale but does not include a person who purchases any goods for the purpose of using them in the production or manufacture of any other goods or articles for sale, or (b) to whom a service is rendered.
The FCCPA has several provisions that guarantee the rights of Consumers to cancel an advanced service and/or ask for refund. Under Part XV, the FCCPA provides for the following:
- Under Section 120(1), a Consumer has the right to cancel any advance booking, reservation or order for any goods or services, subject to a reasonable charge for cancellation of the order or reservation by the Service Provider. It also provides in Subsection 3 that cancellation fee shall not be imposed where the cancellation is due to the death or hospitalisation of the Consumer.
- Under Section 121(3), a Consumer is entitled to receive from the Service Provider goods that correspond to the pre-agreed description or sample, the basis upon which the contract was entered.
- Under Section 122, a Consumer has the right to return products supplied to him and get a full refund where the product is defective or unsafe, or where the product is found unsuitable for use after delivery, or where in an advanced sale, the Consumer rejects the delivery within a reasonable time following discovery that the product does not correspond to the type/quality reasonably contemplated in the sales agreement.
- Under Section 125(1), a Consumer is entitled to damages and monetary restitution where the Service provider in marketing the goods, makes to the Consumer or implies a false, misleading or deceptive representation concerning a material fact.
- Under Section 129(1)B, a Service Provider shall not make a transaction or sales agreement subject to terms and conditions which purports to waive or deprive a Consumer’s right to return defective goods or any right set out in the FCCPA.
- Under Section 130, a Consumer has a right to a timely performance and completion of services provided by a Vendor, and where this fails, a right to refund of a reasonable portion of the price paid having regard to the extent of the failure.
The foregoing provisions of the FCCPA establishes the right of the Nigerian Consumer to seek a refund of his/her payment where the goods are found unsuitable after delivery, or where the goods do not correspond to pre-agreed descriptions or where the service provider fails to render the services according to the terms of the agreement. Except as provided above, the inclusion and/or implementation of “no refund” clause in a sales agreement are prohibited by the FCCPA.
The courts have also applied and enforced the above provisions of the FCCPA. In the recent cases of Patrick Chukwuma vs Peace Mass Transit Limited and Edem Ewa Ekeng & Another vs Wakanow.com Limited, the Court upheld the right of the consumer to rescind a contract and get a refund of payment made as consideration. In this case, the plaintiff requested a refund of the boarding fare after he changed his mind about boarding the bus due to a two-hour delay. The defendant refused his request of a refund of the boarding fare. Hon. Justice C. O. Ajah of the Enugu State High Court awarded damages in the sum of N500,000.00 (Five Hundred Thousand Naira) against the Defendant after a thorough analysis of the provisions of the Federal Competition and Consumer Protection Act 2018. The Court held that the policy of no refund of money after payment is illegal, null and void in light of the provisions of Sections 120, 104, 129(1)(a) and (b) (iii) of the Federal Competition and Consumer Protection Act 2018.
In Edem Ewa Ekeng & Anor v. Wakanow.com Limited, the Magistrates’ Court of Lagos State also held that the non-refund policy of Wakanow.com Limited was illegal, null and void and went further to order the company to refund the money paid by the Claimants for air tickets. The Defendant, a travel agent, had failed to buy airline tickets for a rescheduled flight until the fare increased. The Court held that the Plaintiff was entitled to a refund following the negligence of the Defendant. The Court also awarded monetary reliefs for damages caused by the Defendant’s delay and failure to reschedule the flight despite payment of the sum agreed by the parties.
The above cases, barring a contrary decision on appeal, depict the rights of Nigerian consumers to rescind a contract for purchase of goods/services following non-performance, misrepresentation, breach or fraud by the vendor/service provider, and still get a refund of the purchase price.
 (1893) 1 Queens Bench 256
 Consumers are charged a prepayment in exchange for a certified entitlement (e.g., a ticket) to consume the service in a future time interval.
 Or a Rescission which means the retrospective cancellation of a contract ab initio, as for instance where one of the parties has been guilty of misrepresentation or fraud.
 A defaulter is liable to a prison term of not more than five years (5) or a fine of not more than N10,000,000.00 or both fine and imprisonment for a natural person and 100,000,000.00 for a body corporate.
 Suit No: E/514/202 -Unreported
 Suit No. SCC/LAG/184/2022 – Unreported