Cancellation Fees: What You Need To Know

It is not uncommon for a client to fail to attend a booked appointment without notice, leaving you with an empty time slot and lost income. But can you charge the client for the fee they would have incurred if they had attended?

Cancellation Fees and Policies

Generally speaking, when a client books an appointment, whether online or verbally over the phone, they are entering into a contract with you. Like any contract, this agreement includes terms and conditions your client is bound by, including your cancellation policy.

If you have a cancellation policy in place, it is your responsibility to communicate it to your client before their appointment, ideally at the time of booking. The earlier, the better.

Is It Legal to Have a Cancellation Policy?

Under Australian Consumer Law, contract terms must be fair and reasonable. This means you can legally enforce a cancellation policy requiring clients to pay a cancellation fee, provided the fee is not excessive or unreasonable.

Additionally, your policy should include an ‘out clause’, allowing clients to cancel without a fee if they provide notice within an acceptable timeframe.

Generally, cancellation fees should reflect the actual financial loss suffered due to the cancellation. This means businesses can only charge liquidated damages (an agreed fixed sum). Transparency is key, clients must be made aware of the exact amount they will be charged if they fail to attend. A failure to disclose cancellation fees upfront may result in the policy being deemed unfair and unenforceable.

When Can Cancellation Fees Be Charged?

You can charge a cancellation fee if:

• The client cancels without providing the required notice, as per your policy.
• You have made a reasonable attempt to fill the vacant appointment but were unable to do so.

However, you cannot charge a cancellation fee if the client fails to attend due to circumstances beyond their control, such as extreme weather or a family tragedy. In these cases, the contract is considered frustrated, meaning it is terminated without penalty.

What Is a Frustrated Contract?

A frustrated contract occurs when an unforeseen event makes it impossible to fulfil the agreement. For a contract to be considered frustrated, it must meet the following criteria:

1. The event must have a substantial impact on the agreement.
2. It must occur after the contract was formed.
3. The event must not have been accounted for in the contract.
4. It must occur without fault of the party relying on it.
5. It must be reasonably unforeseeable.

When a contract is frustrated, both parties are released from future obligations, but any prior obligations remain valid.

Handling Unavoidable Cancellations

It’s important to consider cases where a cancellation is unavoidable due to genuine hardship. How your business handles such situations can impact your reputation and client loyalty. Flexibility and understanding in exceptional cases can lead to positive word-of-mouth and higher ratings on social media.

Conclusion

The key point to remember is that you need tocommunicate your cancellation fees to your clients before any appointment. The cancellation terms provide your client with an ‘out clause’ so that the contract may not be deemed unfair. If you have this in writing, it is clearer to prove and thus charge a cancellation fee.

By taking these steps, you can protect your business while maintaining trust with your clients. If you would like more information on cancellation fees or debt collection, contact our team of debt collection specialists at Vic Collect today.