Gift cards – beware the law

With the increase in the number of large retailers such as Game and most recently JJB Sports going into administration, this has highlighted a potential problem with gift cards.

If you have purchased a gift voucher in a company which goes into administration or liquidation, you have no additional legal rights over and above being a normal unsecured creditor, and with big companies like this, where it is almost certain that there will be very significant value secured creditors such as banks, the Inland Revenue and so forth, you are highly unlikely to receive a penny.

Gift cards and vouchers are a popular and easy way of giving a present but not without risks in the current economic conditions.
The difference between administration and liquidation is that a company in administration is still alive and still trading, but is protected from action from creditors while the administrator seeks a buyer for the assets of the business.

With big retailers (although this Is not always the case, with Woolworths being a notable exception in recent years) a buyer is found but the buyer takes the assets and not the liabilities and gift cards are a pre-existing liability, so the new owner will not be legally required to honour the promise made by the voucher and it cannot even be redeemed where some shops or all may remain open during the period of administration.

The same principle applies to loyalty cards which are also popular.

Finally, the recent press regarding this issue has also highlighted that another reason why retailers have embraced gift cards so wholeheartedly is that over 5% are never redeemed, people forget about them r lose them, and there is no obligation to replace a lost card.

For online legal services or legal contracts for your business, My lawyer can help.

Be the first to reply

Leave a Reply

Your email address will not be published. Required fields are marked *