CONSUMER GUARANTEES: YOUR OBLIGATIONS PART 1

Did you know that as a supplier or manufacturer of goods and/or services that you automatically provide certain guarantees to consumers? Consumer guarantees under the Australian consumer law (ACL) provide consumers with a comprehensive set of rights for the goods and services they acquire.

The Consumer Guarantees replace the implied warranties and conditions that previously existed in state and territory fair trading laws and the Commonwealth Trade Practices Act 1974. If you are the operator of a business that provides goods and/or services to the public, then it is important that you understand what your obligations are with respect to the Consumer Guarantees under the ACL.

In this two part BLOG series we will be covering:

What is and isn’t covered by consumer guarantees,
Detail on consumer guarantees,
What happens when goods or services do not meet consumer guarantees,
When a consumer is not entitled to a remedy,
Compensation for consequential Loss,
The consequences of not complying with the ACL,
And finally warranties and Consumer Guarantees.

What is covered?

If you operate a business that supplies goods and/or services – you automatically provide certain guarantees to customers that purchase your products or engage your services. These are called Consumer Guarantees. These guarantees exist regardless of any warranty provided by you as the supplier and/or the manufacturer.

The Consumer Guarantee rules apply to you if you:

Supply goods or services that cost $40,000 or less;
Supply goods or services that cost more than $40,000 which are normally used for personal, domestic or household purposes; or
Supply a vehicle or trailer. The cost of the vehicle or trailer is irrelevant.

What is not covered?

Goods that are not covered by the Consumer Guarantees include:

Those that were purchased before 1 January 2011 (these are instead covered by statutory conditions and warranties under the Trade Practices Act 1974);
Goods that have been purchased from one off sales from private sellers;
Goods that have been purchased at an auction;
Goods that cost more than $40,000 that a person would normally purchase for their business;
Goods where a person has purchased for the purposes of on-selling or re-supply.

Services that are not covered by the Consumer Guarantees include:

Services purchased before 1 January 2011 (these are instead covered by statutory conditions and warranties under the Trade Practices Act 1974);
Services costing more than $40,000 which are for commercial use;
Insurance contracts; and
Services that relate to transportation or storage of goods for a consumer’s business, trade, profession or occupation.

Consumer Guarantees in more detail

If you are in the business of supplying goods or services, it is implied that certain guarantees are provided to the consumer of your goods and/or services. These guarantees are specified in more detail as follows:

The Goods that you supply:

are of acceptable quality when sold, that is, they are acceptable in appearance and finish, free from defects and are safe and durable;
are accurate in their description of goods, (e.g. in catalogue or advertising);
will be reasonably fit for specified purposes;
match their description, sample or demonstration model;
satisfy any extra promises made about them (express warranties);
have clear title, that is, the supplier has the right to sell the goods to the consumer;
are not subject to repossession;
are free from hidden securities/third party interests (e.g. mortgages); and
are subject to manufacturers and/or importers providing a guarantee that spare parts and repair facilities are available for a reasonable time after purchase.

The Services which you provide:

are provided with due care and skill;
are fit for their specified purpose; and
are supplied within a reasonable time (where no specific time frame has been set)

What happens when Goods or Services do not meet Consumer Guarantees?

When the goods or services that you supply fail to meet one or more of the Consumer Guarantees, your customers will generally have a number of remedies against you as the supplier and/or the manufacturer. The type of remedy will depend on the problem (as it relates to the particular Consumer Guarantee).

Minor and Major Failure of Goods

For minor failures with respect to goods, you as the supplier must offer to do any one of the following:

Repair the goods;
Offer the consumer replacement goods; or
Provide a full refund (to the consumer).

For major failures with respect to goods, it is the consumer that has the right to choose which remedy and not the supplier and/or manufacturer. These remedies include the right to:

Reject the goods and obtain a refund;
Reject the goods and get an identical replacement; or
Keep the goods and get compensation (for the drop in value caused by the failure).

Minor and Major Failure of Services

If a consumer has a minor problem with the service provided the supplier can choose to either provide a correction/repair (where possible) or offer a refund. For a major problem with respect to the services supplied to a consumer, the consumer has a choice of cancelling the service (i.e. cancelling a contract it has signed) and obtain a refund or keeping the contact on foot (for the provision of the services) and obtain compensation for the difference in the service that is delivered and what the consumer paid for.

Further information

For further information, you may find the following websites useful:

Australian Consumer Law website: www.consumerlaw.gov.au

Australian Competition & Consumer Commission website: www.accc.gov.au

Consumer and Business Services website: www.cbs.sa.gov.au

Or the ACL guide for business and legal practitioners on Consumer Guarantees below.

We will be continuing this discussion in part 2 here.

Downloads

Consumer guarantees, A Guide for Businesses and Legal Practitioners

For further information, please contact the author.

This article is posted in Adelaide, South Australia by Tri-meridian Corporate & Commercial Law and is intended to be used as a guide only. It is not, and is not intended to be, advice on any specific matter. We do not accept responsibility for any acts or omissions resulting from reliance upon the content of this article. Before acting on the basis of any material in this article, we recommend that you consult your professional adviser.