Many businesses have questions about their obligations when it comes to providing refunds, repairs and replacements. This article answers the most frequently asked questions (FAQs). It is relevant for all businesses, regardless of whether you are selling a product or service.

1. What Standards Should My Products or Services Meet to Avoid Providing Refunds, Repairs and Replacements?

Clients or customers have the right to ask for a refund, repair or replacement if a product or service does not meet the Australian Consumer Law (ACL) guarantees. When someone purchases a product or service, it comes with an automatic guarantee that it will work and do what it is supposed to do. Businesses are required to guarantee products or services they sell, hire or lease which are:

  • under $40,000; and  
  • over $40,000 that are normally for household or personal use.  

Products must meet many ACL guarantees, including that a product must:

  • be safe and lasting with no faults;
  • have an acceptable appearance;
  • perform the function the consumer expects of it;
  • match the descriptions made by the salesperson, on the labelling and in the advertising material;
  • meet any promises made about its condition, quality, performance, lifetime guarantees or money back offers; and
  • have repair facilities and spare parts available for a reasonable time after purchase, unless the business advises the customer otherwise.

Services must be:

  • provided with acceptable care and skill, or technical skill, and a business must take any reasonable steps to avoid loss or damage to the client;
  • fit for purpose and give the results agreed between the business and the client; and
  • delivered to the client within a reasonable time in circumstances where there is no agreed-upon end date.  

2. Are There Any Exceptions to the Consumer Guarantees?

It is important to understand the exceptions to consumer guarantees. Sometimes, businesses are not compelled to provide a refund, repair or replacement of the product or service.

Exceptions include when a:

  • service or product was provided but the purchaser changes their mind, finds it cheaper elsewhere, decides that they do not like the purchase or they have no use for it;
  • customer misuses a product and this results in the problem;
  • customer knows of the faults prior to purchasing the product; or  
  • client requests a service to be provided in a certain way, against the advice of the business or when they were unclear about what they wanted.  

3. What is the Difference Between a Minor and Major Problem?

When there is:

  • a minor problem with a product or service, a business is allowed to provide a free repair instead of a replacement or refund;
  • a major problem with a product, a customer has the right to request a replacement or refund;
  • a service with a major problem, a client can receive compensation for the drop in value for the price paid, or a refund.

A product will have a major problem if it:

  • has a problem that means the purchaser would not have bought it if they knew about the problem at the time of purchase;
  • is unsafe;
  • is significantly different from the sample or description;
  • does not do what the business promised; or
  • cannot be easily fixed.

A service will be deemed to have a major problem when it:

  • has a problem which would have prevented a purchaser from buying it if they knew about it at the time of purchase;
  • is substantially unfit for its common purpose and cannot be easily fixed within a reasonable period of time; or
  • creates an unsafe situation.

4. When Should a Business Provide a Repair?

A customer must accept a repair to a product or service where there is a minor problem. If a business fails to provide a repair within a reasonable time, or they cannot remedy the problem, a purchaser can:

  • repair the product elsewhere and pass the costs of repair on to the business;
  • request a replacement;
  • request a refund; or
  • recover compensation for the drop in value since the date of purchase.  

When a customer takes their product to be repaired, they are not always aware that the goods may contain stored data that can be lost during the repair process. This mainly occurs with electronic goods such as mobile phones, tablets and laptops. The ACL requires that businesses accepting goods for repair provide consumers with repair notices when the:

  • goods which are being repaired are capable of retaining user-generated data;
  • repairer’s practice is to supply refurbished goods as opposed to repairing defective goods, or when they use refurbished goods when repairing the defective good.

In these situations, a customer must receive a written repair notice prior to accepting the goods for repair.  

5. When Should I Provide a Replacement or Refund?

A business must provide a replacement or refund where there is a major problem with the product or service.

A replaced product must be identical to the product originally supplied.

A refund must be for the same amount which the customer or client paid.

Where there is a major problem with a service, a client may request to cancel the contract. They may obtain a refund or seek compensation for the drop in value of the service compared to the price paid.

6. Who is Responsible for Returning the Product?

A customer is generally responsible for returning the product when they can post or easily return it. When the customer cannot easily return or post the product, the business must pay the costs of shipping or collecting the product. However, the customer or client must notify the business within a reasonable time of the problem.

If you discover the product does not have a problem, you can claim the costs of shipping or inspection from the customer. A customer should be provided with an estimate of these costs before the business collects the product. A customer does not need to return a product in its original packaging to get a refund.

7. Can I Use a No Refund Sign?

It is unlawful for a business to tell customers or display a sign with a statement saying that they do not provide refunds under any circumstances, including for gift items or during a sale period. This applies to both online and offline stores.

Consumer guarantees do not have an expiry date and can even apply after a warranty has expired.  

Key Takeaways

As a small business, it can be difficult to stay afloat of the requirements for compliance with the ACL. Ensure you provide a quality product or service and respond legally to complaints or requests for refunds, repairs and replacements.

If you have questions about your obligations under the ACL, get in touch with LegalVision’s competition lawyers on 1300 544 755 or fill in the form on this page.

Ayatalla Lewih
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