The coronavirus outbreak has had a huge impact on Australian businesses. If your business has been affected, you need to ensure that you are still providing your customers with what they are entitled to under the Australian Consumer Law (ACL). If you do not, you could face a claim from the Australian Competition and Consumer Commission (ACCC) for breaching the ACL. This article explains your legal obligations under the ACL due to the impacts of the coronavirus (COVID-19).

What Is the Australian Consumer Law (ACL)?

The ACL sets out provisions to protect consumers and regulate consumer transactions. In light of the impact of COVID-19 on the everyday operation of businesses, businesses and consumers alike should be considering the operation of the ACL in consumer transactions.

Which Businesses Will Be Affected by COVID-19?

Businesses that are likely to be directly affected by COVID-19 include businesses that provide:

  • transportation, such as airlines, bus companies, cruise ships;
  • accommodation, such as hotels, hostels, cruise ships;
  • tours and travel package organisers;
  • event or venue providers;
  • education, such as training organisations; and
  • entertainment events such as concerts, comedy shows, cultural events, conferences and festivals.

These businesses may be affected by the government imposing bans that prevent a business from providing their services.

For example, the Australian government has banned social gatherings of more than 100 people. If an event organiser has a conference scheduled for 500 people during the time period of this ban, they will need to cancel it.

Further, the government has recommended that we must practice ‘social distancing’ to restrain the spread of COVID. This could have an impact on businesses which rely on people meeting together.

For example, businesses within the hospitality industry may see customers cancelling their tickets or reservations. This will likely take a hit on their business’ revenue.

Consumer Guarantees 

If your business provides services for under $40,000, you must comply with the consumer guarantees set out in the ACL. You cannot exclude these consumer guarantees under a contract. 

As COVID-19 is likely to impact your business’ operations, it is crucial to be aware of that you still must:

  • provide all services with care, skill and technical knowledge.
  • take all necessary steps to avoid loss and damage;
  • ensure services are fit for the purpose or give the results that you have agreed; and
  • deliver all services within a reasonable time.

Remedies

If you do not comply with the consumer guarantees under the ACL, the remedies available to a consumer include: 

  • cancellation of a service;
  • obtaining a refund; or 
  • compensation for any loss. 

Refunds are only available if the service has a major problem, which may include that:

  • it creates an unsafe situation;
  • a consumer would not have bought the service if they had known about it;
  • does not meet the specific purpose your customer asked for and you cannot fix this within a reasonable time; or
  • it is unfit for its purpose, and you cannot fix this within a reasonable time.

For example, a venue centre discovers that a visitor who attended a concert had coronavirus. The venue informs an event organiser, who has booked in a concert for the next day, that this has occurred. However, they state that they cannot properly clean the venue prior to this concert.

If the event organiser has paid less than $40 000 for the venue, they can enforce their rights under the ACL. Due to the high potential risk of infecting attendees, the venue provider may be breaching its obligations under the ACL by not properly cleaning the venue. Here, the event organiser can cancel their hire of the venue and request a refund. The event organiser may also be able to claim compensation from the loss of profit from pre-sold concert tickets.

Unfair Terms in Contracts Under the ACL

Service providers should also ideally have contracts in place with its customers which set out a refund, cancellation or termination policy. 

The ACL may, however, also have an impact on these contracts if the terms of the contract are unfair. The unfair contract laws in the ACL apply to:

  • standard form consumer contracts, which the consumer cannot negotiate; and 
  • small business contracts.

To determine whether a term is unfair, you should usually consider if the term:

  • causes a significant imbalance in the parties’ rights and obligations;
  • is not reasonably necessary to protect your legitimate interests; and
  • would cause detriment to a party if they relied on it.

If a term were to be considered unfair by a court, it would be struck out and not apply in the contract. 

For example, an airline has cancelled a customer’s flight due to a travel ban. The customer’s contract to purchase the flight states that it is not allowed to receive a refund under any circumstances. Here, the customer may be able to argue that the term is unfair under the ACL.

Other Considerations

Due to the sensitivity of this time, you should also consider ways you can assist customers in addressing issues that may arise due to travel bans and government recommendations. This may include:

  • being fair in exercising refunds and cancellations if the customer could not reasonably control their inability to use or benefit from the services; 
  • cancelling events if they cannot be postponed within a reasonable time; and
  • taking your customer’s health and safety into consideration prior to going ahead with the provision of the services in light of any current recommendations.

Key Takeaways

If your business is affected by the COVID-19 outbreak, you need to ensure that you are meeting your obligations under the ACL. This includes making sure that you are still meeting the consumer guarantees. If you are unable to do so, make sure that you provide an appropriate remedy to your customers. If you have any questions about the coronavirus and your ACL obligations, contact LegalVision’s coronavirus advice lawyers on 1300 544 755 or fill out the form on this page.

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Kristine Biason
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