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Many consumers know the Australian Consumer Law (ACL) protects them. However, your customers are often unsure what remedies might become available if you breach one of the consumer guarantees. Both businesses and consumers must understand how the ACL  applies in certain circumstances. Businesses should be aware of their obligations under the ACL. Likewise, customers should be able to identify breaches and feel comfortable asking for a remedy. Together, we can all protect the interests of consumers. Whether you are a consumer or a business owner, this article explains the remedies available when there is a breach of consumer guarantees.

Consumer Guarantees

The Australian Consumer Law (ACL) sets out consumer guarantees, which protect those who buy or use goods or services in trade and commerce. You can find the full text of the ACL in Schedule 2 of the Competition and Consumer Act 2010 (Cth). The guarantees tell customers what safety measures they can automatically rely on when purchasing a good or service.

The ACL also provides remedies where a supplier of products or services fails to meet a guarantee. In certain circumstances, consumers may have a claim against a manufacturer. The particular remedy which might become available if there is a breach depends on which guarantee is breached, whether the problem is major or minor and whether it pertains to a good or service.

Remedies for Goods

If a supplier of goods fails to meet their consumer guarantees, consumers may receive:

  • repair or replacement;
  • refund; or
  • compensation for consequential loss.

Who Can the Consumer Claim a Remedy From?

A consumer may claim a remedy from a supplier where the goods sold are not fit for any disclosed purpose, they do not match a sample, the supplier breaches an express warranty, or where there is an issue concerning title, undisturbed possession, or undisclosed securities.

The manufacturer or importer may be liable if the goods do not meet the consumer guarantees for repairs and spare parts or an express warranty given by the manufacturer.

Types of Remedies

The type of remedy will depend on whether the issue is a minor or major problem or failure.

A major failure of goods will arise when:

  • a consumer would not have bought the goods if they had known of the issue;
  • goods are significantly different from the description or sample goods displayed (e.g. a consumer purchases a white car but is delivered a silver car instead);
  • the product is unquestionably unfit for its ordinary purpose and cannot be made fit within a reasonable time;
  • goods are significantly unfit for a purpose that the consumer told the supplier about and cannot be made fit within a reasonable time; or
  • the goods are unsafe.

A minor failure of goods will arise when there has been a failure to perform; however, the failure does not fall within the definition of a ‘major failure’ outlined above. 

Minor Failure

For minor problems, a consumer cannot at the outset reject the product and request a refund. Instead, they can ask the supplier to fix the fault. It is then the supplier’s decision whether to:

  • repair;
  • replace; or
  • refund.

If a business chooses to repair, they return the item to the manufacturer. All suppliers must complete repairs within a reasonable time. There is no one definition of ‘reasonable time’. The length of time depends on the circumstances and the item that needs repair. For example, repairs for an essential household item should happen faster than for non-essential products.  

If the supplier does not repair the good or does not do so in a reasonable amount of time, a consumer can:

  • reject the product and request a refund or replacement; or
  • have the item fixed elsewhere and invoice the supplier for the reasonable repair costs.

A reasonable cost of repair typically encompasses the actual cost of repair and other necessary costs like transportation.

Major Failure

A major failure for goods refers to specific consumer problems. If a fault is a major failure, consumers can:

  • reject the good and choose either a refund or replacement; or
  • request compensation for any drop in value of the product.

Remedies for Services

If a service provider does not meet their consumer guarantees of due care and skill, fitness for a particular purpose, and completion within a reasonable time, consumers can claim a remedy. Again, the remedy will depend on whether the failure is minor or major.

Minor Failure

When a consumer problem with a service is considered minor, the consumer must allow the service provider the opportunity to fix the problem. The consumer has no right at the beginning to cancel the contract and request a refund. The supplier has the right to fix the problem (at their expense) in a reasonable amount of time.

If the supplier refuses to rectify the problem or takes too long to do so, a customer has the right to:

  • engage someone else to fix the problem and invoice the supplier the reasonable costs of doing so; or
  • cancel the contract, and if they have paid, receive a refund.

If a consumer cancels a contract and has not yet paid or has partly paid the contract price, they can refuse to pay at all or pay less than the contract price.

Major Failure

A major failure with services will occur when:

  • a reasonable consumer would not have acquired the services had they known of the problem and its consequences;
  • the services are unquestionably unfit for their advertised purpose and cannot easily be made fit for purpose;
  • the service provider knew of a purpose or particular result that the consumer desired the services for, but the services and any resulting product do not meet that purpose or intended outcome and cannot easily be made fit for that purpose; or
  • the delivery of the services has created an unsafe environment.

If a problem is major, the purchaser can:

  • cancel the service contract and receive a refund for all unconsumed parts of the contract; or
  • keep the contract and receive compensation for the difference between the service purchased and the service supplied.

If a consumer cancels a contract for a major failure, they can do so at any time verbally or in writing. In contrast and as outlined above, a purchaser with a minor problem must wait until the supplier fails to fix the failure in an appropriate period.

Compensation for Consequential Loss

If you breach one or more of the consumer guarantees, your customers might be able to claim compensation for consequential loss. Compensation aims to put the consumer back in the position they would have been in if the goods or services had met the consumer guarantees.

A consumer may apply directly to you, as the supplier, for compensation for consequential loss. If you refuse to pay compensation for consequential loss or where you cannot negotiate an agreement, a consumer might choose to pursue legal action.

It can be difficult to quantify the dollar value for consequential loss. Suppliers and manufacturers will have to pay for losses that result from their own failure to meet a consumer guarantee and that are reasonably foreseeable. However, suppliers and manufacturers do not have to pay for issues unrelated to their conduct or the goods they supplied or losses occurring completely independently of the supplier after the goods left the suppliers control.

Key Takeaways

You must understand your obligations under the ACL. Failing to meet one or more of the guarantees can result in a requirement for you to remedy a problem, which is likely to cost your business money. However, there are no remedies if a consumer changes their mind about purchasing a good or service. Of course, you may choose to have a business policy in place which addresses change of mind. If you do have such a policy in place, you are obliged to follow it.

If you need further general information on a breach of consumer guarantees, remedies, minor problems, major failures or anything else concerning consumer law, contact LegalVision’s consumer lawyers on 1300 544 755 or fill in the form below.

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