What Happens if I Do Not Meet the Consumer Guarantees?

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Table of Contents

• Consumer Guarantees
• Goods
• Services
• Major Failure
• Key Takeaways
• Frequently Asked Questions

Regardless of the size of your business, you must honour your obligations under Australian Consumer Law (ACL). All businesses will face consequences if they are found to be in breach of the ACL. This article explains what happens if a business fails to honour the consumer guarantees contained in the ACL and what you can do if you have purchased a good or service which does not meet the consumer guarantees. 

Consumer Guarantees

The ACL came into operation on 1 January 2011 and simplified consumer protection law in Australia. Previously, consumers were required to navigate both the Trade Practices Act and state and territory laws. The ACL contains consumer guarantees which state, in essence, that all goods and services that a business sells, hires or leases in Australia to ‘consumers’ as defined in the ACL come with automatic guarantees that they will work and do what the customer asked for.

If a good or service does not meet these consumer guarantees, a consumer has legal remedies against the suppliers and manufacturers of such goods and services. However, these remedies are only available to those who fall within the ACL’s definition of a ‘consumer’. The ACL defines ‘consumer’ very broadly as any person (individual or company) who purchases goods or services that cost less than $100,000, for whatever purposes. 

To fully understand the different remedies open to consumers, it is helpful to consider consumers of goods and services separately.

Goods

Under the ACL, if you are a consumer of goods and believe a business has infringed a guarantee and the breach is minor, you can pursue either the supplier or the manufacturer for a remedy. Whether you pursue the supplier or manufacturer depends on the breach.

A consumer is entitled to a remedy from a supplier in instances where the good:

• is not fit for its intended purpose;
• did not come with full title and ownership;
• is not sufficiently similar to the sample or demonstration model;
• came with an undisclosed security; or
• came with an express warranty given by a supplier, and that warranty was not honoured.

A consumer can claim against a manufacturer in instances where the good:

• requires a repair or spare part within a reasonable time after purchase; or
• came with an express warranty given by a manufacturer, and that warranty was not honoured.

A consumer can pursue a manufacturer or a supplier in instances where the good is not:

• fit for its intended purpose; or
• sufficiently similar to the sample or demonstration model;

If a good has not met a guarantee, a supplier must:

• repair or replace the good;
• provide a refund; or
• compensate for any consequential loss.

Repair, Replacement or Refund

A supplier’s repair must be free and completed within a reasonable time. However, if the business cannot repair the good, a consumer can request a refund or replacement. Alternatively, the consumer can have the item repaired elsewhere. If that occurs, the supplier must pay the cost of the repair. A supplier may also have to provide compensation if the good’s value falls below the price paid.

Manufacturer’s Breach

If a manufacturer has breached a consumer guarantee, a consumer is within their rights to request damages. Consumer remedies against suppliers are therefore more extensive than against manufacturers.

It is important to note that if the supplier or manufacturer has breached the guarantee because of the representations of a third party (excluding employees or agents), then consumers will lack entitlement to remedies. Consumers also lack entitlement to remedies where the breach was beyond human control and occurred after supply.

Services

If a supplier of a service breaches the consumer guarantees and the problem is minor, a consumer cannot cancel the service or request a refund. In this situation, a consumer is obliged to give the supplier the opportunity to remedy the failure for free and within a reasonable time. If a supplier refuses or takes too long to remedy the breach, a consumer can either: 

• have another party fix the problem and invoice the supplier; or 
• cancel the contract and request a refund. 

If payment is still to occur, a consumer can refuse to pay or pay less than the stated price.

Major Failure

If a business breaches the consumer guarantees (for either a good or service) and the breach constitutes a ‘major failure’, the remedies available to a consumer can differ.

In general, a major failure occurs when the goods:

• would not have been purchased by a reasonable consumer if they had known about the problem;
• differ significantly from the description, sample or demonstration made to the consumer;
• are substantially unfit for their normal purpose and cannot be made fit easily, within a reasonable amount of time; or
• are unsafe.

Further, a consumer of services can cancel their service contract and request a refund for any unconsumed part of the contract or maintain the contract and claim compensation for the difference between the service bought and the service provided.

Key Takeaways

If your business sells goods or services, you must honour your obligations under the ACL. Therefore, if you fail to meet these consumer guarantees, a consumer has legal remedies against you as the supplier or manufacturers of such goods and services. For more information about the ACL and consumer guarantees, you can go to the ACCC website. Alternatively, to speak with a lawyer, contact LegalVision’s consumer lawyers on 1300 544 755 or fill out the form on this page. 

Frequently Asked Questions