No matter what the size of your business, you must honour your obligations under Australian Consumer Law. The successful action that the Australian Competition and Consumer Commission (ACCC) took against Apple in 2013 proves this point. The simple truth is that all businesses will face consequences if they do not meet their legal obligations to consumers. This article explains what happens if a business fails to honour the Consumer Guarantees.

Consumer Guarantees

The Australian Consumer Law (ACL) contains all the guarantees provided to consumers of goods and services in Australia. The ACL came into operation on 1 January 2011 and simplified Australian Consumer Law. Previously, consumers were required to navigate both the Trade Practices Act 1974 and state and territory legislation.

The ACL guarantees consumers rights against a business that does not meet the consumer guarantees. Specifically, a consumer has legal remedies against the suppliers and manufacturers of goods and services. These remedies are only available to those who falls within the ACL’s definition of a ‘consumer’.

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 a consumer of goods believes a business has infringed a guarantee and the breach is minor, it can pursue either the supplier or the manufacturer. Exactly which depends on the breach.

A consumer is entitled to a remedy from a supplier for breach of:

  1. Fitness for a disclosed purpose;
  2. Title;
  3. Sameness to a sample or demonstration model;
  4. Undisclosed securities; and
  5. An express warranty given by a supplier.
  6. A consumer can claim against a manufacturer for breach of:
  7.  Repairs and spare parts
  8. An express warranty made by a manufacturer

A consumer can pursue a manufacturer or a supplier for breach of:

  1. Acceptable quality; and
  2. Matching the description.

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

  • Repair or Replace the good;
  • Provide a refund; and
  • Compensate for any consequential loss.

A supplier’s repair must be free and completed within a reasonable time. 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. A supplier may also have to provide compensation if the good’s value falls below the price paid.

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.

Be aware that consumers are not entitled to remedies if the supplier or manufacturer has breached the guarantee because of the representations of a third party (excluding employees or agents) or 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.

A consumer of a service has no remedy if the breach occurred because of the representations of a third party (excluding employees or agents) or the breach was beyond human control and took place after supply.

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:

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

In cases of major failure, a consumer of goods can reject the good and request a replacement or refund. Alternatively, they can request compensation for any drop in the value of the good. 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.

The ACCC website provides further information about the ACL and consumer guarantees. Alternatively, speak with a lawyer experienced in Consumer Law. Also, LegalVision has a related article entitled What are Consumer Guarantees? freely available on its website. Contact LegalVision’s qualified lawyers to assist you with your legal needs. Questions? Call us on 1300 544 755.

Carole Hemingway

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