The Australian Consumer Law (ACL) applies to businesses in all states and territories in Australia. The purpose of the ACL is to protect customers. If you run a business providing goods or services to customers, you need to know the key protections afforded to them. This article will set out four areas of the ACL that your business needs to know about. 

1. Unfair Contract Terms

Contracts with consumers or small businesses cannot contain unfair contract terms

A term is unfair if the benefit:

  • causes a significant imbalance in the relationship; or
  • is overly detrimental to one party. 

Commercial contracts will always contain terms that might benefit one party over the other. When a court decides a term is unfair, they will look at the term within the context of the whole contract. 

Exclusion and limitation of liability clauses are common terms within consumer contracts that could become unfair contract terms if not worded properly.

For example, if your contract states that customers cannot ask for repairs for faulty goods, that could be viewed as an unfair term. However, if your contract allows customers to ask for repairs, but the limit of the cost of these repairs is $200, then the court will likely accept this term (and not determine that it is unfair).

2. Misleading or Deceptive Conduct

Businesses are not allowed to engage in conduct that could mislead or deceive consumers. ‘Conduct’ can span business activities such as:

  • contracts;
  • negotiations;
  • advertising; and
  • marketing.

Misleading and deceptive conduct often occurs in advertising, particularly around the price of your goods or services. Your pricing should always be clear and understandable to customers. If you have any additional fees included in the price, you will need to make that clear too.

For example, if you are selling your artwork through your online business, you will need to mention whether the goods and services tax (GST) is included in the cost. This rule generally does not apply in a business-to-business sale.

You must also be careful when promoting your goods or services.

For example, you could promote a discount on your products by saying the computer you’re selling was $1,500 but is now $800 when in fact you only sold it for $1,500 the day before the sale. Under the ACL, you should have sold the computer at that higher price for a “reasonable period” before the sale.

3. Consumer Guarantees

Consumer guarantees are legal promises that automatically apply to all goods and services that you sell to customers, regardless of any additional warranties you may provide. 

The following guarantees apply to all customers. If you supply goods, you must have goods that:

  • are of acceptable quality;
  • do match descriptions provided on their packaging or advertisements; and
  • include warranties.

The following guarantees apply to services, which should be:

  • fit for their designated purpose. For example, if your customer has engaged your painting business to paint their outdoor fence, but you use paint that cannot stand the elements, this service will not have been fit for purpose; 
  • provided with care and skill. For example, if you are engaged by a customer to lop a tree, you should use the appropriate skill and care to ensure that the tree or branches do not fall and damage the customer’s property; and 
  • delivered within a reasonable time, if you have not already specified a timeframe.

4. Importing and Manufacturing

If you import products from an overseas manufacturer, the manufacturer does not automatically take on warranties. You will have to provide warranties. Therefore, you will need to guarantee that manufacturers can assist with any broken or damaged goods within a reasonable time after purchase. You can include a term in your contract that you will no longer provide parts or services after a specified date.

What Happens if You Do Not Comply?

The most common ways that a business can breach the ACL include: 

  • failing to provide goods or services that are of reasonable quality;
  • issuing contracts (whether to customers or other businesses) that contain unfair contract terms;
  • misleading customers about the quality, price or purpose of your goods or services; or
  • providing goods or services that do not meet consumer guarantees. 

Customers will lose trust in your brand if you don’t comply with the ACL. Depending on the seriousness of the breach, customers can seek remedies, such as compensation. 

For example, if you fail to provide services with due care and skill, the court will determine if the customer suffered losses such as financial harm. You may owe your customer a refund, repair or compensation. 

The competition regulator, the Australian Competition and Consumer Commission (ACCC), could also fine your business if you breach the ACL. The maximum penalty for companies is $10 million. Examples of serious breaches of the ACL include: 

  • unconscionable conduct (which spans behaviour such as exercising undue pressure or influence on customers to purchase products);
  • making false or misleading representations; and
  • supplying goods or services that do not meet safety standards.  

Key Takeaways

Every business needs to be aware of their obligations and responsibilities under the ACL. Lack of knowledge is not an excuse if you breach the law. Ensure you have a plan on how you will comply with the ACL. If you have any questions, get in touch with LegalVision’s competition lawyers on 1300 544 755 or fill out the form on this page. 

About LegalVision: LegalVision is a tech-driven, full-service commercial law firm that uses technology to deliver a faster, better quality and more cost-effective client experience.

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