In Short
- Manufacturers can be liable under the ACL to later owners, not just the original buyer.
- Consumer guarantee claims can pass with the product through private resales and may be based on the original purchase price.
- Each owner has their own time limit to claim, which can extend liability over many years.
Tips for Businesses
Review your warranty reserves and insurance to account for long-term ACL risk. Strengthen quality control to reduce defects. Keep clear records of sales, product specifications and complaints. Check supply agreements for indemnities and reporting obligations. Set internal processes for handling consumer guarantee claims quickly and consistently.
Summary
This article explains how the Capic v Ford decision affects consumer guarantee liability for Australian manufacturers and suppliers under the Australian Consumer Law. It is prepared by LegalVision’s business lawyers, and LegalVision, a commercial law firm, specialises in advising clients on consumer law and product liability.
The recent judgment in Capic v Ford [2026] from the Federal Court has significant implications for manufacturers and suppliers of consumer goods. The decision confirms that consumer guarantee obligations can extend well beyond the original sale, creating potential liability that spans multiple owners and years.
If your business makes or supplies products that may be resold, you must understand your consumer law obligations to manage risk and plan for potential claims. This article explains how Capic v Ford confirms that ACL consumer guarantee liability can extend to later owners, increasing long-term risk for manufacturers and suppliers.
What Happened in Capic v Ford?
This judgment arose from the Ford class action, which commenced in 2021. Ms Capic successfully proved that the transmission in her Ford vehicle was not of acceptable quality as required under section 54(1) of the Australian Consumer Law (ACL).
Critically, the Court considered the position of subsequent owners who were not the original purchaser. The decision establishes how consumer guarantees operate when goods change hands multiple times, creating a framework that applies across all consumer products.
The ACL provides consumers with a guarantee under section 54 that goods supplied in trade or commerce will be of acceptable quality. Section 271 allows a person to bring a claim for reduction in value against the manufacturer where products do not meet these standards.
What Key Decisions Did the Court Make?
The Court made four critical determinations:
- Claims run with the product through private sales: Anyone who later buys the goods through a private sale can claim reduction-in-value damages based on the original purchase price. This means the claim runs with the product’s title through successive private sales.
- Different rules apply for trade resales: If goods are resold in trade or commerce, such as by a second-hand retailer, the retailer cannot claim consumer guarantees. However, the end consumer can still claim against the manufacturer, with the claim value assessed by reference to the price paid to the retailer.
- Product lifecycle matters: Section 54 takes into account the nature and lifecycle of goods when determining acceptable quality. Different products have different expected lifespans and durability standards.
- Extended limitation periods: Each new consumer gets their own three-year time limit, starting from when they knew or should have known about the breach, even if earlier owners are already out of time.
How Does This Affect Your Business?
If your business manufactures or supplies consumer goods, you should consider the following:
- Financial planning: Traditional warranty reserves may be insufficient to cover extended ACL liability. Consider setting aside reserves for potential claims spanning multiple ownership periods and review your insurance arrangements.
- Quality assurance: Invest in quality control systems to identify and address potential defects before products reach consumers. Prevention is significantly more cost-effective than managing multiple claims over extended periods.
- Supply agreements: Review your agreements with distributors and retailers to ensure clear allocation of liability, appropriate indemnity provisions and notification requirements when defects are discovered.
- Record keeping: Maintain comprehensive records including original sale prices and dates, product specifications, quality testing results and any complaints or quality issues identified.
- Response protocols: Create clear protocols for responding to consumer guarantee claims, including investigation procedures, documentation requirements and escalation processes for widespread issues.
When you are ready to sell your business and begin the next chapter, it is important to understand the moving parts that will impact a successful sale.
This How to Sell Your Business Guide covers all the essential topics you need to know about selling your business.
Key Takeaways
Consumer guarantee obligations can extend well beyond the original sale, exposing manufacturers to claims from multiple owners over many years. Consumer guarantee claims can ‘run with the product’, allowing subsequent private purchasers to claim against the manufacturer based on the original purchase price.
You should be aware that:
- different rules apply where goods are resold through trade or commerce, but manufacturers may still face claims from end consumers; and
- limitation periods restart for each owner, meaning liability can arise long after the product first entered the market.
LegalVision provides ongoing legal support for manufacturing businesses through our fixed-fee legal membership. Our experienced regulatory lawyers help businesses in the manufacturing industry manage contracts, employment law, disputes, intellectual property and more, with unlimited access to specialist lawyers for a fixed monthly fee. To learn more about LegalVision’s legal membership, call 1300 544 755 or visit our membership page.
Frequently Asked Questions
Yes. Consumer guarantee claims can extend to subsequent owners of goods acquired through private sales. These owners may claim directly against the manufacturer, even if they were not the original purchaser.
Each owner has their own three-year limitation period. Time starts when that owner becomes aware, or should reasonably have become aware, that the goods failed to meet the acceptable quality standard.
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