If you are a business supplying or manufacturing goods, you have an obligation to ensure those goods are of a particular standard. The Australian Consumer Law (ACL) sets out certain statutory guarantees that you provide to consumers and which cannot be excluded. Consumer guarantees are often associated with the supply of new products. However, these guarantees also extend to second-hand products. Therefore, if you sell second-hand goods through your shop or online store, you need to be aware of consumer guarantees and how they apply to your business. This article will outline: 

  • what consumer guarantees are; 
  • the exceptions; and 
  • how best to minimise your liability.

What Products Do the Consumer Guarantees Apply To?

Under the ACL, consumer guarantees automatically apply to:

  • goods or services which cost under $40,000; 
  • goods or services which cost over $40,000 but have been bought for personal, domestic or household use or consumption (for example, expensive jewellery or a car); or
  • vehicles or trailers bought primarily to transport goods on public roads.

The consumer guarantees apply to second-hand goods in the same way as new goods, as long as the goods fit within the above description. However, consumer guarantees will not apply to one-off private sales between individuals where the seller does not obtain an income from regular selling activities. 

For example, if you are doing some spring cleaning and selling your second-hand clothes or furniture on eBay and Gumtree, you would not owe any consumer guarantees.

What Are Consumer Guarantees?

Under the ACL, suppliers and manufacturers automatically provide guarantees on the goods they: 

  • sell; 
  • hire; or 
  • lease. 

Guarantees are also automatically provided on services that suppliers and manufacturers provide to their consumers. These rights exist regardless of any additional warranties provided by the supplier or manufacturer and cannot be excluded from the sale.

Whenever a business supplies goods to a consumer, they guarantee that the goods:

  • are of acceptable quality;
  • will match their description; and
  • will be fit for any purpose made known to the supplier.

This will apply whether the goods are second hand or new. If a good fails to meet a guarantee, a consumer will have legal rights against the supplier.

When Do Second-Hand Goods Breach Consumer Guarantees?

Factors that can determine a good’s quality include its:

  • age;
  • price; and 
  • condition.

For example, a consumer buying a second-hand refrigerator advertised as ‘unused but scratched’ for $500 expects it to work for many years. Alternatively, a consumer purchasing a refrigerator advertised as ‘10 years old’ for $50 may expect it to need new seals or re-gassing within the next 12 months.

Goods with faults will still meet the guarantee of acceptable quality if the seller alerts the consumer to the defects. Advertising a product as ‘preloved’ or ‘second hand’ is not enough. 

You will need to explicitly describe the defects of the product before the time of sale. This is particularly important with online sales, where the consumer cannot examine the goods in person before purchasing them. 

For example, an online second-hand clothing store advertising a jacket for sale as ‘missing a button’ would not be liable to the consumer for that defect.

A consumer who can examine goods before purchasing them, and is consequently able to identify any defects, cannot rely on the consumer guarantee of acceptable quality. This exclusion is important for businesses selling second-hand goods at a traditional ‘brick and mortar’ shop.

Ultimately, the type of goods you sell will determine the level of inspection required. A product that is five years old is likely to need closer inspection than a relatively new product. Therefore, a customer who is able to identify defects and examine a second-hand jacket from a vintage store will not be able to bring legal action against the store if they realise that there is a visible hole in the jacket after purchasing it. However, the consumer can rely on the guarantee if he or she could not have noticed the good’s defect, even with a thorough inspection.

Remedies

If the failure to meet a guarantee on a good is minor, the supplier of the good can choose the suitable remedy (for example, a repair). If it is a major failure, the consumer can choose between a: 

  • repair;
  • replacement;
  • refund; or
  • recovery of compensation for its reduction in value.

A major failure usually occurs when:

  • a reasonable consumer would not have purchased the good had they been aware of the particular default (for example, they probably would not have purchased a car had they known it needed the engine replaced in order to run);
  • the product is substantially unfit for its normal purpose and cannot be easily made fit in a reasonable time (for example, a lamp that does not switch on);
  • the good is substantially unfit for a purpose that the consumer made known to the supplier, and it cannot be made fit easily and within a reasonable time (for example, a ski jacket you specified needed to be waterproof and it is not); or
  • The consumer is at risk due to the product being unsafe (for example, a toy with sharp edges).

Anything else is considered to be a minor failure. It is important to note that if the product is unsafe and causes foreseeable personal injury or property damage to your consumers, the consumer may sue you for compensation.

It is important to remember that if you attempt to exclude the consumer guarantees or states that you do not provide any guarantee or warranty, you may be engaging in false, misleading or deceptive conduct. If this is the case, harsh penalties may apply.

Key Takeaways

If your business sells second-hand goods, the ACL and consumer guarantees will apply to you unless you are engaging in a private sale. As sellers cannot exclude consumer guarantees from the sale of second-hand goods, it is important that you understand the guarantees and your obligations. If you need assistance drafting or reviewing your consumer guarantees, contact LegalVision’s commercial and business lawyers on 1300 544 755 or fill out the form on this page.

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