What are my legal obligations when selling goods?

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Table of Contents

• What is the legal standard for acceptable quality?
• What are damages?
• ‘No Refund’ Signs are unlawful
• What if a customer takes legal action against me?

In addition to any express warranties you give when you sell a product you are also under implied legal obligations whenever you are selling goods to a customer. As the seller of goods you are under an implied legal obligation to:

• Sell goods of an acceptable quality

• Make sure the goods are fit for the purpose they are being sold for

• Ensure that the goods will be the same as what is in the sample model

• Ensure that the goods are same as they are described

• Abide by any warranties you make to customers

• Ensure that the customer has legal title to the goods they purchase

If the goods or services provided to a customer fail to meet any of these standards, then a customer has a legal entitlement to:

• A refund;

• Replacement;

• Ask for compensation.

What is the legal standard for acceptable quality?

The law is quite specific about what is an acceptable quality for a product sold to a consumer.  It is whether a consumer would find them:

• Fit for the purposes for which the goods are usually supplied

• Acceptable in appearance, as you would expect something of the kind to look

• Without any defects

• Safe and durable

Relevant to these considerations are:

• The price

• Statements about the products on the packaging

• Any representations about the products made by the seller to the customer

What are damages?

An aggrieved customer may claim damages against you if it is found you have breached the contract between you and the customer.  “Damages” refers to an award of money which a court can order you to pay the other party for breaching the contract. Your defence – when the consumer misuses the items The good news is that there are limits to your liability.  If a consumer misuses the items the legal guarantee of quality will no longer apply. Under Australian consumer law, a seller will not be liable if the consumer uses the goods in what might be considered an ‘abnormal’ manner.  This basically means misusing the goods and covers breaking them or using them in a way for which the product is not intended.  For example:

• If the consumer drops a mobile phone in water or leaves it out in the rain

• The screen of a television is broken after an object hits it

• Using a small lawnmower to mow four or more hectares each week

• Picking up a laptop by the corner of its screen

‘No Refund’ Signs are unlawful

Yes, believe it or not – but you cannot rob a person of their rights which are enshrined in consumer law by putting up a ‘no refunds’ sign.  Under Australian consumer law all consumers have a basic level of ‘consumer guarantee’. Hence, these signs are also unlawful:

• “No refund on sale items”; and

• “Credit note only for return of sale items”

However, a seller is not obliged to refund or change the items simply because somebody has changed their mind.

What if a customer takes legal action against me?

You should talk to a business lawyer, a contract lawyer or get legal advice immediately.  In some cases you may not just be liable for your transaction with your customer, you might be subject to Government fines and penalties as well.