Table of Contents
When consumer goods are faulty, there can be confusion about who is responsible. Whether you are the manufacturer or the customer who has received the faulty goods, it is useful to understand when a manufacturer is liable for the defective goods. This article sets out the manufacturer’s obligations and other key considerations regarding a manufacturer’s liability.
Who is a Manufacturer?
Under the Australian Consumer Law (ACL), a manufacturer is defined to include a person who:
- grows, extracts, produces, processes or assembles goods;
- holds themselves out as the manufacturer of goods to the public;
- uses their own brand or name concerning the goods;
- permits others to use their own brand or name in relation to the goods; or
- imports goods into Australia that are not manufactured by them, and, at the time of importation, the manufacturer of the goods does not have a place of business in Australia.
What are the Manufacturer’s Legal Obligations?
A manufacturer is required to compensate or remedy a customer when it fails to provide goods that:
- are of reasonable quality;
- do not match their description; or
- require repairing.
Note that the above is not an exhaustive list.
Manufacturers are also under a strict legal obligation to fulfil any warranties they promised the customer. If a manufacturer fails to fulfil these warranties, a customer has every right to take them to court. It is important to note that a customer has three years to bring an action from when they identify the product’s defect.
Manufacturers must also fulfil their obligations when they provide goods with safety defects. Generally, a good has a safety defect if it does not meet the level of safety a member of the public is entitled to expect. If a consumer has received a good with a safety defect, they will be able to seek compensation under the ACL from the manufacturer and can claim damages if they incur losses. If a manufacturer becomes aware of a potential or actual safety risk in their goods, they can voluntarily initiate a recall.
Continue reading this article below the formWhat if the Manufacturer Does Not Offer a Warranty?
Even if the manufacturer does not offer a warranty, the customer still has rights under implied consumer guarantees in legislation. For example, goods must be of a certain quality, or the manufacturer will be liable to compensate the consumer.
Compensation
If the manufacturer cannot replace the item, they are still liable to repay the amount actually paid or the average amount the item would cost on the market.
The customer may also be able to seek damages for ‘consequential loss’ – that is, the loss that flows naturally from the event that the manufacturer caused. This includes the costs of returning the item to the manufacturer.
When is the Manufacturer Not Liable?
The manufacturer is not legally responsible for faults or problems with goods if the manufacturer did not actually cause the problems. Hence, the manufacturer will not be liable to pay damages or compensation if:
- the loss was the result of some representation or omission by a third party who is not related to or an agent or employee of the manufacturer;
- something happened to the goods when they were outside the control of the manufacturer, such as in the delivery process;
- the supplier caused the problem; or
- the supplier sold the product at an inflated price, leading to higher expectations that were not met.
It’s now easier than ever to start a business online. But growing and sustaining an online business requires a great deal of attention and planning.
This How to Start an Online Business Manual covers all the essential topics you need to know about starting your online business.
The publication also includes eight case studies featuring leading Australian businesses and online influencers.
Does a Supplier Have to Compensate the Consumer?
Yes. The same guarantees apply to suppliers if something is wrong with their goods. This is especially in circumstances where the consumer is unable to identify the actual manufacturer or the manufacturer does not have a place of business in Australia. The supplier has the right to seek reimbursement from the manufacturer on the condition that the manufacturer has breached one of the following consumer guarantees:
- goods are of acceptable quality;
- goods are fit for a disclosed purpose as advertised; or
- supply of goods by description.
However, like the consumer, they have a three-year limitation in which they must seek reimbursement.
Supplier-Manufacturer Disputes
It is common for disputes to arise between suppliers and manufacturers over liability. There are often disputes about who is and is not responsible for faulty goods. You can potentially avoid this by utilising a thorough contract. If there is a dispute over liability and faulty goods, we recommend speaking to a business lawyer to receive legal advice.
Key Takeaways
Understanding what obligations a manufacturer has to a consumer is useful. Ultimately, where you have a faulty good, it is essential to understand your rights to obtain a solution.
If you need help with advice on your obligations as a manufacturer or your rights as a consumer, our experienced contract lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
A manufacturer includes someone who produces goods or holds themselves out as a manufacturer to a member of the public.
Yes, they can. The supplier, in turn, can seek compensation from the manufacturer if it is due to a breach of consumer guarantees in certain circumstances.
We appreciate your feedback – your submission has been successfully received.
