If your business sells products to consumers, these goods will come with automatic guarantees under the Australian Consumer Law (ACL). If you do not meet the requirements of these guarantees, the customer can ask you to rectify the issue. In some circumstances, customers may be able to reject the goods. This article explains what your obligations are if your customer rejects products you have sold to them. 

Consumer Guarantees

The consumer guarantees apply to any goods you sell that are less than $40,000. While the guarantees are mostly relevant to your sales with consumers, they may also cover your transactions with other businesses. This is as long as the companies are not reselling the product.

For example, if you sell a couch to a manufacturing company to use in their staff room, this company will be covered by the consumer guarantees.

However, if you sell a couch to a furniture retailer who then sells it to customers, this transaction will not be covered by the consumer guarantees.

There are eight consumer guarantees provided by sellers that state that the goods must:

  • be of acceptable quality, in other words, safe, long-lasting, and work as you would expect them to;
  • match descriptions made on the packaging or advertising;
  • match demonstration models or samples;
  • be fit for their intended purpose;
  • come with full ownership; 
  • not have any hidden security interests attached to them; and
  • come with undisturbed possession, so that no one can take them from you.

Manufacturers or importers also guarantee that:

  • goods will be of acceptable quality;
  • they will honour any express warranties; 
  • products will match their description;
  • they will provide repairs or spare parts for a reasonable time; and
  • they will provide spare parts when necessary. 

Remedying a Breach of a Consumer Guarantee

If you do not meet these guarantees, a customer can go to you (and in some instances, your manufacturer) and request a remedy. To remedy the issue, you may provide a: 

  • repair;
  • replacement; or
  • refund. 

However, you do not have to provide a remedy when the customer has just changed their mind about the purchase. 

The type of remedy you have to provide will depend on whether there is a minor or major failure with the product. 

Minor and Major Failures 

A minor failure one which you can fix reasonably easily, and within a reasonable time. If the product has a minor failure, you can decide whether to provide a: 

  • repair;
  • replacement; or
  • refund. 

A major failure happens if the:

  • product was not accurately described; 
  • customer would not have bought the product if they knew about the failure;
  • product is not fit for its purpose, and you cannot fix it to make it fit for purpose; or
  • product is unsafe.

If a customer asks you to fix a problem and you refuse to do so within a reasonable time, the customer may either:

  • pay someone else to fix the issue and have you recover those costs; or
  • notify you that they reject the goods.

If there is a failure to comply with a guarantee that cannot be remedied or is a major failure, the customer can:

  • notify you that they reject the goods; or
  • recover money for the reduction in value below the price they paid. 

Rejecting Goods

To reject a product, the customer should let you know that they reject it and provide a reason why. They must return the product to you unless it cannot be replaced easily. Instances where products cannot be returned easily include when:

  • they are too expensive to send via post;
  • the products are too large; or 
  • the products are installed in a way which makes them hard to remove.

For example, large products like televisions or furniture will likely be too costly or cumbersome to post. So, if there is a major failure with the product and the customer decides to reject the product, you will be responsible for collecting it and providing a refund or replacement.

Customers are not entitled to reject goods when:

  • a reasonable time from when the consumer received the goods has passed;
  • the goods are lost, destroyed, damaged or disposed of after delivery; and
  • the goods are attached to other property, and they cannot be unattached without damaging them.

Key Takeaways 

As a business owner, you need to be aware of the consumer guarantees that will automatically apply to your products. If you do not meet these guarantees, your customers will likely be able to take action to fix the problem. In some instances, your customers may be able to reject the goods they purchased, and you may be responsible for collecting them. If you have any questions about ensuring you are compliant with the ACL, contact 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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