Selling Products Online: Consumer Guarantees

In Short

• Online retailers must comply with the Australian Consumer Law (ACL), which mandates consumer guarantees on goods sold.
• A clear refund and returns policy should distinguish between mandatory refunds for major faults and optional refunds for change-of-mind purchases.
• Sales terms should specify when title and risk pass, and outline any additional warranties, ensuring alignment with ACL requirements.legalvision.com.au
  
  
  

Tips for Businesses

Ensure your online store’s refund and returns policy complies with the ACL by clearly stating consumer rights, your obligations, and any additional warranties offered. Clearly communicate your policy on change-of-mind returns, including any time limits and conditions, to manage customer expectations and protect your business.

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Table of Contents

• What is a Consumer? 
• Consumer Guarantees
• Sales Terms and Conditions
• Key Takeaways
• Frequently Asked Questions

Do you sell products online? If you sell to “consumers” under the Australian Consumer Law, the Australian Consumer Law (ACL) and its requirements will apply to your online business. This article will help you understand your obligations when selling products online.

What is a Consumer? 

We may normally associate a “consumer” with simply individuals purchasing goods and services for personal use. This is true under the Australian Consumer Law but the law also goes further than this. 

You will be a consumer under the ACL if you are: 

• an individual or a business; 
• purchasing goods or services; and
• the goods and services you are purchasing are less than $100,000. 

If your offering to customers falls under these limits, your customers are consumers, and so, the ACL applies to you. 

Consumer Guarantees

When selling products online, those goods come with guarantees that your business cannot exclude or opt out of. As a seller of goods, whether online or in-store, you must understand how consumer guarantees apply to your business. Notably, there are strict penalties for non-compliance with the ACL. For example, your sales terms and conditions should not limit or exclude any guarantees that are imposed by the ACL.

Under the ACL, a major failure occurs when a reasonable consumer would not have purchased the good or product had they known about the problem, or where the good or product is:

• significantly different from the sample or description at the time of purchase; 
• substantially unfit for its normal purpose and unable to be easily fixed within a reasonable amount of time; 
• substantially unfit for the specific purpose you bought it for, if that purpose was made known to the supplier at the time of purchase, and cannot easily be fixed within a reasonable time period; or
• unsafe.

If the failure is only minor, you can choose between providing a repair or offering a replacement or refund. 

Refunds, Returns and Replacements

The ACL does not mean you must refund every customer claiming you provided them with a faulty or defective good.

For customers who wish to return goods and are seeking a refund or replacement, you can require them to provide evidence that the good is faulty. Standard practice requires the customer to return the goods to you. You can then inspect it and assess whether it is eligible for a refund.

You are not obliged to refund or replace any goods which have been used, connected or installed. An exception is if they have major faults. Likewise, you are also not obliged to provide change-of-mind refunds. 

Importantly, you should outline your business’ approach to refunds, returns and replacements in a policy that follows the ACL and the consumer guarantees. It can be a stand-alone policy or included as part of your sales terms and conditions.

Sales Terms and Conditions

Your sales terms and conditions can state that you will not accept any sale or customised goods for return, unless they have major faults. You can also request that customers adequately package any goods they wish to return to ensure that they are not damaged during the return delivery.

A well-drafted sales terms and conditions will state that title to the goods will not pass until full payment is received, but risk passes on delivery. Therefore, the customer has a duty of care for the goods in their possession.

Additionally, your sales terms and conditions should note that some goods come with a manufacturer’s warranty. This warranty is in addition to any rights and remedies the customer has under the ACL. For customers who do not fall within the definition of a “consumer” under the law, the manufacturer’s warranty may be the sole remedy. You can direct those customers to contact the manufacturer directly to make their claim.

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Key Takeaways

When selling products online, it is vital to understand your obligations to consumers and how the Australian Consumer Law (ACL) will apply to your business. Under the ACL, there are strict requirements regarding the quality of goods you sell and how you advertise them. To protect your business, we recommend having clear sales terms and conditions or a well-drafted refund and returns policy that complies with the ACL.

For more information about your online business, our experienced e-commerce lawyers can assist you 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