What Warranties for Goods Apply to Business Purchases?

Businesses frequently enter contracts with other businesses for the purchase of goods. For any business involved in the purchase of goods, it is important to consider the applicable consumer guarantees and warranties for goods that may apply. This article describes when consumer guarantees and warranties for goods apply to business-to-business (B2B) transactions.

The ACL Consumer Guarantees

The Australian Consumer Law (ACL) consumer guarantees are automatic rights that apply to purchases of goods. The consumer guarantees include that the goods:

• are of acceptable quality;
• are fit for the purpose at which it was supplied; and
• correspond to the description provided and match any sample or demonstration model.

If the goods are faulty, the supplier must offer to repair the goods if they can. If the fault is such that it cannot be repaired, then the goods must be replaced or a refund issued.

The ACL also applies guarantees to manufacturers and suppliers, including that:

• manufacturers will take reasonable action to ensure that repair facilities and parts for goods are available;
• the supplier has title to the goods which allows them to transfer ownership of the goods to the purchaser; and
• the purchaser will have the right of possession of the goods, allowing them to hold and sell the goods.

When Consumer Guarantees Apply to B2B Transactions

The ACL covers the supply of goods under the amount of $40,000. It does not matter whether the customer is an individual person or a business. Therefore, if a business purchases goods from another business and the transaction is less than $40,000, consumer guarantees will apply.

The ACL consumer guarantees will also apply if:

• the amount is over $40,000 and purchased for “personal, domestic or household use”; or
• goods are purchased for transporting other goods (e.g. purchasing vehicles or trailers).

However, an exception is that if you are buying the goods to sell as stock. For example, if you run an electronics store and buy sound systems from a supplier, the ACL’s consumer guarantees do not apply to that purchase.

The Difference Between Guarantees and Warranties for Goods

Warranties for goods differ from consumer guarantees in that they are voluntarily provided by the supplier or manufacturer. In contrast, the ACL imposes consumer guarantees.

However, once a supplier provides a warranty, the purchaser will be able to rely on this warranty. The ACL states that a supplier must comply with any express warranty they make.

A common warranty is that the supplier promises to repair or replace defective goods. If you are a purchaser and wish to rely on such a warranty, you should ensure that you get any warranties set out in writing. These terms should state exactly what the supplier will do to remedy any defects.

The best place to have express warranties is a supply agreement that sets out such matters as the:

• quality, characteristics and specifications of the goods;
• warranties that will apply to the goods; and
• the supplier’s obligations to repair, replace or offer a refund on defective goods.

The supplier of the goods will often provide these agreements, so before purchasing, you should review the contract to see that any express warranties have sufficient detail.

Key Takeaways

Consumer guarantees under the ACL apply to B2B transactions, commonly where such transactions are under $40,000. The supplier cannot contract out of these guarantees but may offer express warranties that detail how they will repair or replace the goods.

If you need assistance with understanding your rights under a supply agreement, call LegalVision’s contract lawyers on 1300 544 755 or fill out the form on this page.