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The Australian Consumer Law (ACL) provides consumers with certain protections. These are called the consumer guarantees. The ACL is available in the Australian Competition and Consumer Act 2010 (Cth). These guarantees give buyers of goods or services automatic rights. The consumer guarantees are administered by the: 

  • Australian Competition and Consumer Commission (ACCC); and 
  • State and Territory consumer protection agencies. 

This article offers a high level overview of the consumer guarantees.

Who Provides the Guarantees?

The consumer guarantees apply to suppliers and manufacturers of goods and services. If your business sells, leases or hires goods or you offer services, the ACL consumer guarantees will affect your trade. 

You must provide consumer guarantees on a combination of goods and services, gifts with proof of purchase, sale items, products and services purchased online from Australian e-businesses. Consumer guarantees also apply to second-hand items. However, their age and condition will affect the standard they must meet.

Who Is a Consumer?

The law classifies an individual or a business as a consumer when they purchase:

  • goods or services valued at less than $40,000;
  • a good or service valued at more than $40,000, where it is purchased for domestic, household or personal use or consumption; or
  • a commercial vehicle or trailer, with the primary purpose being to transport goods on public roads.

People who purchase goods for the purpose of re-supply with the aim to use the goods up or transfer those goods are not consumers. Also, persons who sell goods as once-off sales, such as at a private garage sale or school fetes, are not required to give the consumer guarantees. 

Consumers must be able to rely on the consumer guarantees regardless of any separate or additional warranties.

How Long Must You Provide Consumer Guarantees to Customers?

The ACL does not specify the length of time that a consumer may be able to rely on the consumer guarantees.  Whether the consumer guarantee continues to apply depends on a number of factors, including the:

  • time passed since the purchase was made;
  • type of product;
  • consumer’s likely use of the product;
  • reasonable expected lifespan of the product; and
  • amount of time you could reasonably expect the product to tolerate before a failure might appear.

Guarantees Applying to Goods

The ACL sets out nine consumer guarantees applying to the sale, lease or hiring of goods. We list the consumer guarantees below. 

  1. Goods must be of acceptable quality (meaning that the goods are fit for all the purposes the goods are usually commonly supplied), satisfactory in appearance and finish, free from defects, safe and durable. Acceptable quality takes into account the nature of the goods, the price the customer has paid, statements on the packaging, any representations and any other relevant circumstances.  
  2. Goods must match any descriptions you make as the salesperson, on packaging and labels, and in promotions or advertising.
  3. You must honour any express warranties you make about the goods.
  4. The goods are accompanied by full title and ownership.
  5. Goods are free of undisclosed securities. 
  6. The goods are fit for the purpose you have advertised and any purpose the customer made known before purchasing.
  7. You must sell the goods with ‘undisturbed possession’, meaning that no one has permission to take the goods away or prevent the customer from using them.
  8. The goods must match any demonstration model or sample you advertise.
  9. The manufacturer must guarantee the availability of spare parts and repair facilities for a reasonable time after purchase.

Guarantees Applying to Services

There are three consumer guarantees which apply to services. We list the guarantees below.

  1. Due care and skill or technical knowledge must be practised when providing services to consumers. You should take all necessary steps to avoid loss and damage.
  2. Services must be reasonably fit for purpose. Services ought to be fit for the purpose advertised. Where a consumer makes their purpose or desired outcome known to the service provider, the service must also be fit for that specified purpose. This does not extend to professional services provided by an architect or by an engineer.
  3. Services must be provided within a reasonable time unless there is an agreed time or end date.

Remedies

If a good or service you provide fails to meet a consumer guarantee, you must provide a remedy to fix a fault, deficiency or failure to meet an obligation. A remedy might include:

  • a repair, replacement or refund;
  • service cancellation; or
  • compensation for damages and reasonably foreseeable consequential loss.

The remedies available will depend on the circumstances and whether the issue is major or minor. For example, if the problem is ‘minor’ then you may choose whether to fix the issue with a replacement, repair or refund. However, in certain circumstances, consumers might choose to have another party fix the item and you will be asked to pay reasonable costs.

If you do not meet the guarantee and there is a ‘major failure’, the consumer can choose whether they want a refund, repair or replacement of the goods. Where a service is considered to have a ‘major’ problem, the consumer may choose to terminate the contract for services and obtain a full refund. Alternatively, they may ask for compensation for the difference between the value of the services provided compared to the price paid.

The ACL determines that a good or service has a ‘major failure’ when the: 

  • goods or services are substantially unfit for purpose and cannot be made fit for purpose within a reasonable time;
  • consumer would not have acquired the goods or services, had they known the extent of the failure beforehand;
  • goods do not meet their description or correspond with the demonstration model or sample; or
  • goods or services are unsafe.

How Should You Handle Customer Complaints?

You should put in place a process to hear, handle and resolve customer complaints. The law obliges you to provide customers with a remedy where you break a consumer guarantee. The appropriate remedies are set out in the consumer protection provisions of the ACL.

If you do not offer a complying remedy, the customer may choose to report their complaint to the ACCC or their local consumer protection agency. Alternatively, the consumer may take the matter to the local small claims tribunal or magistrates court. The Magistrate or tribunal member’s decision is legally binding.

Take care not to mislead your customers about their consumer rights. When you hear a complaint, you must handle the problem appropriately. You should not: 

  • direct your customers to request assistance from the manufacturer or importer of the goods; or
  • imply that the consumer guarantees are limited to a specific period of time or warranty period. 

Additionally, the consumer guarantees apply regardless of any additional warranties you offer.

Penalties

If you breach the consumer protections under the ACL, you may face major penalties. The maximum penalty a business might face is the greater of:

  • $10 million;
  • 3 times the value of the benefit the business received; or
  • where the benefit cannot be calculated, 10% of annual turnover in the 12 months leading up to the act or omission which breached the ACL.

Penalties against individuals under the ACL are up to $500,000 per breach. 

Key Takeaways

Your business has an automatic obligation to provide customers with a core set of consumer guarantees when they purchase your goods or services. You cannot exclude consumer guarantees when selling goods or services, and they will exist regardless of any additional warranty that you may provide. It is important that you do not mislead consumers about their rights when purchasing. You should take care to protect your customers. If you fail to provide a consumer guarantee, your customers may have a right to a remedy, such as a refund, replacement or repair. Make sure you understand your obligations and customer rights and how they apply to your particular business. If you have any questions, please contact LegalVision’s consumer lawyers on 1300 544 755 or fill out the form on this page.

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