Summary
- Under the Australian Consumer Law, a major failure occurs when a reasonable consumer would not have purchased the goods or service had they known about the problem, or where the product is significantly different from its description, substantially unfit for purpose, or unsafe.
- Consumers who experience a major failure with goods are entitled to choose a replacement or refund, whilst those experiencing a major failure with a service can seek compensation for the drop in value or a refund, with minor failures generally limited to accepting a repair.
- Consumer guarantee rights apply to goods and services worth less than $40,000, or more than $40,000 if ordinarily acquired for domestic or personal use, with exceptions including change of mind, consumer misuse, prior knowledge of the failure, or purchases through private sellers.
- This article is a guide to consumer rights for major failures under the Australian Consumer Law, explaining how to identify a major failure and what remedies are available to consumers.
- LegalVision is a commercial law firm that specialises in advising clients on consumer law and commercial disputes.
Tips for Businesses
Ensure your products and services meet consumer guarantee standards under the Australian Consumer Law to avoid major failure claims. Train staff to handle remedy requests correctly, directing consumers to the retailer rather than the manufacturer in most circumstances. Document all consumer complaints and remedy outcomes to demonstrate compliance and manage potential disputes effectively.
When a product or service fails to meet the standard you paid for, Australian Consumer Law gives you specific rights to seek a remedy. Knowing whether your problem qualifies as a “major failure” determines what you can claim and from whom. This article will explain:
- how you will know when you have received goods or services with a major failure;
- what you can do about it; and
- how to go about claiming your remedy.
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Major vs Minor Failures
You will want to know whether your problem with the goods or service you have received can be classified as a ‘major’ or ‘minor’ failure to work out which remedies you are entitled to. The Australian Consumer Law provides guidance as to what a ‘major’ failure is. If you have a major failure with a product or good, you can ask for a replacement or a refund. Where you have been provided a service with a major failure, you can either ask for:
- compensation for the drop in value; or
- a refund.
If the problem with the product or service is only minor, you are still entitled to a remedy. However, you must accept a repair if the business offers one.
How Do I Know If The Failure Is Major?
A major failure in a good or product occurs where 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.
A major failure concerning a service occurs where a reasonable person would not have acquired the service had they had known about the problem, or the service:
- is substantially unfit for its normal purpose and you cannot easily fix it within a reasonable amount of time;
- is substantially unfit for the specific purpose you asked for, if that purpose was made known to the supplier at the time of purchase, and you cannot easily fix it within a reasonable amount of time; or
- creates an unsafe situation.
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Replacements and Refunds
If there is a major failure with the good or service you have purchased, you are entitled to a replacement, refund or compensation. In most cases, you can choose the remedy you prefer.
If you ask for a replacement of the damaged goods, you are entitled to a product of the identical kind originally supplied. If you want a refund, you are entitled to receive the same amount you originally paid.
However, you should be aware of the factors a business may take into account should you ask for a refund or replacement.
Who Should You Claim Your Remedy From?
You should approach the retailer or supplier who sold you the product or service to ask for a replacement or refund. The retailer should not direct you to approach the manufacturer or importer directly.
There are limited circumstances in which you can claim a remedy directly from the manufacturer or importer.
Exceptions to Consumer Guarantees
There are a few circumstances where you may not be entitled to a remedy after purchasing a good or service.
Currently, your rights to the remedies discussed in this article only apply where the goods or services you have purchased are worth:
- less than $40,000; or
- more than $40,000 but are of a kind ordinarily acquired for domestic, household or personal use or consumption.
From 1 July 2021, the definition of ‘consumer’ in the Australian Consumer Law is changing to increase this threshold. This means that transactions worth $100,000 or less will soon be subject to consumer guarantees.
Other situations in which your right to a remedy does not apply include where:
- you plan to on-sell or re-supply the product;
- the product is bought as a one-off through a private seller, such as at a garage sale, or at an auction; and
- the contract is to store or transport the products as part of usual business activities.
Key Takeaways
When purchasing goods or services, you should keep in mind that you are protected by consumer guarantee rights. If you have received a good or service with a ‘major’ failure, you are entitled to a remedy to redress the issue. If you have any questions, or you believe these circumstances apply to you and you would like to find out more about how we can help, LegalVision provides ongoing legal support for all businesses through our fixed-fee legal membership. Our experienced competition lawyers help businesses manage contracts, employment law, disputes, intellectual property, and more, with unlimited access to specialist lawyers for a fixed monthly fee. To learn more about LegalVision’s legal membership, call 1300 544 755 or visit our membership page.
Frequently Asked Questions
For a major service failure, you can claim either compensation for the drop in value or a full refund. Unlike goods, you cannot request a replacement for a service with a major failure.
Generally no, you should approach the retailer or supplier directly. You can only claim from the manufacturer in limited circumstances, such as when spare parts or repair facilities are not reasonably available.
Consumer guarantees apply to goods and services worth less than $40,000, or more than $40,000 if ordinarily acquired for domestic or personal use. From 1 July 2021, this threshold increases to $100,000.
You lose remedy entitlements if you changed your mind, misused the product, knew about the failure before purchasing, or instructed a service provider against their advice with unclear instructions.
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