Consumers typically know when they are experiencing a problem with a good or service.  However, consumer law has specific terms for consumer problems.  ‘Major Failure‘ is one such term. This article details what ‘Major Failure’ means and how it affects the remedies available to consumers.

What is a Major Failure?

The Australian Consumer Law (Cth) (ACL) – located in Schedule 2 of the Competition and Consumer Act 2010 (Cth) – governs consumer issues.  Consumer problems with goods and services likely involve a breach of the consumer guarantees.

Depending on which guarantee the problem breaches, a consumer issue is either ‘minor’ or ‘major’.  The ACL defines a major problem as a ‘major failure’.  The term applies equally to goods and services.  It is essential to know if a problem constitutes a major failure because it affects the remedies available to a consumer.

Major Failure and Goods

For goods, a major failure occurs when:

  • No reasonable consumer would have made the purchase if they had known about the problem.
  • The good is significantly different from the description, sample or demonstration model shown to the consumer.
  • The good is substantially unfit for its normal purpose and cannot be easily made fit in a reasonable time.
  • The good is substantially unfit for a purpose that the consumer made known to the supplier, and it cannot be made fit easily and within a reasonable time.
  • The good is unsafe.

For example, a consumer tells a car dealer that she requires a car with an engine powerful enough to enable her to tow her boat. Despite this information, the car dealer sells her a car with an engine that is small. The car is thus not powerful enough to tow her boat. For the ACL, this is a major failure because the good is substantially unfit for the purpose for which the consumer purchased it. Similarly, an electric blanket with faulty wiring such that it catches fire when a customer switches it on also constitutes a major failure. The product is unsafe.  

Major Failure and Services

For services, a major failure occurs when:

  • A reasonable customer would not have acquired the service if they were aware of the nature and extent of the problem.
  • The service is substantially unfit for its normal purpose, and it cannot be made fit for that purpose easily and within a reasonable time.
  • The consumer informed the supplier that they required the service for a particular purpose, but the service and any resulting product do not achieve that purpose and cannot be easily made fit in a reasonable time.
  • The consumer told a supplier about the particular result they wanted from the service but the service and any resulting product, do not achieve that result.  Further, the service cannot attain that result easily and in a reasonable amount of time.
  • The supply of a service has created an unsafe situation.

For example, a major failure would occur if a consumer employs a carpet cleaning service to clean their carpet and the cleaning process turns the carpet a different colour. The service is substantially unfit for its ordinary purpose. Similarly, if an electrician wires the wall sockets in a new apartment incorrectly and renders all the electrical outlets unsafe to use, their service has created a dangerous situation. Under the ACL, this is a major failure.

Remedies for Major Failures

Major failures entitle consumers to different remedies than minor problems. Further, the purchaser chooses the remedy.  For minor problems, a supplier selects the remedy at first instance.

If a consumer has a major failure with a product, they have a right to:

  • Reject it and request either a refund or replacement; or
  • Request compensation equal to the drop in the value of the product owing to the problem.

If the major failure relates to the inability of a product to match its description as stated by or on behalf of the manufacturer/ importer, a consumer can also recover damages from the manufacturer.

If a consumer experiences a major failure with a service, they have the right to:

  • Cancel the service contract with the supplier and obtain a refund for any part of the service not consumed; or
  • Keep the contract and receive compensation for the difference in value between the service supplied and the service for which they paid.

Further information on major failures, the ACL, or any other consumer matter, the website for the Australian Competition and Consumer Competition is an excellent general resource. If you require specific advice about a consumer law issue, it is advisable to speak with a qualified legal practitioner. Contact LegalVision’s business lawyers to assist you. Questions? Call us on 1300 544 755.

 

Carole Hemingway

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