The Australian Competition and Consumer Commission (ACCC) publishes a Warranties and Refunds Guide which explains a business’ legal responsibilities. The guide is targeted at businesses who sell, manufacture, or import goods or services. In this article, we break down five key rules from the Warranties and Refunds Guide that business owners need to know.
1. A Contract in Every Sale
When a consumer purchases a good or service from a seller, they enter into a contract, whether there is anything written down or not.
This contract contains conditions and warranties. Statutory conditions are the very terms that make up the contract. They must be upheld otherwise the contract will terminate. Statutory warranties are terms that are important, but may not necessarily break the contract if they are not met. They are a ‘secondary consideration’.
2. Supply of Goods and Services
Supply of Goods
The Warranties and Refunds Guide explains that in contracts for the supply of goods, there exist both statutory conditions and statutory warranties that protect consumers.
These conditions include that the products:
- must be of a reasonable quality, and not have any defects;
- should fit their purpose; and
- should match any descriptions given when advertising them.
The warranties include that:
- the seller will disclose any problems or potential defects of the product prior to selling it; and
- the consumer will be able to “enjoy quiet possession” of the goods. This means that the consumer can use the goods without interference from another party.
Supply of Services
In contracts for the supply of services, consumers are protected by statutory warranties, but not statutory conditions.
These warranties include that:
- the service should be provided with care and skill;
- any other goods given with the services (such as the paint used by a painter) should be of good quality;
- the services should be provided within a reasonable time; and
- the services should be appropriate for the purpose they are intended.
3. Consumer Rights and Remedies
Consumers who purchase goods or services will be entitled to a remedy if a condition or warranty is not met.
The consumer may also be entitled to a refund if they return the product to the seller and meet the terms of the refund policy.
If a product does not fit its purpose after some time or use, the purchaser may still be able to get the product replaced or repaired by the seller. This length of time is not fixed under law, as different goods will be expected to last for different periods of time or amounts of use.
When is a Consumer Entitled to a Remedy for Goods?
A consumer may receive a full refund if they:
- “cancel” the contract with the seller within a reasonable time after buying the product (this time period is generally stated in a refund policy);
- have not used the product, or have used it minimally (clearly this is not a fixed amount, and will depend on the product and seller);
- return the product, or notify the seller of a problem, within a reasonable time (again, this must be done before the consumer has used the product too much);
- have not damaged, lost, or gotten rid of the product;
- have taken care of the product and used it how it was meant to be used; or
- can prove that they bought them from the seller (often with a receipt).
When is a Consumer Not Entitled to a Refund for Goods?
While the law is designed to protect consumers, it does not support them if they are careless. Sellers do not have to provide a remedy if the purchaser:
- changes their mind;
- sees the product sold more cheaply elsewhere;
- looks at the product before they buy it and did not see any noticeable problems (e.g if a pair of shoes is marked down because they had scuff marks on the sole);
- did not see problems or defaults that were clearly marked; or
- uses the product in the wrong way and damages it.
When is a Consumer Entitled to a Remedy for Services?
A consumer may receive a remedy if the services provided do not meet promises made by the seller. For example, a removalist company may promise to pick up a customer’s furniture at a particular date and time, but arrive five hours late and without a truck large enough to transport the agreed-upon furniture.
Appropriate remedies may include:
- supplying the same service again (with a better outcome);
- paying for the cost of resupply; or
- compensation for any loss suffered from the original incomplete service.
In this situation, a consumer cannot get a refund.
When is a Consumer Not Entitled to a Remedy for Services?
There are certain circumstances where a service provider is not responsible for problems with the service. These include if the consumer:
- did not properly explain what service they needed (e.g. if a customer told the plumber they wanted the bathroom installed downstairs, when in fact they needed it upstairs);
- demanded that the service be done in a certain way, but is then unhappy with the result (e.g. if a customer told a painter to paint their lounge in teal blue, but then does not like how dark the room is once it is painted); or
- requests services relating to either:
- goods being transported or stored for a business-related purpose; or
- an insurance contract.
Note: In Australia, consumers are allowed to demand that the seller provides them with a remedy for faulty goods, even if the problem may be the manufacturer’s fault.
4. Misleading Conduct
The Warranties and Refunds Guide makes clear that a breach of a condition or warranty will usually entitle the consumer to some sort of remedy. Therefore avoid signs saying:
- “no refund on sale items”;
- “no refunds after 30 days”; and
- “items must be returned in original packaging for refund”.
These signs may mislead consumers into thinking there is no available remedy.
Similarly, you cannot confuse consumers about recourse for faulty services. For example, you cannot tell consumers that:
- they have no rights if the service is not carried out with an appropriate level of care and skill;
- you (as a service provider) have no responsibility if there is loss or damage to their property during the provision of the service; and
- you (as a service provider) will take care in the provision of services, but will not accept any responsibility after the service has been provided. For example, you cannot say to a customer, “I will paint your walls, but it is not my responsibility if the paint peels off after two weeks”.
5. Voluntary and Extended Warranties
In some cases, your customers may want additional assurance that if something goes wrong with the goods or service you offer, they have the right to ask for a replacement, repair, or refund of their money.
If you provide these additional warranties, they do not alter the existing laws, but rather extend consumers’ rights and sellers’ responsibilities. These should be specified in the terms and conditions between a buyer and a seller, and are contractually binding.
The ACCC Warranties and Refunds Guide provides sellers with details about their responsibilities and rights. This highlights the importance of knowing the rules, but also clearly stating in your policies and contracts what remedies you provide. If you want further guidance on how to meet your legal obligations when it comes to refunds, contact LegalVision’s competition lawyers on 1300 544 755 or fill out the form on this page.
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