Kathryn Edghill, Partner and Jenny Kojevnikov, Lawyer, Truman Hoyle
Part 3-2 Div 1 of the Australian Consumer Law (ACL) (which is Sch 2 to the Competition and Consumer Act 2010 (Cth) (CCA)) contains consumer guarantees which apply to the supply of goods and services to consumers. Sections 51 to 59 of the ACL contain consumer guarantees relating specifically to consumer products, and ss 60–62 of the ACL contain consumer guarantees which relate specifically to consumer services.
The consumer guarantees in the ACL replace the implied warranties and conditions in the former Trade Practices Act 1974 (Cth).
The consumer guarantees apply to any contract for the supply of goods or services to a consumer made after 1 January 2011. The consumer guarantees are given by suppliers (e.g. a trader, retailer or service provider) and manufacturers (as defined in s 7 of the ACL).
Section 7 of the ACL defines a manufacturer very broadly to include not only those who make goods but also those who:
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produce grow, extract, process or assemble goods;
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hold themselves out to the public to be the manufacturer or permit others to do so;
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apply or use, or permit others to apply or use that person’s brand, name or mark or to be used in connection with the supply or promotion of goods; or
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import goods where the manufacturer does not have a place of business in Australia.
A consumer is defined in s 3 of the ACL as a person who acquires goods:
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for an amount under $40,000 (or such other greater amount as may be prescribed);
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which, if for an amount over $40,000, are of a kind ordinarily acquired for personal, domestic or household use or consumption; or
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which otherwise consist of a vehicle or road trailer acquired for use principally in the transport of goods on public roads,
except where such goods are acquired for the purpose of re-supply or transformation in trade or commerce during production or manufacture.
A person will be taken to have acquired services as a consumer if:
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the amount paid or payable for the services is under $40,000 (or such other greater amount as may be prescribed; or
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the services are of a kind ordinarily acquired for personal, domestic or household use or consumption.
The consumer guarantees will prevail to the extent of any inconsistency with foreign law or the laws of a state or territory (s 64 , ACL). However, under s 68 , ACL, the United Nations Convention on Contracts for the International Sale of Goods will prevail if the consumer guarantees are inconsistent.
A note of caution: s 64 of the ACL provides that the consumer guarantees cannot be excluded, restricted or modified by contract.
Practice Tip: In-house counsel should review all warranty provisions in contracts and any materials provided to consumers to ensure that they do not conflict with, contradict or otherwise imply that the statutory guarantees do not apply.
Consumer guarantees in relation to goods
The consumer guarantees in relation to goods are:
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the supplier will have a right to pass title in the goods, unless a contrary intention appears in a contract or can be inferred from the circumstances of that contract (s 51 , ACL);
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the consumer has the right to undisturbed possession of the goods unless there is a pre-existing security, charge or encumbrance (s 52 , ACL);
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the supplier will supply goods to a consumer that are free from any security, charge or encumbrance (s 53 , ACL);
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goods that are supplied to a consumer (except when they are supplied by auction) are of acceptable quality (s 54 , ACL);
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goods that are supplied to a consumer (except when the goods are supplied by auction) are reasonably fit for any disclosed purpose, and any purpose which the supplier represents they are reasonably fit for (s 55 , ACL);
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goods that are supplied by description will correspond with that description (unless the goods are supplied by auction) (s 56, ACL);
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goods that are supplied (unless supplied by auction) with reference to a sample or demonstration model will correspond with the sample or demonstration model in quality, state or condition; the consumer will have reasonable opportunity to compare the goods with the sample; and the goods will be free from any defect that would not be apparent on reasonable examination of the sample or demonstration model or would cause the goods not to be of acceptable quality (s 57 , ACL);
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the manufacturer of the goods (unless the goods were supplied by auction) will take reasonable action to ensure that facilities for the repair of the goods are reasonably available for a reasonable period after the goods are supplied, unless the manufacturer took reasonable action to ensure the consumer would be given written notice that this would not be the case (s 58 , ACL); and
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the manufacturer and supplier of the goods will comply with any express warranty given or made by the manufacturer or the supplier in relation to the goods (unless the goods were supplied by auction): s 59, ACL.
See Consumer guarantees in relation to goods.
Consumer guarantees in relation to services
The consumer guarantees in relation to services are as follows:
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services will be provided with due care and skill (s 60 , ACL);
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services provided to a consumer will be of such a nature, and quality, state or condition, that they might be reasonably expected to achieve the result that the consumer wishes the services to achieve (where such expected results were made known expressly or by implication prior to the acquisition of the services) (s 61 , ACL); and
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services will be supplied within a reasonable time where not previously fixed by contract or previously determined by consumer and supplier: s 62 , ACL.
The consumer guarantees in relation to services will not apply to insurance contracts, or a contract for the transportation or storage of goods for the purposes of a business, trade, profession or occupation carried on or engaged in by the person for whom the goods are transported or stored: s 63 , ACL.
See Consumer guarantees in relation to services.
Obligations of suppliers and manufacturers to provide refunds, replacements or repairs
Part 5.4 of the ACL sets out the remedies which consumers are entitled to, and which suppliers and manufacturers are obliged to provide, for breach of the consumer guarantees. The obligations of suppliers and manufacturers are dealt with separately, with the basic premise being that consumers are entitled to bring an action for breach of a consumer guarantee against either the supplier or manufacturer (of goods), and a right of the supplier to be indemnified by the manufacturer in certain circumstances.
If a consumer good or service does not comply with a consumer guarantee, the consumer (and any person who is a gift recipient from the consumer) has a number of remedies, the nature of which will depend on whether or not the failure to comply with a consumer guarantee is a “major failure”. Section 260 of the ACL (for goods) and s 268 (for services) set out the circumstances when a major failure will be taken to have occurred.
See Obligations of suppliers and manufacturers to provide refunds, replacements or repairs.
Mandatory requirements for warranties against defects and repair notices
The Competition and Consumer Regulations 2010 (Cth) prescribe certain mandatory content to be provided to a consumer in relation to any warranties provided for a consumer good (which came into effect on 1 January 2012). The following mandatory wording is required to be included whenever a warranty as to defects is given:
Our goods come with guarantees that cannot be excluded under the Australian Consumer Law. You are entitled to a replacement or refund for a major failure and for compensation for any other reasonably foreseeable loss or damage. You are also entitled to have the goods repaired or replaced if the goods fail to be of acceptable quality and the failure does not amount to a major failure.
The regulations also provide for mandatory notices to be given by repairers to consumers in relation to the repair of a consumer good where the repair may involve the use of refurbished goods or parts, and where the repair could result in the loss of user generated data.
As of 1 July 2011, it is an offence under s 103(2) of the ACL for a repairer who accepts goods for the purpose of repairing them to provide a consumer with a notice that does not comply with the regulations. The regulations provide mandatory wording in relation to the repair of goods capable of retaining user-generated data, and if refurbished goods are used or supplied in the repair of a consumer good.
From 1 January 2012, it is an offence under s 102(2) of the ACL for a person, in the connection with the supply of goods and services to a consumer, to give the consumer a document which does not comply with the regulations, or otherwise to represent directly to the consumer that a warranty against defects applies to goods which come with such a non-compliant document.
Penalties of up to $50,000 apply for corporations and up to $10,000 for individuals for a breach of the each of the above sections.
See Mandatory requirements for warranties against defects and repair notices.
Representations regarding consumer guarantees
Section 29(1)(m) and 29(1)(n)(i) of the ACL contain important prohibitions on representations regarding warranties and consumer guarantees.
It is an offence to make:
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a false or misleading representation concerning the existence, exclusion or effect of any condition, warranty, guarantee, right or remedy (including a consumer guarantee) under s 29(1)(m) of the ACL; and/or
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a false or misleading representation concerning a requirement to pay for a contractual right that is wholly or partly equivalent to any condition, warranty, guarantee, right or remedy (including a consumer guarantee) under s 29(1)(n)(i) of the ACL.
Penalties apply of up to $1.1 million for corporations and $220,000 for individuals for breach of these sections.
See Representations regarding consumer guarantees.