ACCC changes – Terms & Conditions, consumer protection component
A reminder to all suppliers and manufacturers – Take action to ensure that you comply with the consumer guarantees under the australian consumer law
In January 2011 the Australian Consumer Law (ACL) was introduced. The introduction of the ACL saw suppliers and manufacturers become subject to new obligations arising from the ACL in relation to products or services that are supplied to consumers.
Of particular importance to suppliers and manufacturers are the 9 consumer guarantees that apply under the ACL. In summary, when goods are sold to consumers, the consumer is protected at law by the rights granted by each of these consumer guarantees.
Although the consumer guarantees apply to goods and services, this article focuses on the supply of goods.
- Goods sold to consumers are covered by the 9 ACL consumer guarantees;
- A consumer is a person who acquires goods of a kind ordinarily acquired for personal, domestic or household use or consumption, or for $40,000 or less. However, a person who acquires goods for the purpose of re-supply is not regarded as a consumer.
- The consumer guarantees apply to suppliers of goods, and certain guarantees apply to manufacturers of goods. In certain circumstances, the ACL provides a supplier with a right to seek an indemnity from a manufacturer where a breach is caused by the manufacturer.
- The consumer guarantees must be complied with and cannot be excluded or contracted out of.
- Suppliers and Manufactures should review their trading terms to ensure that the terms comply with the requirements of the ACL and do not infringe the consumer guarantees.
The ACL provides consumers with statutory guarantees that their purchased products or services are of acceptable quality when they are sold and are fit for any specified purpose.
Suppliers and manufacturers that provide a warranty against defects or similar are doing so in addition to the consumer guarantees. The statutory guarantees discussed here are separate to the laws relating to warranty against defects. If you are a supplier or manufacturer providing a ‘warranty against defects’ in relation to goods sold then you must provide a mandatory statement regarding consumer guarantees and include clear and concise information detailing rights of a person claiming under a warranty and the process for doing so.
The 9 Consumer Guarantees under the ACL
No Consumer Guarantee Applying to:
- Goods are to be of acceptable quality when sold to a Consumer Suppliers and Manufacturers
- Goods will be reasonably fit for any purpose the Consumer or Supplier specified Suppliers
- The description of goods from a Supplier or Manufacturer must be accurate Suppliers and Manufacturers
- Goods are to match any sample or demonstration model and any description provided Suppliers
- Goods are to satisfy any extra promises made about them (express warranties) Suppliers and Manufacturers
- The Supplier has the right to sell the goods (a right to clear title) – unless they alert the Consumer before the sale that they have limited title Suppliers
- No one will try to repossess or take back the goods or prevent the Consumer using the goods except in certain circumstances (a right to undisturbed possession) Suppliers
- Goods are to be free of any hidden securities or charges and will remain so (except in certain circumstances) Suppliers
- Manufacturers or importers guarantee that they will take reasonable steps to provide spare parts and repair facilities for a reasonable time after purchase Manufacturers (and Importers)
Remedies under the ACL
A consumer has a right to a remedy if goods supplied to them do not meet a consumer guarantee.
To determine the available remedies, the following two factors are considered to determine the remedies available:
- Whether the breach constitutes a ‘minor failure’ in the goods; and
- Whether the breach constitutes a ‘major failure’ with the goods.
If it is found that there is a minor failure with the goods then the consumer can ask the supplier to fix the problem. The supplier may choose to either:
- Provide a refund;
- Replace the goods;
- Repair the goods; or
- Fix the title to the goods (if that is the problem)
A consumer’s rights are strong if there is a major failure with the goods. In the event of a major failure, a consumer can either:
- Reject the goods and obtain a refund;
- Reject the goods and get an identical replacement (or one of similar value if available); or
- Keep the goods and receive compensation for the drop in value caused by the problem.
Examples of a major failure would include:
- A reasonable consumer would not have acquired the goods if they were aware of the issue or condition they were in;
- A significant difference or departure is present in the goods compared to the sample or demonstration;
- The goods are unsafe or the services create an unsafe situation; or
- If a good is found not to be of acceptable quality and the situation is not remedied.
Manufacturer indemnity to Supplier
A consumer may seek redress from a supplier (ie retailer) for breach of the consumer guarantees, even where that breach was caused by the manufacturer’s actions (such as where goods are poorly manufactured and not of acceptable quality).
To address the unfairness to the supplier in circumstances where a consumer has claimed directly from the supplier, the ACL provides a right of indemnity to the supplier against the manufacturer where the manufacturer would otherwise be liable under the ACL for the breach of the consumer guarantee.
The introduction of the ACL makes clear the requirements and obligations suppliers have in their dealings and also provides for statutory remedies for the consumers.
Given the significant changes to the law in this area we recommend that the suppliers of goods or services to consumers familiarise themselves with the consumer guarantee requirements under the ACL and seek legal review of their trading terms to ensure that they are complying with the ACL.
If you have any queries regarding the ACL or would like your trading terms reviewed then please contact Phillip Grundy of our office on (03) 9614 7707.