Consumer Guarantees

This note outlines some key questions you should ask yourself if your business supplies goods or services – whether online or in-store – to consumers in Australia.

Does the Australian Consumer Law apply to the goods or services we supply?

The Australian Consumer Law (ACL) is a national law which gives consumers who acquire goods and services in Australia certain statutory rights and remedies in relation to those goods and services.  These statutory rights – known as Consumer Guarantees – are designed to ensure that consumers get what they pay for, and that the product does what it is supposed to do.  The Consumer Guarantees apply regardless of what the supplier’s standard terms and conditions say.

Currently, the Consumer Guarantees under the ACL apply (with some exceptions) to goods and services that cost $40,000 or less.  They also apply to (a) goods and services that cost more than $40,000 if they are goods or services normally acquired for personal, domestic or household use or consumption (not business use), and (b) vehicles and trailers used to transport goods on public roads.

From 1 July 2021, the $40,000 threshold will increase to $100,000 meaning that significantly more transactions will be covered by the ACL so even if the ACL doesn’t apply to goods or services supplied by your business now, from 1 July 2021, it might.

The ACL doesn’t just cover goods that are sold to consumers. It also covers goods hired or leased.  However, the Consumer Guarantees do not apply to goods or services re-sold or transformed into another product that is sold or used, and they do not apply to insurance and financial services products or services for transporting and storing goods which are governed by different laws.

If the ACL does apply, what does this mean?

If the ACL applies to your business transactions, your customers are entitled to automatic guarantees in relation to those goods or services, and if a product or service fails to meet one or more of the Consumer Guarantees, they will be entitled to a remedy.

Outlined below are the Consumer Guarantees that suppliers (and manufacturers and importers where relevant) are taken to give, regardless of their standard business terms and conditions, as well as the range of remedies available to consumers.

Note that businesses can themselves fall within the definition of “consumer” and benefit from the automatic Consumer Guarantees under the ACL in respect of goods or services acquired for business purposes (eg, the purchase of office furniture or the lease of a photocopier). 

What are the Consumer Guarantees?

If a supplier sells, hires or leases goods to consumers in Australia, it is taken to guarantee that:

1.       the goods sold (or hired or leased) will be of acceptable quality;

2.       the goods will be fit for a particular purpose;

3.       the goods will match their description;

4.       the goods will match the sample or demonstration model;

5.       the consumer will get good title to the goods;

6.       the consumer will get undisturbed possession of the goods;

7.       you will honour any express warranties given to the consumer; and

8.       there are no undisclosed securities on the goods.

A manufacturer of goods is taken to guarantee that:

1.       goods will be of acceptable quality;

2.       goods will match their description;

3.       it will honour any express warranties given to the consumer; and

4.       it will provide repairs or spare parts for the product for a reasonable time.

If the manufacturer doesn’t have an office in Australia, the Australian importer of the products is responsible for meeting these manufacturer guarantees.

If a business supplies services in Australia, it is taken to guarantee that:

1.       it will provide the services with due care and skill;

2.       the services will be fit for a particular purpose the consumer made known to it; and

3.       the services will be provided within a reasonable time.

What happens if goods or services fail to meet a Consumer Guarantee?

The remedy available to a consumer from a supplier that fails to meet a Consumer Guarantee will depend on whether the failure can be fixed (“remedied”) in a reasonable time, and whether or not it is considered a major failure.  The ACL defines what a major failure is with respect to goods (section 260) and services (section 268).

In summary, if a failure can be remedied and is not a major failure, the consumer can require the supplier to remedy the failure within a reasonable time.  The supplier might repair, exchange or provide a refund to the consumer. 

If the supplier doesn’t remedy the failure within a reasonable time, the customer could:

1.       have the defect fixed themselves and recover the costs from the supplier;

2.       reject the goods and seek a refund or replacement (within the prescribed “rejection period”); or

3.       keep the goods and recover compensation for their decrease in value.

The ACL also outlines the remedies available in relation to services that fail to meet a Consumer Guarantee.  These remedies include terminating a contract, demanding a refund, and recovering damages for any loss or damage reasonably foreseeable as a result of the failure.

Can we exclude liability for these statutory guarantees?

Generally speaking, consumer guarantees cannot be excluded by contract (section 64A) and attempts to do so may give rise to a claim of misleading conduct under the Act or potential breach of its unfair contract provisions.