The Australian Consumer Law (27 January 2012)
The Australian Consumer Law, contained in Schedule 2 of the Competition and Consumer Act 2010 (Cth), has come into operation in two stages:
(1) from 1 January 2011, it created a new nationally uniform set of consumer guarantees for consumers who acquire goods or services from Australian suppliers, importers or manufacturers;
(2) from 1 January 2012, it imposed new requirements which must be complied with by suppliers who give warranties against defects.
The Australian Consumer Law has replaced the previous regime of implied warranties and conditions which were contained in the Trade Practices Act 1974 (Cth) and in State and Territory fair trading laws.
Importantly, the consumer guarantees are unable to be excluded by a supplier’s terms and conditions.
The new requirements that must be complied with by suppliers who give warranties against defects will require most businesses who supply goods and services to consumers to review their terms and conditions and provide appropriate compliance training for their staff.
Who is a consumer?
A consumer is defined under the Australian Consumer Law as:
- a person who purchases goods or services which cost less than $40,000;
- a person who purchases goods or services which cost more than $40,000 which are normally for personal, domestic or household purposes;
- a person who purchases a vehicle or trailer, irrespective of cost, provided they are used mainly to transport goods.
Significantly, businesses who purchase goods within the above categories (subject to certain exceptions discussed below) will be a “consumer” and will therefore enjoy the same consumer guarantees as individuals.
Individuals who buy or sell goods privately are also affected, in that the consumer guarantees apply to private sales.
What are the consumer guarantees?
The Australian Consumer Law has created the following guarantees for consumers who purchase goods:
- The goods are of an acceptable quality (discussed below).
- The goods match their description or any sample or demonstration model.
- The goods are fit for any purpose represented by the seller or made known by the consumer.
- Additional promises made by the seller (oral or written) will be performed (eg money-back guarantees, lifetime warranties).
- Repairs and spare parts are reasonably available (unless the seller gives written notice that repairs or spare parts are not available).
- Ownership rights in the goods pass to the consumer who is entitled to undisturbed possession (subject to disclosure made by the seller).
For second-hand goods the guarantees are qualified in that age, price and condition are taken into account.
The Australian Consumer Law has created the following guarantees for consumers who purchase services:
- The services are carried out with reasonable care and skill.
- The services are fit for purpose.
- The services will be completed within a reasonable time.
What is ‘acceptable quality’?
‘Acceptable quality’ is defined in the Australian Consumer Law to mean fit for purpose, acceptable in appearance and finish, free from defects, safe and durable.
This is a higher standard than the previous standard of “merchantable quality” in that:
- Goods must be fit for all purposes for which the goods are commonly supplied.
- Goods must be free from all defects.
- Goods will not be acceptable if they are defective within a reasonable period after purchase (rather than simply being free from defect on delivery).
Excluded goods and services
The consumer guarantees do not apply to:
- goods which are to be transformed into something else that is sold or used up (eg raw materials, components, intermediate goods);
- insurance and financial services (which are regulated by other legislation);
- services for transporting or storing goods for business purposes;
- goods bought at auction conducted by an agent of the seller (except the guarantee as to ownership rights passing will apply, subject to disclosure).
Manufacturers and importers
The consumer guarantees create statutory (rather than contractual) rights and obligations, and may be enforced by the consumer not only against the direct supplier of the goods but also against the manufacturer or importer of the goods.
This is in contrast to the previous regime of implied warranties and conditions, as those warranties and conditions were implied in the contract between the supplier and the consumer, and did not give the consumer any rights against the manufacturer or importer in the absence of a direct contractual relationship.
What are warranties against defects?
The Australian Consumer Law imposes new requirements for the form and content of “warranties against defects” that might be given by a supplier.
A warranty against defects is a representation by the seller (written or oral) to the effect that it will (unconditionally or on specified conditions) if the goods or services (or part of them) are defective:
- repair or replace the goods or part of them;
- provide again or rectify the services or part of them; or
- wholly or partly recompense the consumer.
Requirements where warranties against defects are given
A supplier of goods or services to a consumer who gives a warranty against defects must:
(1) concisely state what the person who gives the warranty must do so that the warranty will be honoured;
(2) concisely state what the consumer must do to entitle the consumer to claim the warranty;
(3) incorporate the following wording: “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.”
(4) state the name of the person giving the warranty, the business address, telephone number and any email address;
(5) state the period or periods within which a defect in the goods or services must appear for the consumer to be entitled to the warranty claim;
(6) set out the procedure for the consumer to claim the warranty including the address to which a claim must be sent;
(7) state who bears the expense of claiming the warranty and, if appropriate, how the consumer can claim that expense; and
(8) state that the benefits to the consumer given are in addition to other rights and remedies of the consumer under a law in relation to goods and services to which the warranty relates.
It is noted that the above requirements are detailed and onerous.
Accordingly, any business who supplies goods or services to "consumers" (as defined above) will need to review their terms and conditions to ensure that the above requirements are complied with. Staff must also be appropriately trained so that they do not make representations to consumers which are contrary to the above requirements.
For more information about the Australian Consumer Law, do not hesitate to contact Rhonda Arnott or Demian Walton of our firm on (03) 8602 4000.
The content of this publication is intended only to provide a summary and general overview of the subject matter covered. It is not intended to be comprehensive nor does it constitute legal advice.
