New Aus­tralian Con­sumer Law guar­an­tees — what do they mean for your business?

In brief – Expan­sion of con­sumer rights

On 1 Jan­u­ary 2011, the Com­pe­ti­tion and Con­sumer Act 2011 replaced the Trade Prac­tices Act (TPA). The con­sumer pro­tec­tion pro­vi­sions are now part of the new Aus­tralian Con­sumer Law (ACL), a sched­ule to the Act. This new law now encom­pass­es the con­sumer pro­tec­tion pro­vi­sions that were in the TPA and the Fair Trad­ing Acts of each of the states and territories.

In addi­tion, the ACL sig­nif­i­cant­ly expands a num­ber of con­sumer rights. It gives con­sumers a num­ber of ​“con­sumer guar­an­tees” (replac­ing the implied war­ranties under the TPA) and increas­es the poten­tial lia­bil­i­ty of sup­pli­ers of goods and ser­vices. These changes will affect terms and con­di­tions of sale. They also deter­mine what sales and oth­er staff can and can­not say to con­sumers and what they can and can­not do if faced with a claim of a fail­ure of a guarantee.

Spe­cif­ic con­sumer guar­an­tees for the sup­ply of goods

There are sev­er­al guar­an­tees relat­ed to the sup­ply of goods which replace implied war­ranties under the TPA:

• The buy­er will obtain clear title unless oth­er­wise stated
• There are no undis­closed securities
• The goods are of accept­able quality
• The goods are fit for any dis­closed purpose
• The own­er has a right to undis­turbed possession
• The goods match sam­ple or demon­stra­tion model

New guar­an­tees for sup­ply of goods under Aus­tralian Con­sumer Law

The ACL has also intro­duced three new guarantees:

• The goods will sat­is­fy any express war­ranties that are giv­en in rela­tion to the goods
• The man­u­fac­tur­er of the goods will take rea­son­able action to ensure that facil­i­ties for the repair of the goods, and parts for the goods, are rea­son­ably avail­able for a rea­son­able peri­od after the goods are sup­plied (unless the goods are sold by auction)
• The man­u­fac­tur­er of the goods will com­ply with any express war­ran­ty giv­en or made by the man­u­fac­tur­er in rela­tion to the goods (unless the goods are sold by auction)

Con­sumer guar­an­tees and pro­vi­sion of services

The guar­an­tees that accom­pa­ny the pro­vi­sion of all con­sumer ser­vices are, first­ly, that the ser­vices are pro­vid­ed with due care and skill and sec­ond­ly, that the ser­vices are fit for any spec­i­fied pur­pose. A third new guar­an­tee for the pro­vi­sion of ser­vices has been intro­duced under the ACL – that when no time is set in the con­tract for the ser­vices, the ser­vices must be sup­plied with­in a rea­son­able time.

Def­i­n­i­tion of con­sumer goods and services

Con­sumer goods and ser­vices are defined as:

• Any type of goods or ser­vices cost­ing up to $40,000 (note they do not have to be goods which are nor­mal­ly used for per­son­al, domes­tic or house­hold purposes)
• Goods or ser­vices cost­ing more than $40,000, that are of a kind that are ordi­nar­i­ly acquired for per­son­al, domes­tic or house­hold purposes
• A vehi­cle or trail­er used to trans­port goods, the cost of which is irrelevant

Things not cov­ered by the con­sumer guarantees

Cer­tain types of goods and ser­vices are not cov­ered by the con­sumer guar­an­tees. These include goods bought before 1 Jan­u­ary 2011, goods sold at auc­tion (where the auc­tion­eer is the sell­er’s agent) and goods bought to be onsold. Trans­porta­tion or stor­age of goods as part of a con­sumer’s busi­ness or occu­pa­tion and insur­ance con­tracts are also not covered.

All sup­pli­ers, not just corporations

Any sup­pli­er must ensure that all con­sumer goods or ser­vices they sup­ply com­ply with these guar­an­tees. Pre­vi­ous­ly, the TPA implied terms only applied to ​“cor­po­ra­tions” (with some very lim­it­ed excep­tions), with oth­er sup­pli­ers gov­erned by the var­i­ous Sale of Goods leg­is­la­tion in each state or ter­ri­to­ry. Those sup­pli­ers who were not incor­po­rat­ed could total­ly exclude any implied terms in any con­sumer con­tract. Now, this can­not hap­pen. A sup­pli­er will be liable for all dam­age suf­fered as a result of the fail­ure to meet the guar­an­tee, includ­ing con­se­quen­tial loss that is rea­son­ably foreseeable.

How­ev­er, it is still impor­tant for non-con­sumer sales to exclude or lim­it any lia­bil­i­ty under the rel­e­vant Sale of Goods Act.

Exclu­sion or mod­i­fi­ca­tion of guar­an­tees under the ACL

Any attempt to exclude or mod­i­fy the guar­an­tees under the ACL is void. How­ev­er, sup­pli­ers of con­sumer goods or ser­vices that are not of a kind ordi­nar­i­ly acquired for per­son­al, house­hold or domes­tic use can lim­it their lia­bil­i­ty for any fail­ure to com­ply with the guar­an­tees in respect of those goods or ser­vices. This now means that any sup­pli­er can lim­it lia­bil­i­ty for con­sumer sales that involve goods or ser­vices of a kind that are not ordi­nar­i­ly acquired for per­son­al, domes­tic or house­hold use.

Reme­dies avail­able to consumers

The reme­dies that are avail­able to con­sumers if a guar­an­tee is not met have also changed, depend­ing on whether the fail­ure is ​“minor” or ​“major”.

Where the prob­lem is minor, the sup­pli­er can choose between repair, replace­ment or refund. This is the same as the ways in which lia­bil­i­ty can be lim­it­ed for goods or ser­vices of a kind that are not ordi­nar­i­ly acquired for per­son­al, domes­tic or house­hold use.

Where the prob­lem is major, the con­sumer can either reject the goods or ser­vices and choose between obtain­ing a refund or a replace­ment, or ask for com­pen­sa­tion for any drop in val­ue of the goods or services.

War­ran­ty period

One of the most sig­nif­i­cant ways in which the con­sumer guar­an­tees have been broad­ened is in rela­tion to the removal of a sup­pli­er’s abil­i­ty to lim­it the war­ran­ty peri­od, for exam­ple, to 12 months from pur­chase. A con­sumer can rely on the statu­to­ry guar­an­tee as to accept­able qual­i­ty for as long as the goods or ser­vices are rea­son­ably expect­ed to last.

For exam­ple, a wash­ing machine can be expect­ed to last in a domes­tic envi­ron­ment any­where between 5 – 10 years, depend­ing on the machine type and mak­er. Pro­vid­ed the con­sumer retains the receipt of pur­chase, he or she is enti­tled to rely on the statu­to­ry guar­an­tee of accept­able qual­i­ty to get the machine repaired (or be reim­bursed for the cost of repair) at no charge to the con­sumer for the rea­son­able life expectan­cy of that machine.

Fur­ther, if the retail­er was informed that the con­sumer was going to install the wash­ing machine in a busy hos­tel, and the retail­er did not make a state­ment to the con­sumer that the wash­ing machine was not appro­pri­ate for that heavy use envi­ron­ment and that the con­sumer should pur­chase an indus­tri­al wash­er, the retail­er will be required to meet the statu­to­ry war­ran­ty for the 5 – 10 year peri­od. This oblig­a­tion will fall on the retail­er irre­spec­tive of the man­u­fac­tur­er’s warranty.

Any sup­pli­ers that sup­ply goods which are cov­ered by a lim­it­ed man­u­fac­tur­er’s war­ran­ty need to ensure that after the end of that lim­it­ed peri­od, they are not held respon­si­ble for the con­di­tion of goods that are rea­son­ably expect­ed to have a longer accept­able life than that of the manufacturer’s warranty.

Express war­ranties

Many sup­pli­ers often make extra promis­es about the qual­i­ties or per­for­mance char­ac­ter­is­tics of their goods or ser­vices. If so, those sup­pli­ers guar­an­tee that the goods will sat­is­fy those promis­es. This type of war­ran­ty must be dis­tin­guished from a man­u­fac­tur­er’s war­ran­ty against defects. A war­ran­ty against defects sets out what the man­u­fac­tur­er or sup­pli­er will do if some­thing is wrong with the goods. An express war­ran­ty focus­es on what the goods will do or how they will oper­ate and for how long.

In addi­tion to ensur­ing that these con­di­tions exist, these types of express war­ranties can also affect the length of time dur­ing which the guar­an­tees in rela­tion to accept­able qual­i­ty or fit­ness for pur­pose may be enforced. Any express war­ranties that you give need to be care­ful­ly reviewed.

Extend­ed warranties

The changes also will have an effect on extend­ed war­ranties against defects that many sup­pli­ers offer for addi­tion­al fees. Any extend­ed war­ranties are unlike­ly to be valid unless they go above and beyond the statu­to­ry guar­an­tees. Any extend­ed war­ranties need to be very care­ful­ly reviewed, to ensure that they clear­ly offer rights that are beyond what the guar­an­tees set. From 1 Jan­u­ary 2012, extra rules must be met in rela­tion to any defects war­ran­ty that is offered over and above the statu­to­ry guarantees.

What you need to do about the new con­sumer guarantees

If you haven’t already done so, we are rec­om­mend­ing to all our clients that they:

• Review the terms and con­di­tions under which you sup­ply con­sumer goods or ser­vices, to ensure that any risks or poten­tial expo­sure under these new pro­vi­sions are dealt with properly
• Review any man­u­fac­tur­ers’ war­ranties and any gap between those war­ranties and your oblig­a­tions as a sup­pli­er under a con­sumer sale
• Review any extend­ed war­ranties to ensure that they offer rights beyond the guar­an­tees and that they will com­ply with the fur­ther require­ments from 1 Jan­u­ary 2012
• Review staff knowl­edge and training

Swaab is hold­ing sem­i­nars on this impor­tant topic.

If you’d like to join the dis­cus­sion and learn more, or you’d like some staff train­ing on the changes, please con­tact our Com­mer­cial and IP & Tech­nol­o­gy Team or your main Swaab contact.