Remedies
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If goods or services fail to comply with a consumer guarantee under the ACL, the consumer has the right to remedies, which include:
refund;
repair;
replacement or exchange;
compensation; and
cancellation of the contract.
The particular remedies available to a consumer depend on whether the failure to comply with the guarantee is a major failure or a minor failure.
A consumer may seek a remedy from the supplier, the manufacturer or both, depending on the particular guarantee. Where a foreign manufacturer does not have a place of business in Australia, a consumer can take action against the importer instead.
The remedies under the ACL exist in addition to remedies in any contract, and any warranty provided by the supplier or manufacturer.
Remedies against suppliers of goods for a major or minor failure
A consumer can take action against a supplier if the goods fail to comply with a consumer guarantee (ACL s 259), other than the guarantees relating to repairs and spare parts (which only apply to manufacturers).
Which remedies are available depend on whether the failure can be remedied and whether the failure to comply with a guarantee is a ‘major failure’ (s 260).
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The failure to comply with a consumer guarantee is a major failure if:
the goods would not have been bought by a reasonable consumer who was fully acquainted with the nature and extent of the failure at the time of purchase;
the goods are significantly different from their description, sample or demonstration model;
the goods are substantially unfit for their normal purpose and cannot easily be made fit within a reasonable time;
the goods are substantially unfit for the purpose disclosed to the supplier (or their agent) before purchase and cannot easily be made fit within a reasonable time; or
the goods are not of acceptable quality because they are unsafe (ACL s 260).
In short, a major failure is a problem with the goods that cannot be fixed or is very difficult to fix.
If there is a major failure with goods, a consumer has two choices:
If there is a major failure with the goods, a consumer can reject the goods and choose a refund or replacement (subject to ACL s 262). The seller must give the consumer a refund and must not insist that they take a credit, credit note or rain check. The seller must also refund any other form of payment the consumer made (e.g. a trade-in). If this is not possible (e.g. the trade-in has been sold), the seller must refund the value of the payment in another way.
If there is a major failure with the goods, a consumer can keep the goods and recover compensation for any reduction in the value of the goods below the purchase price (ACL s 259(3)).
A consumer may not reject the goods where:
the consumer has lost, destroyed or disposed of the goods; or
the ‘rejection period’ has ended – the rejection period runs from the date of supply until the date it would be reasonable to expect the particular failure to become apparent (ACL s 262).
If a consumer is no longer entitled to reject the goods, they are still entitled to compensation for any reduction in the value of the goods.
To reject goods, a consumer must notify the supplier of the reasons for the rejection and return the goods. If the goods cannot be returned without significant cost to the consumer, then the supplier must collect the goods at its own cost.
It can be difficult to assess whether a consumer is entitled to reject faulty goods. Consumers should get independent expert evidence about the defects in the event of any legal action, particularly in complex matters (e.g. car disputes).
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If the failure to comply with a consumer guarantee can be remedied within a reasonable time and is not a major failure, the consumer may ask the supplier to fix the problem (ACL s 259(2)).
The supplier must remedy the failure (free of charge and within a reasonable period) by choosing to either:
repair the goods;
replace the goods with goods of an identical type;
refund the value of the goods; or
cure any defect in title, if applicable (ACL s 261).
If the supplier refuses or fails to remedy the problem within a reasonable time after the consumer’s request, the consumer may:
have the failure remedied elsewhere and recover all reasonable repair costs from the supplier; or
reject the goods (subject to ACL s 262).
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In addition to the above remedies for major and minor failures, a consumer may also take action against a supplier of goods to obtain compensation for any reasonably foreseeable consequential loss or damage they have suffered due to the supplier’s failure to comply with a guarantee (ACL s 259(4)).
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A consumer may not be entitled to a remedy if:
the consumer has changed their mind, decided they do not like the purchase, or has no use for it;
the consumer has damaged or used the goods in an unreasonable or unintended manner;
the consumer has discovered they can buy the goods or services more cheaply elsewhere (unless the seller guarantees that the goods cannot be purchased more cheaply elsewhere);
the consumer examined the goods before buying them and should have seen any obvious faults;
the consumer has had a defect drawn to their attention before buying (e.g. goods labelled as seconds with their faults clearly marked);
the consumer is not happy with a service that the seller insisted on having carried out in a particular way;
the consumer did not make it clear what service they wanted and what they wanted the service to achieve; or
the consumer did not rely on, or reasonably rely on, the seller’s skill or judgment when choosing a product or service.
A consumer is not entitled to claim against a seller where the failure to meet a consumer guarantee is:
due to something someone else said or did, unless it was their agent or employee; or
due to an event that was beyond the seller’s control (e.g. bad weather or delays in delivery).
Remedies against suppliers of services
A consumer can take action against a supplier of services where there has been a failure to comply with a consumer guarantee (ACL s 267).
The available remedies depend on:
whether the failure can be remedied; and
whether the failure to comply with a guarantee is a ‘major failure’.
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The failure to comply with a consumer guarantee is a major failure if:
the service would not have been acquired by a reasonable consumer fully aware of the nature and extent of the problem;
the service is substantially unfit for its normal purpose and cannot easily be made fit within a reasonable time;
the service (and any product resulting from that service) is unfit for the particular purpose that the consumer made known to the supplier and cannot easily be made fit within a reasonable time;
the service (and any product resulting from that service) does not achieve a desired result that the consumer made known to the supplier; or
the service creates an unsafe situation (ACL s 268).
If there is a major failure with a service, a consumer may choose to:
keep the service contract and recover compensation for the reduction in value of the service below the price paid or the amount payable; or
cancel the service contract and obtain a refund for any parts of the service not used.
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If the failure to comply with a consumer guarantee can be remedied within a reasonable time and is not a major failure, the consumer may ask the supplier to fix the problem (ACL s 267(2)). Minor failures to comply with a consumer guarantee can normally be fixed or resolved.
In this case, a seller can choose to offer the consumer a refund or to re-supply the services. This must be provided free of charge and within a reasonable time period, depending on the circumstances.
If the supplier refuses to fix the problem, or takes too long to do so, the consumer may:
have the failure remedied by someone else and recover all reasonable costs from the supplier; or
cancel the service contract and obtain a refund (or reduce the amount payable) for the defective service.
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In addition to the above remedies for major and minor failures, a consumer may also take action against a supplier of services to seek to obtain compensation for any reasonably foreseeable consequential loss or damage they have suffered due to the supplier’s failure to comply with the guarantee (ACL s 267(4)).
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The standard of due care, skill and fitness for purpose are statutory implied warranties of the contract between the providers of financial services and consumers, so the remedy is in contract. A breach of the statutory implied warranties may involve breaches of the Corporations Act 2001 (Cth) and the ASIC Act. ASIC can take enforcement action against such breaches.
Remedies against manufacturers of goods
An affected person can bring an action for damages against a manufacturer of goods (ACL s 271) where there is a failure to comply with the consumer guarantees as to:
acceptable quality (s 54);
matching description (s 56), applicable to any description given by the manufacturer;
express warranties (s 58), applicable to any express warranty given by the manufacturer; or
repairs and spare parts (s 59).
An ‘affected person’ includes the consumer and any person who acquires the goods from the consumer (other than for the purposes of re-supply), such as the consumer’s family, friends or associates (ACL s 2).
If a consumer purchased goods directly from a manufacturer, all the guarantees and remedies applying to suppliers apply to the manufacturer.
Legal action against a manufacturer must be commenced within three years of the date that the affected person became, or ought to have become, aware of the manufacturer’s failure to comply with the relevant guarantee (ACL s 273).
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In addition to the consumer guarantees, manufacturers may provide a voluntary warranty promising that if defects occur within a given period of time, a consumer may be entitled to a repair, replacement, refund or other compensation. Voluntary warranties do not alter or override the consumer guarantees.
The consumer guarantees apply to all purchases and cannot be waived. In contrast, manufacturers’ voluntary warranties are offered voluntarily and usually apply to certain types of products such as electrical goods, cars and furniture.
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In addition, manufacturers may offer extended warranties to provide additional protection or to lengthen the coverage of their consumer guarantees and their manufacturers warranties. Consumers normally have to pay extra for extended warranties when they make a purchase and, as such, they form part of the contract with the consumer.
Note that extended warranties do not alter or override a consumer’s right to claim for breach of a consumer guarantee, so the consumer should consider whether there is any reason to purchase an extended warranty.
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An affected person may seek to obtain compensation for the reduction in value of the goods resulting from the manufacturer’s failure to comply with the relevant guarantee (ACL s 272).
The reduction in value is calculated as the difference between the current value of the goods and:
the actual price paid by the consumer; or
the average retail price of the goods at the time of purchase,
whichever is the lower value.
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An affected person may also seek to obtain compensation for any reasonably foreseeable consequential loss or damage they have suffered due to the failure of a manufacturer to comply with a guarantee (ACL s 272). This includes the cost of inspecting and returning the goods to the manufacturer.
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A manufacturer is not liable to pay damages if the relevant guarantee was not complied with because of:
an act, default, omission or representation made by a person other than the manufacturer, its agent or employee;
something beyond human control that occurred after the goods left the manufacturer’s control; or
the fact that the supplier charged a higher price than recommended or average retail price, creating a higher standard of acceptable quality (due to the higher price) – the manufacturer is only held to the standard expected of goods based on the recommended or average retail price.
Remedies
Chapter: 7.3: Consumer guarantees
Contributor: Paul Latimer, Adjunct Professor, Swinburne Law School; Volunteer lawyer, Fitzroy Legal Service
Current as of: 1 September 2024
Law Handbook Page: 634
Next Section: Finance agreements
