When do the consumer guarantees apply?
Definitions
Generally, the consumer guarantees only apply to the ‘supply’ of goods and services to a consumer in ‘trade and commerce’. Remedies can be sought against the supplier and/or, in some cases, the manufacturer. Therefore, it is necessary to define the terms goods, services, consumer, supplier, manufacturer, and trade or commerce.
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The ACL defines ‘goods’ broadly (s 2). It expressly includes second-hand goods, computer software, animals, gas and electricity, and component parts. Consumer guarantees apply to new goods, second-hand goods and ‘seconds’.
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The ACL defines ‘services’ broadly to include any rights, benefits, privileges or facilities that are, or are to be, provided, granted or conferred in trade or commerce (s 2). This definition covers most contracts for the supply of services to consumers, including professional services (e.g. legal or accounting services).
However, the consumer guarantees do not apply to:
professional services by qualified architects or engineers (s 61(4));
services relating to the transportation or storage of goods for a business or contracts of insurance (s 63); or
financial services, which are regulated under the ASIC Act and the Corporations Act 2001 (Cth). However, the ACL does apply to ‘linked credit’, as discussed below.
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A person acquires goods and/or services as a ‘consumer’ if:
the amount payable for the goods or services is less than $100 000 (from 1 July 2021) (less than $40 000 before that date);
the goods or services were of a kind ordinarily acquired for personal, domestic or household use or consumption; or
the goods consisted of a vehicle or trailer acquired for use principally in the transport of goods on public roads (ACL s 3(1)).
Therefore, even goods acquired by a business may be covered if they cost less than $100 000.
However, a person is not a consumer if they acquired goods:
for the purpose of re-supply; or
for the purpose of using them up or transforming them in a process of production, manufacture, or repair (ACL s 3(2)).
If it is alleged that a person is a consumer in any proceeding, then it is presumed they are a consumer unless the contrary is established (ACL s 3(10)).
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In relation to goods, ‘supply’ (this includes re-supply) includes selling, exchanging, leasing, hiring and purchasing by hire-purchase. In relation to services, supply includes providing, granting and conferring. The terms supplier and ‘supplied’ have corresponding meanings (ACL s 2(1)).
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A person is the manufacturer of the particular goods in question if they:
actually manufactured the goods – to manufacture includes to grow, extract, produce, process and/or to assemble;
claim to be the manufacturer of the goods;
permit someone else to claim they are the manufacturer of the goods;
permit their business name or one of its brand names to be applied to the goods (e.g. printed on a wrapper or woven on a label); or
imported the goods if the actual manufacturer does not have an office in Australia (ACL s 7(1)).
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A number of the ACL’s consumer guarantees only apply when goods are supplied in trade or commerce. Generally, this means that the supplier must be carrying on a business of supplying goods and services. Therefore, the consumer guarantees do not cover goods or services sold as one-offs by individuals because these are not done in trade or commerce. The guarantees relating to title, undisturbed possession, and undisclosed securities apply whether or not the goods are sold in trade or commerce.
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Many of the consumer guarantees do not apply to goods bought at an auction where the auctioneer is an agent of the seller. The only consumer guarantees that apply to goods bought at a traditional auction are the guarantees relating to title, undisturbed possession and undisclosed securities.
Online auctions may be covered by the consumer guarantees if the website does not act as an agent of the seller. Check the terms and conditions, and seek legal advice before an auction.
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The consumer guarantees apply to goods bought from online businesses based in Australia. However, the guarantees do not apply to goods bought from overseas websites if they do not offer their products and services in Australia, or if the product is first sent to an overseas address before it is sent to Australia or if the transaction is made overseas. It is important to check the terms and conditions of the contract. Even if they do apply, there may be practical difficulties in taking legal action and obtaining an effective remedy from an overseas-based seller.
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A consumer’s rights under the consumer guarantees – that goods comply with their description, are of acceptable quality and are fit for their purpose – cannot be excluded from consumer contracts. A term of a contract is void (i.e. not enforceable) if it claims to exclude the operation of the consumer guarantees or exclude liability for a failure to comply with a consumer guarantee (ACL s 64).
Signs, cash register receipts, websites, etc. that state ‘no refunds’ are misleading because they send the message that it is not possible to get a refund or other remedy even if there is a breach of a consumer guarantee. These notices try to stop consumers from claiming their statutory rights to the non-excludable consumer guarantees under the ACL.
Notices stating the following terms are unlawful:
‘no refund on sale items’;
‘exchange or credit note only for return of sale items’; and
‘no refunds after 30 days’.
Similarly, insisting that a consumer return goods unopened or in the original packaging may be misleading as this is not a pre-condition to enforce the consumer guarantees.
However, notices that state that ‘no refunds will be given if you have simply changed your mind’ are acceptable because they do not try to negate the consumer guarantees.
The consumer guarantees of acceptable quality, fitness for purpose and description cannot be limited by time. A seller or manufacturer may say that it will cover defects for (say) 24 months from the date of purchase but this does not affect ACL rights, which may last longer depending on the pre-requisites discussed above, such as the description and the price.
A term of a contract may limit a supplier’s liability to replace or repair faulty goods, or to pay to replace or repair the goods. However, this only applies if the goods are not ordinarily used for personal, domestic or household use or consumption (ACL s 64A). This means that any term in a contract that attempts to limit the remedies available for personal, domestic or household goods is void.
Also, displaying a no refunds sign may be an offence under section 29(1)(m) of the ACL because it makes a false or misleading representation concerning the effect of a condition, warranty or guarantee. This is an offence under the ACL which could lead to a criminal penalty in section 151(5) for breach of the law with a fine of up to $50 million and/or a civil penalty in section 224(1) of up to $50 million.
When do the consumer guarantees apply?
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: 629
Next Section: Consumer guarantees: Goods
