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Australian Consumer Law: Consumer guarantees

Overview

Shopping CentreThe Australian Consumer Law (ACL)

The Australian Consumer Law incorporates a single set of consumer guarantees.

The existence of these guarantees provides some recognitionf or the fact that there is normally a power imbalance between most merchants and consumers and that goods and services are now frequently supplied on a take it or leave it basis rather than arising as a result of a genuine bargaining process; this is perhaps most evident when buying at 'self-service' checkouts or clicking 'I accept' on online service agreements before accessing software, platforms or other cloud services..

The consumer protections are designed to help ensure that minimum standards of fairness, quality and safety are met and cannot be excluded by a party with more bargaining power.

The ACL provides for a set of remedies if the supplier (or manufacturer) contravenes the guarantee requirement. These remedies, set out in Part 5-4 of the Australian Consumer Law, depend upon the seriousness of the breach. Remedies may include rejection of goods, a requirement that the supplier remedy the failure to comply with a guarantee and damages. Importantly, the effectiveness of these remedies depends first on the consumer's awareness of their rights under the ACL and then on their willingness to self-enforce those rights; although litigation is possible, for small purchases in particular the most effective (certainly most cost-effective) remedy will be direct self-enforcement against the company.

This page is broken into the following parts

When do the consumer guarantees apply?

What are the consumer guarantees (in relation to goods)?

Guarantee as to title

Guarantee as to undisturbed possession

Guarantee as to undisclosed securities

Guarantee as to acceptable quality

Guarantee as to fitness for purpose

Guarantee relating to supply of goods by description

Guarantee relating to supply of foods by sample or demonstration model

Guarantee as to repairs and spare parts

Guarantee as to express warrantees

What are the consumer guarantees (in relation to services)?

Guarantee as to due care and skill

Guarantee as to fitness for a particular purpose

Guarantee as to reasonable time for supply

Exclusions in relation to services

What remedies are available for breach of consumer guarantees?

See also legislation page for consumer guarantees in the CCA.

Consumer guarantees versus implied terms

Prior to the introduction of the Australian Consumer Law in 2011 various federal, state and territory fair trading regimes implied terms into consumer contracts which provided similar protections but offered only contractual remedies. The new regime operates independently of contract, with the result that the guarantees can operate without proof of a valid contract and the remedies available are independent of contract (and considerably more flexible)

 

When do the consumer guarantees apply?

Figure shoppingTwo requirements must be met before the consumer guarantees will apply

  • The transaction must occur in trade or commerce
  • The person acquiring the goods must be a consumer

The guarantees do not depend on there being a contract, do not form part of a contract and the remedies for their breach are not restricted to contractual remedies. Although the implied terms took substantially the same form they were more limited because of their direct connection to contract and the limitations of contractual remedies.

The new (2011) consumer guarantees operate beyond contract and are not dependent on contract (so if you are a minor acquiring goods it doesn’t matter if it’s not enforceable and you can personally enforce consumer guarantees in respect of gifts you’ve received (some proof of purchase will be needed but it need not be an original receipt) and the remedies are statute based; they do not depend on a complex claim for breach of contract.

Consumer guarantees cannot be excluded

Importantly, subject to limited exceptions, it is not possible for consumer guarantees to be excluded; a term of a contract purporting to do so is void (s 64).

One of the key exceptions to this rule relates to recreational services. Section 139A of the Competition and Consumer Act 2010 provides that a term of a contract for the supply of recreational services to a consumer is not void under s 64 only because it excludes, restricts or modifies, or has the effect of excluding, restricting or modifying provisions under subdivision B of Division 1 of Part 3-2 of the Australian Consumer Law (this is the sub-division dealing with guarantees relating to the supply of services). This allows the exclusion of liability in relation to death, physical or mental injury provided not caused by reckessness.

Trade or commerce

First, the transaction must occur in trade or commerce:

  • This will include (but not limited to) anything bought in a store – might be a physical store
  • Might be an online store

Importantly, it won’t capture garage sales or other sale by one off private seller. 

Consumer

A person acquires goods as a 'consumer' for purposes of the consumer guarantees if either:

  • the cost of the goods purchased was less than $40,000 (regardless of whether they are being used for personal or business use ) or
  • they cost more but are of the kind normally used for personal, domestic or household purposes.

Some other rules also apply in relation to determining whether goods or services are considered consumer purchases:

  • Vehicles and trailers are covered, provided they are used mainly to transport goods.
  • Goods will not be considered consumer goods if they are to be re-sold or transformed into something that is sold or used up (eg, parts for a computer you are building to sell, even if the individual items are under $40k).

Exclusions

Online shoppingInsurance (s 63) and financial services are excluded from the consumer guarantee regime (covered by other laws)

Other exclusions operate for specific provisions (noted below).

One important exclusion relates to goods sold by auction.

Auctions

Some guarantees (for goods (relating to acceptable quality, fitness for purpose, sale by description, sale by sample or demonstration model and compliance with express warranties); for services relating to guarantees as to repairs and spare parts) do not apply to sales by auction (s 55).

Auctions are defined (s 2) as a sale conducted by an agent.

Perhaps the most obvious example is eBay, where some sales are referred to as auctions. Importantly, the eBay user agreement states that ‘eBay is not your agent for any purpose in relation to this Agreement or your use of the eBay services’ with the result that the better view is that sales on eBay (where they otherwise meet the definition of consumer sales) will be caught by the regime and the guarantees will apply. This is because eBay is not an agent but a platform.

 

Consumer guarantees in relation to products (goods)

Tech saleThere are separate guarantees applicable for goods and services.

Goods are defined broadly (s 2) and include

  • ships, aircraft and other vehicles
  • animals, including fish
  • minerals, trees and crops – attached or otherwise
  • gas and electricity
  • computer software;
  • second-hand goods
  • any component part of, or accessory to, goods.

Different, but overlapping, guarantees apply to the seller and manufacturer (or where the manufacturer is not in Australia, the importer)

Seller

  • Acceptable quality
  • Fitness for any particular purpose
  • Match description
  • Match sample or demonstration model where shown
  • Honour express warrantees
  • Title to goods
  • Undisturbed possession
  • No undisclosed securities

Manufacturer/Importer

  • Acceptable quality
  • Match description
  • Honour express warrantees
  • Provide repairs or spare parts for reasonable time

 

Guarantee as to acceptable title (s 51)

There is a guarantee that the supplier has the right to dispose of property int he goods supplied, unless it is agreed that the supplier will transfer only such title as they have.

This section does not apply to supply by way of hire or lease

 

Guarantee as to acceptable undisturbed possession (s 52)

Provided a supply of goods is not a supply of 'limited title' there is a guarantee the consumer will have a right to undisturbed possession of the goods.

 

Guarantee as to acceptable undisclosed securities (s 53)

Provided a supply of goods is not a supply of 'limited title' there is a guarantee that the goods are free from any undisclosed security, charge or encumbrance and that they will remain free from encumbrance until property passes to the consumer.

 

Guarantee as to acceptable quality (s 54)

There is a guarantee that goods will be of acceptable quality.

When assessing this consideration is given as to what would normally be expected for the type of product and cost, having regard to any statements or representations made about the goods.

In particular, goods must be:

  • fit for all the purposes for which goods of that kind are commonly supplied
  • acceptable in appearance and finish
  • free from defects
  • safe
  • durable (how long would a reasonable and informed consumer expect goods to function without fault?)

View section 54

 

Guarantee as to fitness for purpose (s 55)

Goods must be fit for any disclosed purpose and for any purpose for which the supplier represents they are reasonably fit; this can be through an express statement or may be implicit (a consumer may expect a toaster to make toast notwithstanding the lack of an express statement to that effect).

There is a caveat; the guarantee will not apply if the consumer did not rely on the representation or if it was unreasonable for them to rely on the skill and judgment of the person to whom they disclose their intended purpose.

View section 55

 

Guarantee relating to supply of goods by description (s 56)

Where goods are sold by description there is a guarantee they will correspond with that description.

 

Guarantee relating to supply of goods by sample or demonstration model (s 57)

If goods are sold by reference to a sample or demonstration model there is a guarantee goods will correspond with the sample or demonstration in 'quality, state or condition' and, if sold by sample, that there will be a 'reasonable opportunity' to compare the supplied product with the sample.

There is also a guarantee that goods will be free from any defect that 'would not be apparent on reasonable examination of the sample or demonstration model' and 'would cause the goods not to be of acceptable quality'.

 

Guarantee as to repairs and spare parts (s 58)

There is a guarantee that the manufacturer will 'take reasonable action' to ensure facilities for repair of goods and parts of goods are 'reasonably available for a reasonable period' after supply, unless the manufacturer tool 'reasonable action' to ensure the consumer was given written notice before or at the time of supply that repair facilities or replacement parts would not be available after a specified time.

 

Guarantee as to express warranties (s 59)

There is a guarantee that the manufacturer and supplier (respectively) will comply with any express warranty they gave in relation to goods.

A warranty is defined (s 2) as 'an undertaking, assertion or representation' relating to:

  • 'the quality, state, condition, performance or characteristics of the goods; or
  • the provision of services that are or may at any time be required for the goods; or
  • the supply of parts that are or may at any time be required for the goods; or
  • (iv) the future availability of identical goods, or of goods constituting or forming part of a set of which the goods, in relation to which the undertaking, assertion or representation is given or made, form part

where the undertaking, assertion or representation is made in connection with the supply of goods (or their promotion), 'the natural tendency of which is to induce persons to acquire the goods'.

 

Consumer guarantees in relation to services

Generic tradesperson characterServices are defined (s 2) as including 'any rights [including in relation to property], benefits, privileges or facilities that are, or are to be, provided, granted or conferred in trade or commerce'.

Services must be:

  1. rendered with due care and skill (s 60)
  2. fit for any purpose made known by the consumer (s 61)
  3. supplied within a reasonable time (unless otherwise agreed) (s 62)

ACCC website summarises the guarantees in relation to services:

https://www.accc.gov.au/consumers/consumer-rights-guarantees/consumer-guarantees

 

Guarantee as to due care and skill (s 60)

There is a guarantee that services supplied to consumers in trade or commerce will be 'rendered with due care and skill'.

View section 60

 

Guarantee as to fitness for a particular purpose (s 61)

There is a guarantee that services supplied to consumers in trade or commerce will be reasonably fit for any purpose the consumer made known, unless the consumer did not rely (or it was unreasonable to rely) on the skill or judgment of the supplier.

This guarantee does not apply in relation to the supply of 'services of a professional nature by a qualified architect or engineer'

 

Guarantee as to reasonable time for supply (s 62)

Where the time for supply of services is not set (or agreed to be determined between the parties) there is a guarantee services will be supplied within a reasonable time.

 

Exclusions in relation to services (s 63)

The services guarantees do not apply in relation to services supplied under:

'(a) a contract for or in relation to the transportation or storage of goods for the purposes of a business, trade, profession or occupation carried on or engaged in by the person for whom the goods are transported or stored; or

(b) a contract of insurance.'

 

Remedies

Forthcoming

 

Further reading

There are some excellent resources relating to consumer guarantees. These include:

Academic books, articles and notes

2018

Editorial, 'Consumer guarantees and the doctrine of half-truth' (2018) 26(2) Australian Journal of Competition and Consumer Law 95

2017

Thomas Cadd, 'Apple iOS Updates Cause ACCC Service Headache, Overseas Camera Purchase Not a Pretty PICTURE, and Flimsy eBay Sheds' (2017) 25(3) Australian Journal of Competition and Consumer Law 213