New consumer guarantees under the Australian Consumer Law

With the introduction of the Australian Consumer Law (ACL) on 1 January 2011, Australia has a single national consumer law.

The ACL applies to all Australian businesses, wherever trading in Australia. It replaces different national, state and territory laws that set out consumer rights and business obligations when selling goods and services with a single, national set of rules.

While much of the new law will not significantly change current obligations in dealing with consumers and other businesses, some of the new provisions will affect all suppliers of goods and services. A key area of reform is the introduction of new consumer guarantees.

Consumer Guarantees

As of 1 January 2011, suppliers and manufacturers automatically provide guarantees about goods sold, hired or leased and services provided to consumers. These consumer guarantees apply irrespective of any warranty provided by the supplier or manufacturer.

The following consumer guarantees will replace the implied conditions and warranties that existed under the Trade Practices Act 1974 (Cth) and introduce some new guarantees for goods and services:

Consumer guarantees applying to goods:

1. suppliers and manufacturers guarantee that goods are of acceptable quality when sold to a consumer
2. suppliers guarantee that goods are reasonably fit for a represented or disclosed purpose the consumer or supplier specified
3. suppliers and manufacturers guarantee that goods correspond with their description
4. suppliers guarantee that goods match any sample or demonstration model and any description provided
5. suppliers and manufacturers guarantee that any extra promises or ‘express’ warranties given about the goods made or sold will be honoured
6. a supplier guarantees that they have the right to sell the goods, unless they alert the consumer to limited title before the sale
7. a supplier guarantees that the consumer has a right to undisturbed possession of the goods
8. a supplier guarantees that the goods are free from undisclosed securities, charges or encumbrances
9. manufacturers and importers of goods guarantee that they will take reasonable steps to ensure that repairs will be undertaken and spare parts are available for a reasonable time after purchase

Consumer guarantees applying to services:

1. services will be rendered with due care and skill
2. services and related products will be reasonably fit for their identified purpose
3. services will be supplied within a reasonable time (when no time is set)

Application of Guarantees

The consumer guarantee regime applies to

• goods and services up to $40,000 (this includes business to business contracts) regardless of purpose or use
• goods and services over $40,000 which are normally acquired for personal, domestic or household use or consumption
• for a vehicle or trailer principally used to transport goods on public roads

As a result:

• All the above contracts will contain express or implied non-excludable consumer guarantees.
• Where contracts involve the supply of goods, express warranties and pre-contractual statements made in relation to the goods will be treated as non excludable consumer guarantees.
• Any term which seeks to exclude an implied consumer guarantee will be invalid and will have no effect.
• Goods covered by the guarantees must be sold in trade or commerce and bought by a consumer.
• Guarantees in respect of title, undisturbed possession and undisclosed securities apply to all goods, irrespective of whether or not they are sold in trade or commerce.

Exclusions

• The consumer guarantees do not apply to:
• One off sales such as garage sales
• Commercial transactions which exceed $40,000 in value
• Goods or services acquired to be re-supplied or re-sold
• Private sales by individuals to other individuals or businesses
• Insurance contracts
• Auction sales where the auctioneer is acting as an agent (real estate), however, the new guarantees do apply to business sales via online ‘auction’ websites (including eBay) and the sale of second hand goods
• Goods or services used up in the process of manufacturing other goods or services

Where exclusions apply, a supplier or manufacturer can limit their liability to replacement, repair or the cost of the goods, or the cost of re-supplying the services.

If manufacturers sell directly to consumers, they will have the same responsibilities as suppliers under the consumer guarantees.

If you are a provider of goods and services and require advice on how to ensure you are complying with this new law, contact us to discuss a tailored solution for your business and to obtain a copy of our ACL Action Checklist.

Author: Fotini Kypraios

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