What are the Consumer Guarantees

Australian Consumer Law provides for a number of minimum standards in addition to a warranty or contract, but the first step is to know what is meant by the terms “consumer”, “supply”, “trade or commerce”, “goods” and “services”.

Protection of consumer rights

The ACL provides a number of minimum standards, called guarantees, which apply where goods or services are supplied to consumers. When a consumer guarantee is breached, the consumer may have a number of rights against the supplier or manufacturer. These rights exist in addition to any contract or express warranty provided by the supplier or manufacturer.

The ACL guarantees largely relate to the supply of goods in trade and commerce. It is therefore necessary to determine what we mean by the terms “consumer”, “supply”, “trade or commerce”, “goods” and “services”.

Who is a consumer?

According to section 3 of the ACL, a “consumer” is a person who acquires goods and services for $40,000 or less, or for personal, household or domestic purposes.

Also, the ACL states that a person is a consumer if they purchase “a vehicle or trailer acquired for use principally in the transport of goods on public roads”.

According to the ACL, a person is not considered to be a consumer when they have acquired goods for the purposes of re-supply, or in order to use them up, or transform them in a process of production, manufacture or repair (s 3(2)).

Who is a supplier and when are goods supplied in “trade or commerce”?

The term “supply” is defined in section 2 of the ACL. In relation to goods, the definition of “supply” (including re-supply) in the ACL includes selling, exchanging, leasing, hiring and hire-purchasing. In relation to services, the definition of “supply” in the ACL includes providing, granting and conferring. The term “supplier” has a corresponding meaning.

A number of the ACL guarantees only apply when goods are supplied “in trade and commerce”. This generally means that the supplier must be carrying on a business of supplying goods and services. Therefore, the ACL guarantees do not cover goods or services sold as one-offs by private individuals. Also, goods sold by auction are expressly excluded from some of the ACL guarantees.

Guarantees in relation to goods

The meaning of “goods” is defined broadly in the ACL. Importantly, “goods” expressly includes “second-hand goods” and “computer software”. The guarantees that apply under the ACL are outlined below.


NOTE

Goods purchased privately though classified websites are generally not covered by the ACL guarantees. Similarly, not all the guarantees apply to goods purchased at public auctions.

Consumers should be careful when purchasing goods through classified websites (e.g. eBay and Gumtree) or at auctions. Apart from the fact that many of the ACL guarantees may not apply, there could also be practical hurdles to getting a refund or taking legal action against a private seller.


Guarantee: the seller must have the right to sell the goods

Several guarantees in the ACL protect a consumer when a supplier does not have the right to sell the goods.

First, the supplier must have the right to dispose of the goods at the time the consumer acquires property in the goods (e.g. by taking delivery of the goods) (s 51). The only exceptions to this are where there is a clear intention that the consumer will not obtain absolute title in the goods (e.g. where the goods are provided for a limited period), or where the goods are hired or leased.

Second, goods supplied to a consumer must be free from any security (e.g. a mortgage), unless it has been disclosed to the consumer (s 53). This guarantee does not apply to goods that are hired or leased.

Third, consumers have a right to “undisturbed possession” of goods – subject to any security (e.g. a mortgage) disclosed before the consumer agreed to the supply of the goods (s 52). This guarantee states that, where a supplier transfers only limited title in the goods, the consumer’s possession is not to be disturbed by the person whose title is transferred (or by anyone claiming on the basis of that title). This guarantee applies to transfers under a hire or lease, but only for the period of the hire or lease.

Guarantee: goods must be fit for their purpose

The ACL creates a guarantee that goods must be reasonably fit for:

any purpose made known by the consumer to the supplier, the supplier’s agent, or the manufacturer of the goods (s 55(2)); and

any purpose for which the supplier represents that the goods are reasonably fit (s 55(1)).

This guarantee only applies when the consumer did not rely on, or where it was not reasonable for the consumer to rely on:

the supplier;

a person by whom prior negotiations were conducted; or

the manufacturer of the goods.

The guarantee only applies when the goods are supplied “in trade or commerce”.

Guarantee: goods must be of acceptable quality

When goods are supplied to a consumer in trade or commerce, other than by auction, the goods must be of “acceptable quality” (s 54). Section 54(2) requires that the goods must be:

fit for the purposes for which such goods are commonly supplied;

acceptable in appearance and finish;

free from defects;

safe; and

durable,

to the standard that a reasonable consumer who knows the state and condition of the goods (including hidden defects) would regard as “acceptable”.

In deciding what is “acceptable”, a consumer should consider:

the nature and price of the goods;

any statements on the packaging or labelling; and

any representations about the goods by the supplier or manufacturer (s 54(3)).

If you are having difficulty determining whether goods you have purchased are of acceptable quality, seek legal advice.

The guarantee of acceptable quality does not extend to the following situations:

where the reasons the goods are not of acceptable quality are drawn to the consumer’s attention before purchasing (s 54(4));

where the reasons the goods are not of acceptable quality are disclosed in a written notice displayed with the goods (s 54(5));

where the consumer examines the goods before they agree to their supply and upon reasonable examination it would have been apparent they were not of acceptable quality (s 54(7));

where the consumer to whom the goods are supplied causes them to become of unacceptable quality, or fails to take reasonable steps to prevent them becoming of unacceptable quality, and where they are damaged by abnormal use (s 54(6)).

Guarantee: goods must correspond to their description

Where goods are supplied to a consumer based on a description, the goods must correspond to that description (s 56).

Section 56(2) provides that goods might be supplied by description even where “having been exposed for sale or hire, they are selected by the consumer”.

Section 56(3) says that goods can be supplied by description and by sample or by demonstration, in which case the guarantees under sections 56 and 57 both apply.

The section 56 guarantee does not apply to goods sold privately or by auction and only applies where the goods are supplied “in trade or commerce”.

Guarantee: goods sold by sample must correspond to the sample

The ACL creates a guarantee that where goods are supplied to a consumer, in trade or commerce, “by reference to” a sample or demonstration:

the goods must correspond with the sample or demonstration in quality, state or condition (s 57(1)(c));

the consumer must have a reasonable opportunity to compare the goods to the sample, if the goods are sold by reference to a sample (s 57(1)(d)); and

the goods must be free from any defect that would not be apparent on reasonable examination, which would cause the goods not to be of acceptable quality (s 57(1)(e)).

This guarantee does not apply to private sales or sales by auction.

Other guarantees

The ACL creates guarantees that apply to the supply of goods in trade or commerce and require:

a manufacturer to take reasonable action to ensure that facilities and parts for repair of the goods are available for a reasonable period (s 58); and

a manufacturer to comply with any express warranty given by the manufacturer in relation to the goods (s 59).

Guarantees in relation to services

In the ACL (s 2), “services” is widely defined to include “any rights, benefits, privileges or facilities that are, or are to be, provided, granted or conferred in trade or commerce”.

Overviews of the ACL guarantees for services are below.

However, importantly, the guarantees in the ACL do not apply to contracts relating to insurance or the transport of goods for a business.

It is not uncommon for a trader to supply a consumer with goods and services in a related transaction (e.g. where a trader sells and installs an air-conditioning unit).

Guarantee: services must be rendered with due care and skill

Under the ACL (s 60), services provided to a consumer in trade or commerce must be rendered with due care and skill. Other legal principles may be relevant in assessing if there has been a breach of this guarantee (such as principles relating to common law negligence).

Guarantee: services must be fit for specified purpose

Services must also be reasonably fit for any purpose made known by the consumer to the supplier, either expressly or by implication (s 61) .

The services – and any product that results from those services – must be of such nature, quality, state or condition that they might reasonably be expected to achieve the consumer’s desired result, if the consumer has made this known to the supplier or the supplier’s agent (s 61(2)). These protections only apply to the supply of services in trade or commerce, and only if it was reasonable for the consumer to rely on the skill and judgment of the supplier (s 61(3)).

Guarantee: services must be provided within a reasonable time

Under the ACL (s 62), services must be supplied in a reasonable time, where the time for the supply is not fixed, or to be determined in an agreed manner.