The ACL definition of goods (s.2) encompasses goods such as vehicles, animals, gas and electricity, and expressly includes computer software, second-hand goods, and any component part of, or accessory to, goods.
The term "services" is defined broadly in section 2 of the ACL and includes most things normally thought of as services.
Most of the consumer guarantees under the ACL do not apply to sale of goods by auction.
The guarantees under the ACL arise where there is a supply of goods or services by a supplier to a consumer. A "consumer" is defined in section 3 of the ACL. That is, a consumer is a person who acquires goods and services for $40,000 or less (until that amount is increased by regulation), or for personal, household or domestic purposes. The ACL adds 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".
The ACL provides that a person will not be a consumer where 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.
The ACL sets out "guarantees" that apply by law to consumers transactions in relation to goods and services below:
GOODS
The seller must have the right to sell the goods
The ACL provides for several guarantees that protect a consumer where a supplier does not have the right to sell the goods.
First, section 51 provides for a guarantee that the supplier has 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). The only exceptions to this are where there is a clear intention that the consumer would not obtain absolute title in the goods (e.g., where the goods are provided for a limited period), or where the supply is by hire or lease.
Secondly, section 53 creates a guarantee that goods supplied to a consumer are free from any security (such as a mortgage), unless it has been disclosed to the consumer. Section 53 does not apply to a supply by hire or lease.
Thirdly, section 52(1) creates a guarantee of the consumer's right to "undisturbed possession" of goods, subject to any security (such as a mortgage) disclosed before the consumer agreed to the supply. Section 52(3) creates a guarantee that, where a supplier transfers only limited title in goods, the consumer's possession is not to be disturbed by the person whose title is transferred, or anyone claiming on the basis of that title. Section 52 applies to transfers under a hire or lease, but only for the period of the hire or lease.
Goods must conform to their description
Where goods are supplied to a consumer by description, section 56 of the ACL creates a guarantee that the goods will "correspond" to that description. For an explanation of what constitutes a sale by description, see above.
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", and section 56(3) says that goods can be supplied by description and by sample or demonstration, in which case guarantees under sections 56 and 57 will both apply.
The guarantee under section 56 will not apply to goods sold by auction, and will only apply where the goods are supplied "in trade or commerce". That is, it will not normally apply to private sales of goods, at least when the supplier is making a "one-off" sale, rather than regularly selling goods.
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
- for which the supplier represents that they are reasonably fit (s.55(1)).
The guarantee does not apply where 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 will only apply where the goods are supplied "in trade or commerce".
Goods must be of acceptable quality
The ACL replaces the concept of "merchantable quality" with "acceptable quality". Section 54 creates a guarantee that where goods are supplied to a consumer in trade or commerce, other than by auction, they must be of "acceptable quality". This means that they must be as (s.54(2)):
- fit for the purposes for which such goods are commonly supplied;
- acceptable in appearance and finish;
- free from defects;
- safe; and
- durable,
as a reasonable consumer who knows the state and condition of the goods (including hidden defects) would regard as "acceptable".
In deciding what would be "acceptable", regard must be had to:
- 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)).
The guarantee will not extend to goods where the reasons the goods are not of acceptable quality are drawn to the consumer's attention (s.54(4)) or are disclosed in a written notice displayed with the goods (s.54(5)), or would have been disclosed on a reasonable examination, and the consumer examined the goods (s.54(7)). The guarantee will also not apply 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 or where they are damaged by abnormal use (s.54(6)).
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 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 sales by auction.
Other guarantees
The ACL also creates guarantees, which require, in the context of the supply of goods in trade or commerce:
- that a manufacturer is to take reasonable action to ensure that facilities and parts for repair of the goods are available for a reasonable period (s.58); and
- that a manufacturer comply with any express warranty given by the manufacturer in relation to the goods (s.59).
SERVICES
What protections are offered?
Protections in the ACL do not apply to contracts for services relating to the transport of goods for a business, or to contracts of insurance.
The ACL creates a guarantee that services provided to a consumer in trade or commerce will be rendered with due care and skill (s.60).
The ACL provides for a protection to ensure that services are fit for their specified purpose. Section 61(1) sets out that services must be reasonably fit for any purpose made known by the consumer to the supplier, either expressly or by implication. The 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 supply 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)).
The ACL creates a guarantee that services will be supplied in a reasonable time, where the time for the supply is not fixed, or to be determined in an agreed manner (s.62).
The ACL allows a consumer to take action against a supplier of goods where one of the guarantees provided for in relation to the supply of goods has been breached by the supplier (s.259(1)). The remedies available to the consumer will depend on whether the failure to comply with a guarantee was a "major failure". A major failure will occur where (s.260):
- the goods would not have been acquired by a reasonable consumer fully acquainted with the failure to comply with the guarantee;
- the goods differ significantly from their description (if supplied by description), or sample or demonstration (if supplied by reference to sample or demonstration);
- the goods are substantially unfit for a purpose for which goods of that kind are commonly supplied, and that unfitness cannot easily be remedied within a reasonable time;
- the goods are unfit for a purpose disclosed to the supplier or their agent before supply, and that unfitness cannot easily be remedied within a reasonable time; or
- the goods are unsafe.
If the failure to comply with a guarantee is not a major failure, and can be remedied, the consumer may require the supplier to remedy the failure to comply with the guarantee (s.259(2)). A supplier remedies a failure to comply by (s.261):
- curing any defect in title, if there is such a defect;
- repairing the goods;
- replacing the goods with goods of an identical type; or
- refunding the amount paid by the consumer.
If the supplier fails to comply with that requirement in a reasonable time, the consumer may have the failure remedied (for example, by having the defective goods repaired), and take action against the supplier to recover the reasonable costs of remedying the failure (s.259(2)(b)(i)). Alternatively, the consumer may notify the supplier that the consumer rejects the goods (s.259(2)(b)(ii)).
The consumer may not reject goods where (s.262(1)):
- a period has passed since the goods were supplied, within which it would be reasonable to expect that the failure to comply with a guarantee would become apparent to the consumer; or
- the goods have been lost, destroyed or disposed of by the consumer.
The ACL creates a similar right of action for a consumer where one of the guarantees in relation to the supply of services has been breached by the supplier.
A person who has suffered loss or damage as a result of contravention of the guarantees set out in the ACL may recover the amount of loss or damage from the person who contravened the relevant provision (s.236(1)). This right of action lasts up to six years from the date of the contravention (s.236(2)).
The ACL provides that a term of a contract is void if it has the effect of excluding the application of the ACL guarantees, the exercise of rights conferred under it, or liability for a breach of an ACL guarantee (s.64). Section 64A sets out that a term is not void if it limits liability to the replacement of faulty goods, their repair, payment for replacement, or payment for repair.
The ACL provides for protections for a consumer who is a party to a "linked credit contract": broadly speaking, a contract with a credit provider with a close association with the supplier of goods and services (s.2 ACL). Where there is a breach of any of the guarantees described above relating to the quality of the goods or services (and in a range of other circumstances), the supplier and the linked credit provider are each liable for the whole amount of the loss and damage the consumer suffers (s.278). Generally speaking, the consumer must take any action against the supplier and the linked credit provider jointly (s.279).
A linked credit provider will not be liable if the consumer sought out the credit from the credit provider, and was not induced to do so by the supplier of goods or services (s.280(1)). A linked credit provider would also not be liable where the credit provider satisfied itself of the good reputation of the supplier of goods and services, and had no cause to suspect that the consumer would be entitled to take action for breach of a guarantee, and that the supplier could not cover the liability (s.280(2) & (3)). A linked credit provider who supplies continuing credit (such as a credit card) tied to the supply of goods and services, will not be liable if given the nature and volume of their business, they had no cause to suspect that a consumer might be entitled to claim damages from the supplier for breach of a guarantee (s.280(4) & (5)).
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APPLICATION OF THE STANDARDS :: Last updated: Thu Jul 1st 2010