Every business from 1 January 2011:

  1. who provides goods whether by selling, leasing or hiring or provides services;
  2. that makes goods, puts them together or has their name on them;
  3. that imports goods into Australia, if the manufacturer of those goods does not have an office in Australia;

where the sale of those goods is a 'consumer sale' automatically gives certain guarantees set by the Competition and Consumer Act 2010 (Cth) ("CCA").

If these guarantees apply and they are breached by the business, the consumer is entitled to a remedy.

What is a 'consumer' sale?

A person or a company will be considered a consumer if they purchase:

  1. goods or services that cost less than $40,000 (no matter for what purpose); or
  2. goods or services that cost more than $40,000 but are of a kind ordinarily acquired for domestic, household or personal use or consumption; or
  3. a vehicle or trailer primarily used to transport goods on public roads.

What are the exclusions to consumer guarantees?

All goods sold prior to 1 January 2011 that were sold for personal use or for less than $40,000, continue to be covered by the implied warranties and conditions in state and territory fair trading laws and the TPA.

Also, if goods are purchased to be resold or to be transformed into a product that is sold, the consumer guarantees will not apply to that transaction.

However, even if you sell the goods for the purposes of re-supply, if the sale to the end-user is a 'consumer sale', then that end-user may either make a claim against the supplier or the manufacturer in relation to a breach of the consumer guarantees. For this reason, all businesses in the chain need to ensure that they comply with the consumer guarantees and the CCA generally.

What are the Consumer Guarantees?

Every business satisfying any of the above requirements must comply with the consumer guarantees set by the CCA. The consumer guarantees for goods supplied by the business are that the Goods:

  1. will be of acceptable quality;
  2. will match the description;
  3. will match sample or demonstration model;
  4. have clear title; and
  5. are free from hidden securities or charges.

The business must also:

  1. honour any express warranties that it makes; and
  2. guarantee that the goods are sold with undisturbed possession.

The relevant guarantees for services provided by the business are that the services:

  1. will be carried out with due care and skill;
  2. will be fit for a particular purpose; and
  3. must be supplied within a reasonable time (if no time is set).

Limiting Liability

In accordance with section 64A of the ACL, a business may limit its liability for breach of a consumer guarantee if it makes a consumer sale that is not for "personal, domestic or household use or consumption" (for example it is a sale to a business for business use only) if it is fair and reasonable for the business to rely on that term of the contract.

Penalties

The CCA sets the following penalties if a business tells a consumer that a guarantee does not exist, may be excluded or may have a particular effect including a business representing that it will not be responsible for reasonably foreseeable consequential loss:

  1. maximum civil penalty of $1.1M for a body corporate and $220,000 for individuals; and
  2. criminal penalties of the same amounts also apply.

Remedies Available to Consumers for Breach of a Consumer Guarantee

Depending on the circumstances and whether or not the failure to comply with the consumer guarantee is major or minor, the consumer may be entitled to either repair, replacement, refund or compensation.

A major failure to comply with a consumer guarantee is one where a reasonable consumer would not have purchased the goods had they known of the full extent of the problem, the goods differ significantly from any description, sample or demonstration model or the goods are unsafe. In these circumstances, the consumer may elect the remedy they wish to receive, including electing to keep the goods and seek compensation.

A minor failure to comply with a consumer guarantee is every other failure that is not considered to be a major failure. In these circumstances, the sellers will be able to choose whether they remedy the problem with a replacement, repair or refund.

If you have questions about the new rules or how them may affect you, the team at Coleman Greig can assist you.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.