A number of concerns have been expressed with the existing statutory implied terms regime in Australia. As a result, the Commonwealth Consumer Affairs Advisory Council is currently undertaking a review of the existing laws on implied terms.

In addition to any warranties given voluntarily by manufacturers and retailers of goods and services, the national Trade Practices Act 1974 (the TPA) and the fair trading and sale of goods acts in the States and Territories imply certain rights and obligations into all consumer contracts.

Whether a particular consumer can have the benefit of the operation of implied terms in their favour will depend on the monetary thresholds and use limitations that apply under the law that is being relied upon. For example, under the TPA a consumer qualifies if either the goods or services acquired have a value of $40,000 or less, or the goods or services are of a type ordinarily used or purchased for personal, domestic or household use or consumption.

By reason of the terms implied in consumer contracts by the TPA, a consumer that purchases goods may have a remedy for breach of contract against the seller if:

  • the goods are not of merchantable quality;
  • the goods are not fit for their intended purpose;
  • the goods do not match the description or sample given to the consumer;
  • the consumer does not receive clear title to the goods;
  • the consumer does not enjoy quiet possession of the goods; or
  • the goods are encumbered.

The type of remedy that the consumer will be entitled to will depend on the circumstances. However, typically, it may include replacement of the goods, the repair of the goods, compensation for loss or damage or a refund.

The TPA also implies terms into consumer contracts for the supply of services. If the services are not carried out with due care and skill or they (or any materials supplied in connection with the service) are not fit for their intended purpose, a consumer will again have a remedy under contract.

Many of the above principles are echoed in the fair trading and sale of goods acts in the States and Territories. However, the laws between the States and Territories do differ in some respects and to varied extents.

A number of concerns have been identified as arising under the existing statutory implied terms regime. These include:

  • lack of awareness and misinformation (of consumers and businesses) as to what their respective rights and obligations are under the laws;
  • differing implied terms laws across jurisdictions leading to uncertainty and inconsistency;
  • lack of clarity in legislation, including the fact that available remedies for breaches of implied terms are not set out and ambiguity of certain terms;
  • inability of the laws to sufficiently redress harm suffered by consumers;
  • inaccessibility of remedies;
  • the uncertainty presented by extended warranties and how they interact with implied terms;
  • the fact that Australia does not currently have "lemon laws" (which provide a remedy where consumer goods repeatedly fail); and
  • the additional risks presented by online shopping.

As a result, the Commonwealth Consumer Affairs Advisory Council is currently undertaking a review of the existing laws on implied terms. It examined the issues outlined above in its Issues Paper in July 2009.

It is apparent that it might not be desirable, necessary or possible to address all of these matters and that identification of the precise issues requires further development. Since the Issues Paper puts forward no suggestion as to how the implied terms regime might be reworked, submissions made in response to the Issues Paper are currently only able to contribute to the debate on the effectiveness of the existing regime, without addressing any proposed solution in detail.

However, it is clear that in light of the current proposals to amend and harmonise other consumer laws in Australia, it is also appropriate to consider reconfiguring the statutory implied terms regime at this time. How such a review is ultimately approached will be determinative of the outcome.

The review procedure and its underlying policies will be something to watch closely over coming months.

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.