Australia: Consumer Guarantees and Warranties from Defects: Are You Compliant with the New Law?

Last Updated: 13 February 2012

By Alicia Hill

The Australian Consumer Law, contained in schedule 2 of the Competition and Consumer Act 2010 (Cth), creates a basic set of guarantees for consumers who acquire goods or services from Australian suppliers, importers and manufacturers and stipulates mandatory provisions to be complied with where warranties against defects are provided.1

The Australia Consumer Law is a national law that replaces the pre3existing implied warranties and conditions regime contained in the Trade Practices Act 1974 (Cth) and the State and Territory fair trading laws.

The Australian Consumer Law is based on the same core principles as the implied warranties and conditions laws but has standardised rights and remedies across Australia for consumers acquiring goods and services.

Who is a consumer?

A consumer is:

  • A person who purchases goods which cost less than $40,000;
  • A person who purchases goods worth more than $40,000 which are normally for personal, domestic or household purposes;
  • A person who purchases a vehicle or trailer, irrespective of cost, provided they are used mainly to transport goods.

A person who receives a gift has the same rights as the person who purchased the goods or services, if they meet the definition of consumer and are not excluded goods or services.

A business which purchases an office chair or a photocopier may be a consumer under this definition.

What are consumer guarantees?

When a consumer buys goods and services the Australian Consumer Law provides that the consumer has guaranteed rights that:

  • The goods are of an acceptable quality;
  • The goods match their description or any sample or demonstration model;
  • The goods are fit for any represented purpose or purpose the consumer made known;
  • Where a seller makes extra promises, either verbally or in writing, these promises will be met (e.g. money3back guarantees, lifetime warranties);
  • Repairs and spare parts are reasonably available (unless written notice was given that repairs or spare parts would not be available);
  • The ownership rights in goods bought pass to the consumer, unless the seller has advised that there are other rights over the goods (e.g. leased or hired goods, pre3existing security over the goods), who is entitled to undisturbed possession;
  • The services are carried out with reasonable care and skill;
  • The services are fit for a particular purpose; and
  • The services are completed within a reasonable time.

The consumer guarantees apply to:

  • Second hand goods (but age, price and condition must be taken into account);
  • Private sale transactions.

However, the consumer guarantees do not apply to:

  • Goods which are to be sold or transformed into something that is sold or used up;
  • Insurance, financial services or services for transporting or storing goods for business purposes;
  • Goods bought at auction conducted as an agent of the person selling the goods (apart from title passing, undisturbed possession and disclosure of any other securities).

The consumer guarantees are not able to be excluded from operation.

What are warranties against defects?

A warranty against defect is a representation communicated to a consumer in connection with the supply of goods or services, at or about the time of supply, to the effect that a person will (unconditionally or on specified conditions), if the goods or services, or part of them, are defective:

  • Repair or replace goods or part of them;
  • Provide again or rectify the services or part of them; or
  • Wholly or partly recompense the consumer;

Such a representation includes any document by which such representation is evidenced.

The Australian Consumer Law imposes new requirements relating to the form and content of warranties against defects which affect consumer goods that contain an express warranty against defects.

Who do the consumer guarantees and warranties against defects apply to?

The consumer guarantees and warranties against defects requirements apply to any seller of goods or services to a consumer.

The consumer guarantees also applies to any manufacturer or importer where there is a failure of a consumer guarantee relating to acceptable quality of the goods, goods not matching the description, repairs and spare parts not being reasonably available (unless disclosed otherwise) and express warranties not being met. The warranties against defects may also apply to manufacturers and importers.

When did these new provisions come into effect?

On 1 January 2011 the Australian Consumer Law came into effect, resulting in the consumer guarantees becoming binding upon consumers, retailers, importers and manufacturers in Australia.

The consumer guarantees only apply to goods and services purchased on or after 1 January 2011.

However pursuant to the Trade Practices (Australian Consumer Law) Amendment Regulations 2010 (No.1)(Cth), any warranties against defects in any consumer products sold in Australia, did not need to be compliant with the Australian Consumer Law until 1 January 2012.

How is the Australian Consumer Law different to the law that applied to uspreviously?

Extension of implied warranties and conditions to services in Queensland

Consumer guarantees relating to services from 1 January 2011 will now apply to services in Queensland, Tasmania and the ACT.

Previously these States and Territory did not have statutorily implied warranties and conditions for services.

Goods must be of an acceptable quality rather than the past merchantable quality requirement

Goods now need to be of an 'acceptable quality' as opposed to the previous standard of being 'merchantable quality'. 'Acceptable quality' is defined to mean fit for purpose, acceptable in appearance and finish, free from defects, safe and durable.

Criteria for considering what would be regarded as acceptable is contained in the Australian Consumer Law, with some exclusions also applicable.

There are several material differences between the two terms, including:

  • Goods must be fit for all purposes for which the goods are commonly supplied;
  • Goods must arguably be free from all defects;
  • Goods will not be acceptable if they are defective within a reasonable period after purchase as opposed to the previous position of defective when delivered.2

Consumers can rely on breach of statutory warranties rather than asserting a breach of contract

Previously the implied warranties and conditions in the Trade Practices Act 1974 and the respective Fair Trading Acts in the States or Territories inserted into contracts terms largely similar to the consumer warranties set out above. This meant that a consumer was required to sue for breach of contract of an warranty or condition implied by the respective Act to enforce their rights.

The Australian Consumer Law has made these consumer guarantees and warranties statutory obligations meaning that a consumer will not necessarily need to sue for breach of contract and may choose to sue for breach of a statutory obligation and one or more of the statutory remedies available.

What do I need to do?

Review your business

Identify if you are selling to consumers, as defined in the Australian Consumer Law. If you are selling to consumers you will need to comply with the Australian Consumer Law.

Review your Terms and Conditions of Trade

If you offer an express warranty against defects you need to:

  • Concisely state what the person who gives the warranty must do so that the warranty will be honoured;
  • Concisely state what the consumer must do to entitle the consumer to claim the warranty;
  • Incorporate the wording set out in the CCA regulation. "Our goods come with guarantees that cannot be excluded under the Australian Consumer Law. You are entitled to a replacement or refund for a major failure and for compensation for any other reasonably foreseeable loss or damage. You are also entitled to have the goods repaired or replaced if the goods fail to be of acceptable quality and the failure does not amount to a major failure."
  • Incorporate the name of the person giving the warranty, the business address, telephone number and any email address;
  • State the period or periods within which a defect in the goods or services must appear for the consumer to be entitled to the warranty claim;
  • Set out the procedure for the consumer to claim the warranty including the address to which a claim must be sent;
  • State who bears the expense of claiming the warranty and, if appropriate, how the consumer can claim that expense; and
  • State that the benefits to the consumer given are in addition to other rights and remedies of the consumer under a law in relation to goods and services to which the warranty relates.

Review your internal policies to ensure compliance and train staff

New requirements require training of staff as part of the consumer guarantees include oral representations made to consumers by the seller or its representatives (employees, etc.).

Seek advice if required. We are willing to assist if required. For general information you can also visit www.consumerlaw.gov.au

Footnotes

1 See 'The Australian Consumer Law – A Guide to Provisions', and 'Consumer Guarantees – a guide for consumers' published by the ACCC for more general information. Available on www.accc.gov.au
2 Hughes, A, 'Focus: Consumer guarantees under the Australian Consumer Law', Allens Arthur Robinson, 27 October 2010

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.

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