Commercial Transactions

It is important for both business and consumers to be aware and understand the implications of the Consumer Guarantee Provisions under the Australian Consumer Law (ACL). As the name suggests, these guarantees are automatic and must be abided by businesses who provide goods or services to consumers. This article will examine the ACL guarantees to provide you with some clarity on how they can apply to your business as a supplier or manufacturer.

The ACL, which falls under the Competition and Consumer Act 2010 (Cth), is fundamentally aimed at improving ‘the welfare of Australians through the promotion of [and]… provision for consumer protection’. (see ACL section 2) This requires that a provider of goods or servicesensure that the goods or services meet certain standards,and ensure that efficient and effective redress is available to consumers where they suffer some loss or harm. It also necessitates enforcement that is both balanced and risk-based in its application. Interpretation of the ACL by the courts thus requires promoting the policy objective of limiting personal consumer detriment in circumstances where the goods or services supplied fail to meet consumer expectations.

The Consumer Guarantee Provisions provide consumers who acquire goods or services from suppliers or manufacturers with a basic set of rights, as well as a legislative basis for seeking remedies.There are nine guarantees regarding goods and three regarding services. The guarantees for goods articulated from sections 51 through to 59 of the ACL include guarantee as to title, undisturbed possession, undisclosed securities, encumbrances and charges, acceptable quality, fitness for any disclosed purpose, correspondence with samples or depscription, repairs and spare parts, and express warranties. The three regarding services can be found in sections 60 through to 62, fromguarantees as to due care and skill, fit for any particular purpose, and reasonable time. As per section 64, a business cannot contract out of these guarantees. That is, a term which excludes, restricts or modifies the consumer guarantees is void. Furthermore, it will be considered misleading conduct under sections 18 and 29(1)(m) of the Act to make incorrect statements about consumer rights under the regime, which will include the use of no refund signs by a business.

These consumer guarantee provisions can be enforced by private litigation or by the ACCC in certain cases, against either the manufacturer or supplier. Damages cannot be claimed for failure to comply with ACL provisions, but are available where consumer’s rights are exercised against the manufacturer. (see ACL section 271) That is, where recourse is sought by the consumer against the supplier for failing to comply with the guarantee of acceptable quality, the manufacturer will be liable as per the supplier’s right of indemnity. (see ACL section 274) A cause of action can also arise against the manufacturer, (see ACL section 271) which includes a recovery against the manufacturer for the price paid, and any loss or damage suffered by the consumer if such loss or damage is reasonably foreseeable as a result of the failure. (see ACL section 272) Importantly, the liability of the supplier or manufacturer cannot be excluded. (see ACL sections 64, 276)

The Australian Consumer Law is extensive and comprehensive, working to protect the interests of consumers by ensuring goods or services meet their expectations. It is important to understand your rights and obligations as a supplier, manufacturer or consumer under the law. The position of manufacturers and suppliers are distinct, with liability differing between these providers.

To find out more about Commercial Transactions check out our Resources Centre. If you need any further advice about prospective breach of consumer guarantee provisions, please get in touch today!

This article was authorised by Warwick Heeson.

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