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Why You Absolutely Need Consumer Guarantees (Even When You Think You Don’t)

Commercial Law

If you are a business offering a product or service in Australia, you are subject to the Australian Consumer Law (ACL) under the Competition and Consumer Act 2010. However, many corporations are unsure about the necessity of consumer guarantees, which can lead to costly litigation from both consumers and the government.

What are consumer guarantees?

According to the ACCC, “Consumer guarantees are a set of rules that apply to goods and services purchased by consumers under the ACL.” These rules are intended to protect buyers, acting as an assurance that any good or service purchased will work as expected. They also outline the circumstances in which a business is legally required to provide a remedy or refund.

The ACL commenced operation on 1 January 2011 and replaced the Trade Practices Act 1974 (Cth) (TPA). If you operate a business within Australia, you are legally required to comply with the ACL, which includes complying with consumer guarantees. These guarantees apply, regardless of any additional terms or conditions you include in your contract of sale.

What do consumer guarantees cover?

It is not only small items that are covered. The ACL cover items and services sold to individuals up to a value of $40,000, which captures most businesses in Australia.

The consumer guarantee will vary depending on whether you provide a good or a service. According to the ACCC, if you are providing a good, you must ensure that they:

  • Are of acceptable quality: the goods must be safe, lasting, have no faults, look acceptable and do all the things someone would normally expect them to do
  • Are fit for any purpose that the consumer made known to the business before buying
  • Have been accurately described
  • Match any sample or demonstration model
  • Satisfy any express warranty
  • Come with undisturbed possession
  • Are free from any hidden securities or charges
  • Have spare parts and repair facilities reasonably available for a reasonable period of time, unless the consumer is advised otherwise.

If you provide a service,  you must guarantee:

  • Due care and skill;
  • Fitness for a particular purpose or desired result;
  • Provision of the service within a reasonable time if time is not otherwise specified or determined.

Contracts vs guarantees

As mentioned previously, the guarantees in the ACL act independently of any contracts you may have in place. As such, they cannot be modified, excluded, restricted or limited in the terms of the contract.

As a business owner, you cannot tell a consumer that the guarantee does not exist, may not have a particular effect, or may be excluded. Even if they agree (in writing or verbally)  the consumer guarantee does not exist, the consumer still cannot surrender their rights under Australian Consumer Law. For example, it is unlawful to display a sign which states, “No refunds” as this implies that refunds are not available under any circumstances. In fact, it is also unlawful to display signs which state “No refunds on sale items” or “Exchange or credit note only for return of sale items.” However, a sign which states that “No refunds will be given if you change your mind” is allowed.

The penalties for providing false or misleading information about consumer guarantees are severe. You may be investigated by the ACCC and if found guilty, body corporate may be fined up to $1.1 million while individuals may be fined up to $220,000. Criminal penalties may also be imposed.

What happens if I don’t meet those guarantees?

If your business does not fulfil any of the above-listed consumer guarantees, the buyer or consumer has the right to a:

  • Repair
  • Replacement
  • Refund
  • Cancellation of service
  • Compensation for any damages or loss

It is the responsibility of your business to remedy the issue as soon as possible.

How do I ensure compliance with the ACL?

The existence of the ACL does not mean that businesses have no rights. You can still develop terms and conditions that comply with the ACL but which also offer your business important protection. We recommend enlisting the services of an experienced law firm to assist in the drafting of the best possible contract terms to suit your business. A lawyer who is well-versed in Australian Consumer Law will review your existing contracts to ensure they include important clauses such as the acknowledgement of the potential applications of ACL, any exclusions of warranty provisions, limitation of liability clauses and more.

We can also help you in circumstances where a dispute has arisen with a consumer so as to find the most practical and cost effective solution, sparing you from the distraction of a consumer dispute, and avoiding the difficult publicity which can arise when consumer’s expectations, whether realistic or not, are not met.

As a business owner, it is your responsibility to be fully aware of your responsibilities and obligations to consumers under the ACL. To fully protect your business, get in touch with the team at AV lawyers to arrange a free consultation.