Published: 27 June 2013
Summary: This video looks at the consumer guarantees in detail and the remedies available when a guarantee hasn't been complied with - a must for all business owners and managers.
FEMALE PRESENTER: Consumer guarantees apply to “consumer goods” and “consumer services” – what are these? The Australian Consumer Law introduces uniform definitions about when consumer guarantees apply. The key things to remember are that the consumer guarantees regime applies:
- for goods or services under $40,000
- for goods or services over $40,000 which are normally acquired for personal, domestic or household use or consumption; and
- for a vehicle or trailer principally used to transport goods on public roads.
The consumer guarantees won’t apply if the goods are purchased to be resupplied or to be transformed into something else, which is then on-sold.
Let’s look at the basics of the consumer guarantees regime. Simply put, the guiding principle is that consumers ought to be able to obtain a remedy from a seller if goods or services do not meet a certain standard.
Goods must be of acceptable quality, which is defined under the ACL. “Acceptable quality” defines a standard which a reasonable consumer would find acceptable.
This doesn’t mean that you can’t sell a good if it has a minor problem – the law also states that if the seller clearly draws the customer’s attention to any defects prior to purchase, the goods will be deemed to be of acceptable quality.
MALE PRESENTER: Fitness for any disclosed purpose, compliance with description or sample, express warranties and due care and skill are also required under the consumer guarantees regime.
Importantly, the new laws make it clear that it is the responsibility of the seller of goods or services to provide a remedy to a consumer. The seller can then liaise with the manufacturer or importer to provide repairs, or to compensate them if they have provided a refund or replacement and the problem was caused by the manufacturer/importer.
FEMALE PRESENTER: Perhaps most importantly, the consumer guarantees clarify the remedies that consumers are entitled to when a good or service doesn’t meet the consumer guarantees. These remedies are repair, replacement, fixing a problem with services or a refund.
The appropriate remedy depends on how major the problem with the goods or services is. Problems can be defined as major or minor. We’ll look at what a major failure to comply is shortly.
If a failure to comply with the consumer guarantees is major the consumer is entitled to choose which remedy they’d prefer.
If the failure to comply is minor and can be remedied, the supplier has the option to fix or replace the goods within a reasonable time, rather than give a full refund.
If the problem with the goods or services causes other loss or damage—for example, a faulty toaster causes a fire in the consumer’s kitchen—the consumer may also be entitled to compensation for the loss or damage.
It is important that you understand the remedies your consumers are entitled to, as there are a number of consequences of non-compliance. For the first time, the ACCC, ASIC and state and territory consumer protection agencies can take action against businesses, on behalf of affected consumers, if they fail to comply with the consumer guarantees.
Consumers and regulators can also take action against a business if the business misrepresents consumer rights. This includes any misleading conduct or misrepresentations made by sales staff.
MALE PRESENTER: How do we distinguish between a major and minor failure? Well for the supply of goods, a major failure is where:
- the failure is so serious that a consumer who fully understood the failure would not have made the purchase
- the goods differ significantly from the description given, or sample shown
- the goods are substantially unfit for the purpose for which such goods are generally used, or for a purpose made known to the supplier, and cannot be modified to make them fit; or
- the goods are unsafe.
FEMALE PRESENTER: As mentioned earlier, in the case of major failure the consumer may either reject the good or take action to recover compensation for any reduction in the value of goods below the price paid.
Of course, a consumer’s rights to reject goods are not limitless – goods cannot, for example, be rejected because they have been lost or damaged after delivery, or if a consumer continued to use the goods for a significant time after they realised there was a problem with them.
MALE PRESENTER: A minor failure is a failure to perform which does not meet any of the definitions of “major”. If the failure to comply is minor, then the supplier has a chance to repair or replace the goods, but this must be done within a reasonable time. If it takes too long to fix or replace the goods, the consumer may choose to reject the goods and obtain a refund.
FEMALE PRESENTER: In the case of services, a major failure is classified as where:
- a consumer who fully understood the failure would not have acquired the services
- the services are substantially unfit for the purpose for which such services are generally used, and cannot be modified to make them fit
- the services – and any product resulting from the services – are not fit for the purpose that was made known to the seller and cannot be remedied to meet the original purpose; or
- the supply of the services creates an unsafe situation.
As with goods, a service failure which does not meet any of these definitions is a minor failure.
In the case of major failure the consumer may terminate the contract for the services and get a refund. If the failure to comply is not major, then the supplier has a chance to remedy the problem with the services, but this must be done within a reasonable time.
If it takes too long to fix the problem with the services, the consumer may choose to terminate the contract and obtain a refund.
MALE PRESENTER: There are a number of common misconceptions about rights and obligations with regards to guarantees. The next chapters will highlight the key points that all businesses, and their staff members who deal with consumers, need to know.