Whether you have to provide a refund, repair, replacement, or compensation to a consumer for problems with goods or services depends on whether you have met 'consumer guarantees' set under the Australian Consumer Law. You are responsible for understanding you obligations under the law.
Goods are covered when sold in trade or commerce and bought by a consumer. Second-hand, leased or hired goods are also covered. Some consumer guarantees apply regardless of whether the goods are sold in trade or commerce. These are the guarantees that a consumer is buying goods:
'Trade or commerce' means in the course of a supplier's or manufacturer's business or professional activity, including non-profit business or activity.
A consumer is a person who buys:
Goods not covered by consumer guarantees include those:
Both suppliers and manufacturers guarantee that goods:
A supplier also guarantees the consumer is buying goods:
A manufacturer guarantees that repairs and spare parts will be available for a reasonable time after purchase.
Suppliers and manufacturers guarantee that goods are of acceptable quality when sold to a consumer. This means they guarantee the goods will be:
If the goods are not of acceptable quality, the consumer is entitled to a remedy. A remedy is an attempt to put right a fault, deficiency or a failure such as a repair, replacement or refund.
The test for acceptable quality is whether a reasonable consumer, fully aware of the goods' condition, including any defects, would find them:
This test takes into account:
Second-hand goods sold in trade or commerce are covered by the guarantee of acceptable quality, but their age, price and condition must be taken into account.
For example - A consumer buys a second-hand washing machine for $250.00 from a shop. The supplier said it was 2 years old and in good condition, but it breaks down after 2 months. A reasonable consumer would expect to get more than two months' use from this machine and would be entitled to a remedy from the supplier.
Consumer goods leased or hired to a consumer must also be of acceptable quality. A consumer 'hires' goods when they pay the supplier to use the goods on a temporary basis, usually short term. A 'lease' is similar but usually involves payment of regular instalments over a longer term.
For example - A consumer hires a steam cleaner to clean their carpet but the machine does not generate steam and leaks. The consumer is entitled to a remedy because the steam cleaner is not of acceptable quality.
When the supplier alerts the consumer to any hidden defects. Some goods may not be of acceptable quality due to problems already known to the supplier. For example - goods with cosmetic problems sold as seconds.
Defective goods can be sold, usually for lower prices, if the consumer is alerted to the defects before the sale, for instance:
It is not enough for the supplier to describe the goods as 'seconds', 'sale' items or 'as is', however a consumer is assumed to be aware of defects if a written notice setting out the defects was displayed with the goods.
A consumer alerted to defects in goods before the sale does not have the right to a remedy if those particular defects later cause problems with the goods, however the supplier may have to meet the guarantee if the consumer finds a different fault.
For example - A consumer finds a bargain in a shoe shop where shoes are labelled as 'seconds'. A tag attached to the shoes advises there is a problem with the stitching. The consumer buys the shoes but when the stitching breaks the consumer cannot claim the shoes were not of acceptable quality. The consumer may be entitled to a remedy where another fault develops such as the sole cracking.
A consumer is not entitled to a remedy if they had an opportunity to examine the goods before purchase and did not find any defects that they should have noticed. For example - Second-hand goods and antiques are often sold on an 'as is' basis. An antiques dealer is not required to give a remedy for defects that a consumer should have noticed when examining the goods, such as chipped surfaces or faded paint.
The amount of effort that a consumer should take examining goods, even given the opportunity, depends on the nature of the goods. For new goods, very limited time or no examination would be expected, however a consumer may be entitled to a remedy for defects that they would not have found even with the most careful inspection.
The acceptable quality does not apply where the consumer uses the goods in an 'abnormal manner'. Goods are not expected to be indestructible, and the consumer's use of the goods can affect the durability of those goods.
The guarantee of acceptable quality will not apply if the consumer:
The law does not define ' abnormal use', however examples of abnormal use include:
Suppliers and manufacturers guarantee the description of goods. For example - In a catalogue or television commercial is accurate. This does not apply to goods bought at auction.
If the goods do not match the description, such as are a different colour or size, the consumer is entitled to a remedy. A remedy is an attempt to put right a fault, deficiency or failure by way of a repair, replacement or refund.
A supplier or manufacturer cannot argue that the consumer inspected the goods before purchase and should have picked up on any errors in the description.
Suppliers and manufacturers also guarantee goods will match any sample or demonstration model shown to the consumer. For example - A sample of fabric is used to sell a couch but the couch delivered to the consumer is a different colour from the sample. This guarantee does not apply to goods bought at auction.
Goods sold by relying on a sample or demonstration model must not have any hidden defects. A hidden defect is a problem that would:
The guarantee that goods will match any sample or demonstration model applies even if the differences are unavoidable, provided they are substantial. For example - If shading or colouring in an installed woollen carpet is substantially different from the sample used to sell it, the consumer may be entitled to a remedy.
The consumer must be given a reasonable time to compare the goods with the original sample. This does not apply to demonstration models.
For example - A consumer buys a car based on a demonstration model shown to them by a car dealer. The dealer can sell the demonstration model to someone else, and they do not have to keep it to allow the consumer to comapare their car to that model. However, a furniture retailer would easily be able to keep a sample of the fabric used to sell a couch, to allow the consumer to compare it with the couch supplied.
If the consumer is shown a sample or demonstration model and given a description of the goods, the goods must match both.
A supplier guarantees that goods will be reasonably fit for any purpose that they told the consumer the goods would be fit for. For example - A diver buys a watch, which the supplier says will be suitable for diving. The first time the watch is used when diving the watch fills with water. The consumer would have the right to a remedy from the supplier.
A consumer might want goods to do a specific job or achieve a specific purpose, different from the normal use or purpose of those goods. A supplier guarantees that goods will be fit for such a special job or purpose if, before purchasing the goods, the consumer:
For example - A consumer tells a car dealer they want a car capable of towing a boat. The dealer sells the consumer a car that the dealer says will do that job. The car's normal purpose is to transport people, but as the consumer told the dealer they want it to tow a boat, then the car must be able to do so.
This guarantee does not apply if the supplier can show that:
For example - A consumer tells a fellow customer at a discount department store that they want a television capable of all available digital channels. The other customer tells the consumer that a particular television 'looks like one my dad bought, which I think is what you want'. After buying the television, the consumer discovers that it is analogue and will not capture digital channels. The consumer did not rely on the supplier when buying the goods, so is not entitled to a refund or replacement.
Suppliers guarantee they have the right to sell the goods (clear title), unless the supplier alerted the consumer before the sale that they had 'limited title'.
If the goods are sold with limited title, any other person with ownership rights, such as a person owed money by the previous owner, can ask a court for permission to take the goods back from the consumer.
This happens most often when goods are sold from deceased estates. While alive, the person may have pledged the goods as security. People owed money by the deceased sometimes try to repossess the goods after the items were sold as part of the deceased estate.
A supplier guarantees that no person will try to repossess or take back the goods bought by the consumer, or prevent the consumer from using those goods, except when:
A supplier guarantees that goods bought by a consumer are free from any hidden securities or charges and will remain so, unless the security or charge was either:
If the supplier makes it clear to the consumer there is limited title before sale, the supplier can claim to have disclosed all known securities or charges over the goods. For example - A financier claims to be owed money by the former owner of some goods, who may have used the goods as security for a loan. If the consumer did not know about the outstanding debt when buying the goods, the supplier who sold the goods would have to provide a remedy such as a replacement.
Manufacturers guarantee to take reasonable steps to provide spare parts and repair facilities, such as a place that can fix the consumer's goods, for a reasonable time after purchase. If the manufacturer does not have an office in Australia, the importer takes on these responsibilities. For example - A consumer drops a digital camera, which was bought a year ago for $2,000. They contact the importer and ask where it can be repaired. The importer advises they no longer supply parts for the camera. A reasonable consumer would expect a camera only a year old to be repairable. The supplier has not taken reasonable steps to provide spare parts or repair facilities.
Reasonable time depends on the type of goods. For example - it would be reasonable to expect that tyres for a new car will be available for many years after purchase, but it may not be reasonable to expect that spare parts for an inexpensive child's toy are available at all.
A manufacturer does not have to meet the guarantee on repairs and spare parts if they advised the consumer in writing, at the time of purchase, that repair facilities and spare parts would not be available after a specified time.
You do not have to give a refund if the consumer simply changes their mind about the goods, but you can have a policy to offer a refund, replacement or credit note when this happens. If so, you must abide by this policy.
When goods fail to meet a guarantee a consumer has a right to a remedy, being an attempt to put the situation right. Common remedies include repairs, replacements and refunds.
The supplier must provide the remedy when goods do not meet the following consumer guarantees:
The manufacturer has to provide the remedy when repairs or spare parts are not available for a reasonable time after purchase. The importer is responsible for this when the manufacturer does not have an office in Australia. The consumer can claim from the manufacturer or supplier if goods:
Whether you offer a repair, replacement, refund or other remedy depends on whether the problem is a:
Consumer guarantees apply to both. When goods fail to meet a consumer guarantee, the consumer can also claim for consequential losses such as compensation for their costs in time and money because something went wrong.
For a major failure with goods the consumer can:
The consumer gets to choose, not you.
A major failure with goods is when:
If the problem is not major and can be repaired within a reasonable time, teh consumer cannot reject the goods and demand a refund. The consumer can ask you as the supplier to fix the problem. You may choose to:
It is your responsibility to return the goods to the manufacturer for repair. If the cost of repairing the goods is more than the value of the goods, you could offer the consumer a replacement instead.
A consumer must tell you if they intend to reject the goods, and explain why. The consumer must:
Sometimes , faced with a major fault, a consumer may agree to or request a repair to the goods. For example - Where the consumer did not know they were entitled to a refund or replacement. If so, teh consumer does not lose their right to a refund or replacement. The problem with the goods is still 'major' so they may still reject the goods at any time and ask for a refund or replacement.
A consumer cannot reject goods when:
The right to reject the goods runs from the date of supply to the consumer until the fault or problem would reasonably be expected to appear. This depends on:
Even if the consumer has lost the right to reject the goods, they may still keep the goods and ask for compensation for any drop in the goods' value.
When the consumer tells you they are returning the goods, the goods become your property. The consumer must return the goods to the supplier unless the cost of removing, transporting or returning would be significant. For example - due to the size or height of the goods, or due to the type of problem such as where the consumer would not normally be able to remove a light fitting that has melted and stuck to a wall.
If the cost to the consumer of returning the goods is significant, you must collect the goods at your own expense and within a reasonable time.
You must repay any money paid by the consumer for the returned goods and return any other form of payment made by the consumer such as a trade-in. If this is not possible, you must refund the consumer the value of the other form of payment.
You must not:
You must provide goods of the same type and similar value. If such a replacement is not readily available, the consumer may choose a repair or a refund.
The consumer must return the goods to you. If this involves significant cost to the consumer, you must collect the goods at you own expense.
The consumer guarantees that applied to the original goods will apply to the replacement. For example - A consumer buys a new mobile telephone and due to a problem the supplier replaces it. Consumer guarantees will apply to the replacement telephone as if it were a new telephone.
If a supplier cannot repair the goods, for instance where they do not have parts, or cannot do so within a reasonable period of time, the consumer can:
For example - Several buttons came off a consumer's new shirt due to poor stitching. The tailor who made the shirt could not supply matching buttons. The consumer is entitled to ask for a replacement or refund.
You must fix the problem within a reasonable time. What is 'reasonable' will depend on the circumstances. For example - A supplier would be expected to respond quickly to a request to repair an essential household item such as a water heater. For goods used less often, such as a lawnmower, the reasonable time would be longer.
If you refuse or take more than a reasonable time to repair the goods, the consumer can:
You cannot reduce a refund when a consumer has brought the goods back without their original packaging. Consumer guarantees will also apply to any replacement goods.
If the consumer has no option but to take goods elsewhere for repair, they do not have to get your agreement or provide quotes, however you only have to pay the 'reasonable costs' of the repairs.
A reasonable cost would be within the normal range charged by repairers of such goods and include:
For example - The zip on a pair of trousers breaks after 1 week. The retailer tells the consumer the repair will take a month, but the consumer needs the pants urgently for work. The consumer gets the zip replaced by a tailor for $25.00. When the consumer asks the retailer to pay for this, the retailer says that their tailor would have done it for $20.00. If the higher price is a normal price for a tailor to fix trousers, the retailer would have to reimburse the consumer.
From 1 July 2011, a repairer of goods, whether or not a supplier, must notify the consumer of particular information before accepting the goods for repair.
The repairer must tell the consumer if the repairer intends to replace defective goods with refurbished goods of the same type rather than repairing the problem with the original goods, or to use refurbished parts to repair the goods. The Australian Consumer Law Regulations prescribe certain wording about refurbished goods.
For goods capable of storing data created by the user of the goods, user-generated data, the repairer must advise the consumer that repairing the goods may result in loss of the data. User-generated data includes songs, photos, telephone numbers and electronic documents.
Repairers that fail to comply may face:
Consumers often by goods linked to certain services, such as mobile telephone contracts. A consumer who has returned goods within a reasonable time and is still entitled to a refund may also cancel the linked service contract. They can do this when returning the goods, or within a reasonable time. Such contracts do not terminate automatically.
For example - A consumer signs up for a package that includes a modem and internet access. They reject the modem as it turns out to be faulty, but choose to keep the internet connection. Alternatively, the consumer could reject the faulty modem and cancel the internet connection.
A consumer who cancels a linked service contract is entitled to a refund or can refuse to pay for any services not yet received.
You do not have to give a refund for any services the consumer has already received up to the time they reject the related goods.
For example - A consumer subscribes to 12 editions of a magazine for $200.00, including $80.00 delivery. The consumer only receives 3 editions in 6 months, so cancels the subscription and delivery. The supplier must refund $150.00 for the 9 magazines not yet received, $90.00 for he magazines and $60.00 for the delivery.
A consumer is not entitled to a remedy when you do not meet one of the consumer guarantees due to something:
Sometimes, a manufacturer may recall goods in order to fix a potential safety issue, such as a car manufacturer recalling a car because of suspected brake defects. If so, the potential safety issue with the goods does not automatically amount to a major failure on the basis that the car is unsafe. Each of the goods subject to the recall would need to be considered individually.
A manufacturer is a person or business that:
The importer is responsible for consumer guarantees on goods if the maker does not have a place of business in Australia.
Along with the supplier, you guarantee that goods:
You also guarantee repairs and spare parts.
If you refuse to honour an express warranty or fail to do so within a reasonable time, the consumer can take legal action to enforce the warranty in a tribunal or court. They can also:
If there is no express warranty and you have not met a consumer guarantee, the consumer can assert their rights under the consumer guarantees.
As a manufacturer or importer, you may sell goods directly to consumers. For example - in a seconds shop at your premises. If so, you are acting as supplier and have the same responsibilities under consumer guarantees law.
A consumer is entitled to ask for an amount covering any drop in the value of the goods when paying compensation. This amount must be equal to or less than the difference between the current value of the goods and the lowest of either:
The consumer can also ask for compensation for any 'resonably foreseeable' loss suffered due to the manufacturer's failure to meet the consumer guarantess. 'Reasonably foreseeable' costs include the cost of inspecting and returning the goods to the manufacturer.
As a manufacturer, you are not responsible for problems with goods beyond your control. You do not have to pay damages if goods do not meet the consumer guarantees due to:
For example - A mechanic, not employed by the manufacturer, uses the wrong engine oil in a car. This damages the engine. In this case the mechanic is responsible for the damage, not the manufacturer.
Suppliers and manufacturers can limit their liability under the consumer guarantees for problems with goods or services not used for personal, domestic or household purposes. You can limit remedies to:
You can only do this if it is fair or reasonable. What is 'fair and reasonable' will depend on the circumstances, including whether:
Some goods may not be of acceptable quality due to a manufacturing defect, may not match the description given by the manufacturer or are unfit for a purpose specified to the manufacturer. A consumer may ask a supplier, not the manufacturer, to deal with the problem. If so, the manufacturer must reimburse the supplier. The amount can include any compensation paid to the consumer for reasonably foreseeable consequential losses.
A supplier may make a request to the manufacturer within three years of the date:
Manufacturers cannot 'contract out' of this obligation to reimburse the supplier, however when goods are not used for personal, domestic or household purposes, and it is fair and reasonable to do so, the manufacturer can limit their liability to the lowest cost out of:
Suppliers and manufacturers can also make an agreement about what they will each be responsible for, as this does not affect the consumer's rights.
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