Consumer Guarantees

The Australian Consumer Law (“ACL”) provides for certain statutory guarantees in relation to the supply of goods and services to consumers. Although this article will only focus on the supply of goods, statutory guarantees are provided under the legislation to protect consumers.

Who is a consumer?

Section 3 of the ACL defines the circumstances in which a person is considered a consumer. Accordingly, a person is taken to have acquired goods as a consumer if:

• the amount payable for the goods does not exceed $40,000; or
• the goods are of a kind ordinarily acquired for personal, domestic or household use or consumption; or
• the goods consisted of a vehicle or trailer acquired for use principally in the transport of goods on public roads.

A person will not be considered a consumer if the goods are acquired:
• for the purpose of re-supply; or
• in trade or commerce for use in the process of production or manufacture; or
• in the course of repairing or treating other goods or fixtures on land for trade and commerce.

Guarantee as to title

A guarantee as to title refers to the supplier’s right to dispose of goods, and the consumer’s right to undisturbed possession. This is important because it ensures that
the goods will not be limited by an unknown interest or charge. As such, where a consumer purchases goods that are subject to a security, charge or encumbrance and they have not been disclosed before the contract is made, the seller will be in breach of the guarantee.

An example of this is where a consumer purchases a secondhand car that is subject to a security, charge or encumbrance from another entity that has not been disclosed to the consumer.

Correspondence with description

Correspondence with description is concerned with the supply of goods to a consumer in trade or commerce on the basis that those goods correspond with a description. For the guarantee to apply, the goods must be sold based on their description. This is because the guarantee is concerned with the identity of goods and is common where goods are purchased online.

The difficulty that this guarantee presents is that it does not apply where the problem with the goods is the quality. An example of this may include a contract to purchase
a new mobile telephone, but instead receive a second-hand mobile telephone of the same type. In this example, the identity is the same, but the quality is different. By contrast, an example where a breach of the guarantee will occur is where there is a contract to purchase a mobile telephone, but the buyer instead receives a music player.

Acceptable Quality

Where there is a contract for the supply of goods, there is a guarantee that those goods will be of acceptable quality. Acceptable quality relates to goods that an ordinary person fully acquainted with the state and condition of the goods would not regard as acceptable on the basis that it is not:

1. fit for all the purposes for which it is commonly supplied;
2. acceptable in appearance and finish;
3. free from defects;
4. safe; or
5. durable.

Given the wide application of this guarantee, a breach will not occur in circumstances where the consumer causes them to become of unacceptable quality, or if the reason why they were not so was drawn to their attention before it was purchased.

Remedies

The remedies available for a breach of a consumer guarantee depend on whether the breach is a major failure or not. If the breach is a major failure, the consumer is entitled to eject the goods or recover compensation for any reduction in value, and recover damages for any reasonably foreseeable loss or damage caused by the failure.

As such, a major failure can occur in the following circumstances:
• the goods would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure;
• the goods significantly depart from their description or sample;
• the goods are substantially unfit for a purpose commonly supplied and cannot be easily remedied;
• the goods are unfit for a disclosed purpose in which they were supplied; or
• the goods are unsafe.

By contrast, where the breach is not a major failure, the supplier may be required to remedy the failure within a reasonable time, or if the supplier refuses, the consumer may reject the goods and obtain a full refund, or recover the reasonable costs incurred for remedying the failure.