In beginning our series on the new national Australian Consumer Laws (ACL), in this issue we’ll be covering the area of consumer guarantees.
If you are in the business of providing goods or services, you will now be automatically liable to honour new guarantees to consumers. And as a seller of goods and services, the burden in some cases will be on you directly to actively meet these guarantees – you won’t always be able to just send the consumer on to the manufacturer. The consumer guarantees do, however, provide sellers with rights against manufacturers or importers of goods if the seller provides a remedy to a consumer for a problem which is caused by the manufacturer or importer.
The purpose of these new guarantees is to ensure that every consumer is protected. And be warned, as a seller you won’t be able to exclude your liability under them. Read on to learn more.
What are the consumer guarantees?
As a seller, you are now bound by these guarantees. And don’t assume that these guarantees only apply to just individuals as “real” end-consumers, they can apply to business-to-business contracts in some circumstances too.
In relation to goods:
- the goods must be of acceptable quality
- must be fit for any disclosed purpose
- must match any description, sample or demonstration model shown
- repair facilities and spare parts have to be reasonably available for a reasonable time
- any express warranty made by a seller or manufacturer must be honoured.
In relation to services:
- the services must be delivered with due care and skill,
- be fit for any disclosed purpose,
- and if there isn’t a set time for delivery of the services, be completed within a reasonable time.
The new laws have introduced harsh penalties for failure to comply, with fines of up to $1.1 million for corporations and $220,000 for individuals who breach the new laws.
Am I able to contract out of these guarantees?
No, you cannot, and any attempt to do so will be declared void.
What is my liability to a consumer?
If the failure is minor, the seller is able to choose the remedy, be it repair, replacement or refund. But if the failure is major, the consumer can choose to reject the goods or services, and either get a refund, replacement or ask for compensation for any drop in value of the goods or services.
The onus will fall on the seller to meet the statutory warranty, irrespective of the manufacturer’s warranty. But if the problem is caused by the manufacturer or importer, the seller has rights against the manufacturer or importer, in providing that remedy to the customer.
Now as a seller you can’t limit a warranty period to a set timeframe. A consumer has a statutory guarantee that a good/service will be of acceptable quality for as long as that particular good/ service is expected to reasonably last. Of course, this will vary depending on the nature of the good or service.
If a seller makes extra promises about the quality or performance of their goods or services, under the new laws the seller will be bound to satisfy those promises. Even things that you, and your employees, say verbally come within the definition of “express warranty”, and you will be bound to honour these above and beyond the obligations that are already set out under the consumer guarantees.
So be careful about what you and your staff and agents are saying about your goods and services.
What do I have to do now?
Any contracts for the supply of goods to “consumers” will need to be reviewed with careful attention on any exclusion clauses, limitation of liability clauses, entire agreement clauses, and express warranties.
And your contracts with your suppliers should also now be reviewed to ensure that you have protection from them that mirrors your increased obligations under the ACL.
You will also need to review your marketing and train staff to ensure that you avoid making any “express warranties” about the goods or services as under the new laws you will then be bound to honour them.
Contact us if you need our help in reviewing your current client terms, your supplier terms and otherwise helping to ensure that you are complying with the new laws, and in protecting your liability.