New Consumer Guarantees – make sure your supply contracts are updated

In beginning our series on the new national Australian Consumer Laws (ACL), in this issue we’ll be covering the area of consumer guarantees.

Before you discard this article thinking that the changes won’t impact your role, perhaps take a few seconds at least to skim the information – it might have more relevance than you think…

The ACL brings together a range of new extended rights for consumers. Interestingly the definition of “consumer” doesn’t just mean individuals who are the purchasers of the end products. It can also include businesses.

Given the extended rights for consumers in the new legislation, and the broad definition of who a consumer is, if your business provides goods or services, you might find that it is impacted by this legislation, and your arrangements with your suppliers.

What are the changes to consumer guarantees?

A seller of goods or services to a consumer will now be automatically liable to honour new guarantees to “consumers”, rather than simply being able to send the consumer on to the manufacturer.

Sellers are also provided with some extended rights against manufacturers or importers of goods, where the seller provides a remedy to a consumer for a problem which is caused by the manufacturer or importer.

We have included more information about the details of the changes in other articles, but in summary, while the “consumer guarantees” are similar in many ways to the old legislative provisions of “fitness for purpose” but they go further than those old provisions.

The consumer guarantees differ from the old laws in several significant ways:

1. The old concept of “merchantable quality” is out.   This has been replaced with a new term: “acceptable quality”.  What’s the difference?  The test for acceptable quality is based on the question: what would a “reasonable” consumer regard as acceptable in the particular circumstances?  I know, sounds a bit vague doesn’t it?
2. The consumer now gets its choice of remedies if there has been a “major” failure.  In real terms this means that if a customer claims a major failure they can force the supplier to give them a full refund or a replacement product.  And it’s the consumer’s choice.  So what is you have sold them a car, and it has issues after 2 years?  Can you be forced to give them a whole new car???  This is not a change to treat lightly.
3. Warranty periods have potentially been extended.  The new yardstick is “what would a reasonable consumer consider to be an acceptable length of time for that type of good to last?”  Not a definitive definition?
4. The requirement to provide spare parts and repair facilities has been extended.
5. Comments made by sales people may now be turned into guarantees that you will be bound to honour.

So what does all of this mean for you?

1. Some of your purchases might possibly now be viewed as a consumer purchase and you might have some of these protections in your purchases.
2. It is critical for you to be aware of your extended liabilities under this legislation with your customers so that you can make the appropriate changes to your supply agreements.

You should consider at least the following changes to your supply arrangements:

• The length of warranties provided to you by your suppliers (do they match up with your company’s increased warranty obligations to their customers?)
• Your supplier’s obligation to make repair facilities and spare parts available (do these obligations line up with your company’s obligations relating to spare parts?)
• Remove any express warranties, unless it’s your intention to honour these
• In your supply contracts remove choice of law clauses which nominate another jurisdiction where Australia would otherwise be the proper jurisdiction for the contract

 

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, importantly for anyone involved in purchasing, 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.

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.

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