We come into contact with the Australian Consumer Law ("ACL") nearly every day. Every time you buy something as a consumer, you touch the ACL. And, in our consumer-driven, capitalist society, that's pretty darn often. And yet, most of us couldn't name anything contained in the ACL. To remedy this, we've put everything you need to know in plain English, right here. So, here we go!
First off, what is the ACL, and who does it affect?
The Australian Consumer Law is contained in schedule 2 of the Competition and Consumer Act 2010 (Cth). As the name suggests, it's the piece of legislation that regulates consumer transactions. This means that every consumer transaction is subject to the ACL.
So then, for the purposes of the ACL, what is a consumer transaction? For a transaction to be subject to the ACL:
- The total cost paid for the goods must not exceed $40,000; OR
- The goods must be of a kind ordinarily acquired for personal, domestic or household use or consumption; OR
- The goods acquired are a vehicle or trailer used mainly to transport goods.
However: if the purchaser of the goods acquired those goods for the purpose of:
- Re-supply (i.e., onselling the goods); OR
- Using them up or transforming them in the process of manufacture or production;
Then the transaction is not a consumer transaction and is therefore not subject to the ACL.
Quick guide: Is the purchase less than $40,000 OR is this person purchasing the item for personal use? If so, it's a consumer transaction, and the ACL applies.
Our ACL Guarantees Guide contains a handy flowchart for determining when the ACL does and doesn't apply, which you can download here.
Guarantees related to the supply of goods
The ACL contains 9 statutory guarantees that apply to all consumer purchases. They cannot be contracted out of. This means that regardless of any contrary provision in the relevant contract of sale, or terms and conditions, these guarantees will apply.
The guarantees are:
- Guarantee as to title
- Guarantee as to undisturbed possession
- Guarantee as to undisclosed securities
- Guarantee as to acceptable quality
- Guarantee as to fitness for any disclosed purpose
- Guarantee as to supply of goods by description
- Guarantee as to supply of goods by sample or demonstration model
- Guarantee as to repairs and spare parts
- Guarantee as to express warranties.
We'll now go through an overview of each guarantee in turn.
- Guarantee as to title
Guarantee to title means that in every purchase the consumer can assume that the person selling the goods has the right to sell those goods. Basically, it means that if the seller has actually stolen the goods or is otherwise not legally entitled to on-sell those goods, it's a breach of the ACL.
2. Guarantee as to undisturbed possession
This means that once the seller has sold the goods, they can't then come along and disturb the purchaser's ownership of those goods in any way. It's the legal version of "no take-backsies."
3. Guarantee as to undisclosed securities
This means that the purchaser is entitled to presume that when they've bought something, there's no one out there who's lodged a loan using the purchased goods as security. For example, if you purchased a car, this guarantees that a bank or loan shark can't waltz in someday and take that car off you because the previous owner of the car has defaulted on a loan to them.
However, note that this guarantee doesn't apply to loans.
4. Guarantee as to acceptable quality
For goods to be of acceptable quality they must be:
- Fit for all the purposes that goods of that kind are usually supplied (e.g. if you're supplying snow boots you have to be able to wear them in the snow);
- Acceptable in appearance and finish;
- Free from defects;
- Safe;
- Durable.
There is some limitation to this guarantee, however. Basically, the cost affects what is considered acceptable quality. Meaning that the same level of quality isn't expected from snow boots which cost $100 as those which cost $1,000. The test is what's reasonable to expect from a purchase - if you've only paid a few dollars for some snow boots, it's not a breach of the acceptable quality guarantee when they fall apart after a few wears. But, if you've paid a few thousand dollars for them, it probably is a breach.
5. Guarantee as to fitness for any disclosed purpose
This one is especially important for salespeople to take note of. This guarantee means that if a customer asks a retail assistant if the snow boots are suitable to be used in -15 degree temperature, and the retail assistant says that they are, even though they're really only suitable for use up to -8 degree temperature, it's a breach of this guarantee.
The customer may disclose their intended purpose for the good(s) either expressly (i.e. by directly voicing their intended purpose to the seller) or impliedly (i.e. through conduct).
Exception: This guarantee addresses when a customer relies on the advice of a person selling the goods as to whether a particular item is suitable for their intended uses. However, the customer's reliance on that advice must be reasonable. For example, it would be reasonable for a customer to rely on the advice of an Apple Genius as to whether a particular model of Macbook is suitable for their work. However, if you know someone specialises only in Microsoft products, and you rely on their advice about Apple products, that reliance may not be reasonable, and the guarantee won't be breached.
6. Guarantee as to supply of goods by description
This means that if a product is described in a certain manner, the actual product must correspond to that description. If a carbolic smoke ball is advertised as being able to cure the common cold, it must actually be able to cure the common cold, or else it will breach this guarantee.
The description of the product may be in any form or at any point in the buying process - in the advertisement, on the package, described orally to the customer.
7. Guarantee as to the supply of goods by sample or demonstration model
This guarantee applies when a purchase has been given some form of sample or demonstration of the product which they later purchase. It means that the actual purchased product must be of the same quality and make as the sample.
So if the purchased item has some defect in it then it's a breach of this guarantee. Further, even if the defect is present in the sample, but that defect isn't apparent upon reasonable examination or inspection then it will also breach the guarantee.
8. Guarantee as to repairs and spare parts
This guarantee means that purchasers are entitled to spare parts and repairs of a purchased item from the seller or manufacturer of that item for a reasonable time after purchase.
This guarantee can partially be contracted out by way of the seller/manufacturer informing the purchaser that repair or spare parts will not be available after a specified time before they made the purchase.
9. Guarantee as to express warranties
In law, a "warranty" is basically a contractual promise. A warranty can be anything - this guarantee is basically a catch-all for any promise made to a customer that may not fit under the other guarantees. So basically, if you promise something to a customer in regards to a purchase, and you don't follow through on that promise, it's a breach of the express warranties guarantee.
Guarantees related to the supply of services
In addition to the 9 guarantees related to the supply of goods, the ACL contains 3 guarantees pertaining to the supply of services. These are:
- Guarantee as to due care and skill
- Guarantee as to fitness for a particular purpose etc
- Guarantee as to reasonable time for supply.
- Guarantee as to due care and skill
This one is self-explanatory. When a service is provided, that service must be carried out with due care and skill. It means that service suppliers will breach the ACL if they or their staff are negligent in carrying out that service.
2. Guarantee as to fitness for a particular purpose etc
This is the same as the fitness for purpose guarantee in the supply of goods. It means that if a customer makes it known that they're acquiring the services for a particular purpose, the service provided must be reasonably fit for that purpose.
3. Guarantee as to reasonable time for supply
Another self-explanatory one. Services must be supplied in a timely manner. What is a reasonable time for supply will vary in the circumstances - if providing the service requires first sourcing material from overseas, then what is reasonable may be weeks or months. If the service can be delivered immediately, then a reasonable time may be days or even hours.
Note: this guarantee only applies if the time period for supply isn't specified in the contract. If the contract specifies a date for the service to be provided, the service must be provided on that date.
What happens if a breach occurs?
There are two different pathways which emerge when a breach of one of the statutory guarantees occurs:
- When the breach isn't a major failure OR; and
- When the breach is a major failure.
What's a major failure?
A major failure is a breach of any of the guarantees where:
- A reasonable customer wouldn't have bought the goods had they known the nature and extent of the breach; or
- The goods were supplied by description or sample, and they depart from that description or sample in one or more significant respects; or
- The goods are substantially unfit for the purpose which the same kind of goods are commonly used for AND the problem with them can't be fixed easily and within a reasonable time; or
- The goods aren't fit for a purpose which the customer disclosed to the seller (and the problem with them can't be fixed easily and within a reasonable time); or
- The goods are unsafe.
If any of the following applies, it's a major failure.
What isn't a major failure
It's not a major failure if:
- The breach of the guarantee can be remedied; and
- It's not otherwise a major failure.
Remedies when the breach isn't a major failure
If the breach isn't a major failure, the customer is entitled to have the supplier fix the breach within a reasonable time. This may mean repairing the defect or simply providing a replacement.
If the customer notifies the supplier of the problem, but the supplier fails to fix it, the customer is entitled to fix the problem themselves. Once they've done so, they can go to court and launch an action against the supplier to recover the cost of fixing the problem.
Remedies when the breach is a major failure
When the breach is a major failure, the customer also has the right to have the purchase repaired, replaced, or refunded. Additionally, they may be able to:
- Keep the purchase, and receive compensation for the drop in the value of the purchase caused by the breach;
- Be compensated for any loss that is reasonably foreseeable as a result of the problem with the goods or services.
Exceptions
Remedy for a breach of guarantee won't be available where:
- The breach of the guarantee was solely due to a cause independent of human control.
- The goods are damaged after being delivered to the customer for reasons unrelated to their condition at the time of supply.
- The goods have been lost, destroyed, or disposed of by the customer.
Time period for remedy
Once a customer has notified the supplier of the problem with their purchase, the supplier must provide a remedy (repair, refund, or replacement) within a reasonable time. If a remedy isn’t provided within a reasonable time, the customer may take the supplier to court to recover compensation.
Conclusion: where do we stand with the ACL?
The Australian Consumer Law is large and covers the entirety of consumer transactions in Australia. As such, this blog post obviously hasn't covered everything contained in the ACL. However, the Consumer Guarantees which this post has focused on is probably the most important part of the ACL as it's the most likely to come up in everyday transactions. As such, we chose to begin our ACL series here. Check back soon for more ACL information.
For a visual (and printable!) look at the ACL consumer guarantees, you can download our ACL Consumer Guarantees factsheet here.
