We have previously discussed consumer guarantees, who is and isn’t covered and what happens when goods or services do not meet consumer guarantees. For this information please see the link here. Here we will be further discussing compensation and consequences for not complying with the Australian Consumer Law (ACL) as well as warranties and consumer guarantees, although first;
When is a Consumer not entitled to a remedy?
There are a number of situations where a consumer is not entitled to a remedy. These include, but are not limited to the following situations:
- If a consumer has been alerted by the supplier of the goods that there was a particular defect (before the goods were sold to the consumer), then the consumer will not have a right to a remedy if those defects later caused problems with the goods
- If the consumer had the opportunity to inspect the goods prior to purchasing but failed to find obvious defects that ought to have been detected.
- If the consumer uses the goods in a manner that is deemed ‘abnormal’. Examples of this include damage to the screen of a laptop or television due to an object hitting the screen.
- If the consumer simply changes their mind about the goods (unless the supplier’s policy offers a refund or exchange).
- If a supplier does not meet one of the Consumer Guarantees due to something (that occurred after the goods or services were supplied) which was beyond the control of the supplier or as a result of something that was said or done by someone else who is not an agent or employee of the supplier; or
- Where a consumer claims that goods are not fit for their purpose but:
- the consumer did not rely on the supplier’s skill or judgement when purchasing the goods – and instead relied on his or her own skil
or judgement; or
- in the circumstances it was unreasonable for the consumer to have relied on the supplier’s skill or judgement.
Compensation for Consequential Loss
If, as a supplier of goods or services, you fail to meet a Consumer Guarantee, a consumer may have the right to claim compensation for consequential loss. The compensation is intended to place the consumer in the position they would have been in if the goods or services had met the Consumer Guarantee.
The loss that a supplier is obligated to cover includes losses that could have been expected to result from a failure to meet a Consumer Guarantee and are reasonably foreseeable.
Consumer claims against the Manufacturer
If goods fail to meet a Consumer Guarantee, the manufacturer of those goods is required to provide damages to the consumer. In most cases, consumers deal with suppliers such as retailers, but in some instances consumers may ask the manufacturer to resolve the problem. The amount of compensation that a consumer is entitled to ask for is limited to damages for loss or, damage suffered because of the failure to comply with the guarantee if it was reasonably foreseeable that the consumer would suffer such loss or damage as a result of such a failure.
According to the ACCC “the supplier or retailer can’t refuse to help you by sending you to the manufacturer or importer.”
Consequences of not complying with the Australian Consumer Law
For false and misleading representations, such as advising your consumers that they are not entitled to Consumer Guarantees (when in fact they are), there are penalties as high as $1.1 million for a body corporate and $220,000 for individuals.
As a supplier of goods or services, if you fail to comply with the Consumer Guarantee laws, you may be subject to court orders and/or penalties.
A court may:
- Grant an injunction with respect to contraventions or attempted contraventions of the ACL to either restrain a person from doing an act or require a person to do a certain act. An example of this includes restricting a supplier from carrying on business or supplying goods or services.
- Require the refund of money or the destruction or disposal of property;
- Make an adverse publicity order – requiring a person to publish an advertisement in terms to be specified by the court;
- Disqualify a person from managing a corporation;
- Make an order to compensate the consumer; or
- Make an order directing a person to attend community services or establish a compliance program or educate its employees.
Can you exclude the Consumer Guarantees?
The law does not allow a supplier and/or manufacturer to limit, restrict or exclude the Consumer Guarantees nor does it allow the avoidance of certain obligations by getting consumers to agree to contract out of them.
‘No refund’ signs are themselves unlawful according to the ACL guide (available at the bottom of the page) as they imply that a refund is impossible to attain. However, a sign that states that ‘No refunds will be given if you have simply changed your mind’ are acceptable.
Warranties and Consumer Guarantees
From 1 January 2012, if you are a supplier who supplies goods to your customers and you choose to provide a warranty against defects, then under the ACL, the warranty against defects is in addition to the Consumer Guarantees. According to the ACL a “warranty against defects” includes a representation communicated to a consumer in connection with the supply of goods or services (at the time of supply) to the effect that a person will (unconditionally or on specified conditions):
repair or replace the goods or part of them; or
provide again or rectify the services or part of them; or
wholly or partly compensate the consumer;
if the goods or services or part of them are defective.
If providing a warranty against defects, you need to ensure that the document that evidences this contains:
terms that are expressed in plain English and presented clearly;
the warranty period, the procedure for claiming the warranty, who bears the cost of claiming the warranty and that the benefits of the warranty;
what the business will do if goods are faulty or defective;
state the name, business address, telephone number and email address (if any) of the corporation or person who is providing the warranty; and
include the statement “Our goods come with guarantees that cannot be excluded under the Australian Consumer Law. You are entitled to a replacement or refund for a major failure and for compensation for any other reasonably foreseeable loss or damage. You are also entitled to have the goods repaired or replaced if the goods fail to be of acceptable quality and the failure does not amount to a major failure.”
For further information, you may find the following websites useful:
Australian Consumer Law website: www.consumerlaw.gov.au
Or the ACL guide for business and legal practitioners on Consumer Guarantees below.
Consumer guarantees, A Guide for Businesses and Legal Practitioners
For further information, please contact the author.
This article is posted in Adelaide, South Australia by Tri-meridian Corporate & Commercial Law and is intended to be used as a guide only. It is not, and is not intended to be, advice on any specific matter. We do not accept responsibility for any acts or omissions resulting from reliance upon the content of this article. Before acting on the basis of any material in this article, we recommend that you consult your professional adviser.