The Australian Consumer Law (ACL) sets out consumer rights that are called consumer guarantees. These include your rights to a repair, replacement or refund as well as compensation for damages and loss and being able to cancel a faulty service.
In 2020 the Federal Government passed amendments to the ACL, which will see changes to some key areas for businesses.
This is the first of our new series of blogs to help guide you through these changes. In this blog we look at the broadening of the definition of a ‘consumer’.
Who does this impact?
This amendment will affect the manufacturers and sellers of goods in trade and commerce (not generally used for domestic or household purposes).
The Treasury Laws Amendment (Acquisition as Consumer – Financial Thresholds) Regulations 2020 sees the monetary threshold increased from July 2021 to $100,000 (previously this threshold was $40,000).
This in turn means the consumer guarantees which are provided for under the ACL, will now capture a broader audience of consumers. Businesses making or supplying goods or services to consumers (now with a monetary threshold increased to $100,000) are bound by the automatic consumer guarantees that are imposed by the ACL and also rules relating to refunds, warranties and liability for damages. This is regardless of any voluntary or extended warranty offered.
For businesses that provide goods, some of the consumer guarantees imply warranties that:
• Goods will match any description provided
• Goods will be of an acceptable quality
• Goods will be reasonably fit for purpose
• Facilities for the repair of the goods are reasonably available
• Any express warranties given in relation to the goods will be complied with
For businesses that provide services, some of the consumer guarantees imply warranties that services will be:
• Rendered with due care and skill
• Reasonably fit for purpose
• Supplied within a reasonable time
A business cannot contract out of the consumer guarantees imposed by the ACL by way of a special condition in a contractual arrangement. There are significant penalties for a breach of the consumer guarantees.
What should you do?
It is important for businesses to review their procurement contracts:
• Depending on whether the problem with the goods is major or minor, the seller must repair, replace or refund a good or service if it fails to meet a consumer guarantee. The seller is also liable for any reasonably foreseeable loss or damage suffered by the consumer arising from the defect
• The manufacturer of goods with a major or minor defect can be liable directly to the consumer (for compensation), or must indemnify the seller if the seller is required to provide a remedy or payment to the consumer
Businesses should also review their warranty material when they offer their own warranties to ensure they comply with the strict provisions of the ACL. For example, warranty documents must be presented in a certain way and include mandated statements and specific information that is easily understood by consumers. Accordingly, all warranty statements should be updated as soon as possible.
Businesses should review their business precedent documents to ensure they are meeting their ACL obligations.
If a contractual term is found to breach these ACL provisions, from 1 July 2021 it is likely the ACL will invalidate any such terms which breach consumer protections requirements and fines may be imposed on businesses found to in breach.
Contact us to assist you in reviewing your contract documents.