In which of the following situations is a producer guaranteed full control over product sales?

The Australian Consumer Law (ACL) requires businesses to provide consumer guarantees for most consumer goods and services they sell.

Consumer guarantees are a set of rules that apply to goods and services purchased by consumers under the ACL.

These rules set out the circumstances under which a business is required to provide a consumer with a remedy.

The consumer guarantees automatically apply regardless of any voluntary or extended warranty given by a seller or manufacturer of goods and services, or if such a warranty has expired.

Who is a consumer?

A person – or a business – will be considered a consumer if:

• they purchase goods or services that cost less than $100,000
• the goods or services cost more than $100,000, but they are of a kind ordinarily acquired for domestic, household or personal use or consumption
• the goods are a commercial road vehicle or trailer used primarily to transport goods on public roads.

Who must comply with the consumer guarantees?

Businesses that provide goods – by selling, leasing or hiring – or services to consumers in Australia must comply with the consumer guarantees.

Manufacturers and importers must also comply with certain consumer guarantees.

Businesses that sell goods guarantee that those goods:

• are of acceptable quality – the goods must be safe, lasting, have no faults, look acceptable and do all the things someone would normally expect them to do
• are fit for any purpose that the consumer made known to the business before buying (either expressly or by implication), or the purpose for which the business said it would be fit for
• have been accurately described
• match any sample or demonstration model
• satisfy any express warranty
• have a clear title, unless you otherwise advise the consumer before the sale
• come with undisturbed possession, so no one has the right to take the goods away from or to prevent the consumer from using them
• are free from any hidden securities or charges
• have spare parts and repair facilities reasonably available for a reasonable period of time, unless the consumer is advised otherwise.

Manufacturers and importers guarantee that their goods:

• are of acceptable quality
• have been accurately described
• satisfy any manufacturer’s express warranty
• have spare parts and repair facilities reasonably available for a reasonable period of time, unless the consumer is advised otherwise.

What happens if these guarantees are not met?

If you sell a customer a product that fails to meet one or more of the consumer guarantees, they are entitled to a remedy – either a repair, replacement or refund and compensation for any consequential loss – depending on the circumstances.

Generally, if the problem is minor, the seller can choose whether to remedy the problem with a replacement, repair or refund. If you choose to repair and it takes too long, the consumer can get someone else to fix the problem and ask you to pay reasonable costs, or reject the good and get a full refund or replacement.

If the problem is major or cannot be fixed, the consumer can choose to:

• reject the goods and obtain a full refund or replacement, or
• keep the goods and seek compensation for the reduction in value of the goods.

A purchased item has a major problem when it:

• has a problem that would have stopped someone from buying it if they’d known about it
• has multiple minor problems that, when taken as a whole, would have stopped someone from buying it if they’d known about them
• is significantly different from the sample or description
• is substantially unfit for its common purpose and can’t easily be fixed within a reasonable time
• doesn’t do what the consumer asked for and can’t easily be fixed within a reasonable time; or
• is unsafe.

Gift recipients are entitled to the same rights as consumers who bought the goods directly.

The seller cannot refuse to provide a remedy if the product is not returned in its original packaging.

The seller also must not refuse to deal with a customer about the returned good and tell them to deal with the manufacturer instead.

Approaching the manufacturer directly

Consumers are entitled to approach manufacturers directly for a remedy. Consumers may take action against manufacturers to recover costs, which include an amount for reduction in the product’s value and in some cases compensation for damages or loss.

Businesses that supply services guarantee that those services will be:

• provided with due care and skill
• fit for any specified purpose (express or implied)
• provided within a reasonable time (when no time is set).

A contract or agreement for the supply of services usually states when the services will be provided and the date they will be completed. If not, the supplier guarantees to supply the service within a reasonable time. What is ‘reasonable’ will depend on the nature of the service and other relevant factors such as the weather, for example, if services are being performed in outdoor areas.

What happens if these guarantees are not met?

If you sell a customer a service that fails to meet one or more of the consumer guarantees, he/she is entitled to a remedy – for example, a refund, a further service to rectify the problem and in some circumstances compensation for consequential loss. The service provider must then provide the appropriate remedy.

If the problem is minor and can be fixed, you can choose how to fix the problem.

The consumer cannot cancel and demand a refund immediately. You must have an opportunity to fix the problem. If the repairs take too long, the consumer can get someone else to fix the problem and ask you to pay reasonable costs, or cancel the service and get a refund.

If the problem is major or cannot be fixed, the consumer can choose to:

• terminate the contract for services and obtain a full refund, or
• seek compensation for the difference between the value of the services provided compared to the price paid.

A purchased service has a major problem when it:

• has a problem that would have stopped someone from purchasing the service if they had known about it
• has multiple minor problems that, when taken as a whole, would have stopped someone from buying it if they’d known about them
• is substantially unfit for its common purpose, and can’t easily be fixed within a reasonable time
• does not meet the specific purpose the consumer asked for and can’t easily be fixed within a reasonable time
• creates an unsafe situation.

The consumer guarantees do not apply to goods or services costing more than $100,000 that are normally used for business purposes (for example, installing industrial air conditioning to a factory premises).

Additional exceptions apply in some circumstances. These include:

• goods bought from one-off sales by private sellers, such as a private garage sale or school fetes
• goods purchased at a traditional auction
• goods purchased to be resold or transformed into a product that is on-sold
• services for transportation or storage of business goods, or
• fitness for purpose of professional services provided by a qualified architect or engineer.

Different laws apply to:

• financial products and services
• contracts for insurance, and
• goods and services sold before 2011 (implied warranties and conditions).

For further information and types of exceptions, please refer to the Act.

Consumer obligations

Consumers’ rights are not limitless and the consumer guarantees do not require you to provide a remedy unless one of the guarantees has not been met.

For example, you may not be required to provide a remedy if a consumer:

• simply changes their mind, decides they do not like the purchase or has no use for it
• discovers they can buy the goods or services more cheaply elsewhere
• has damaged the goods by using them in a way that was unreasonable.

Your customers can seek compensation for damages and losses they have suffered due to a problem with a product or service (in addition to any other remedy provided) if you could have reasonably foreseen the problem. In other words, customers can also recover losses that would probably result from your failure to meet a guarantee.

Damages include the cost caused to the consumer as a result of the problem with the product or service. This is usually financial, such as costs of repairing damaged carpets as a result of a faulty leaking washing machine, inspection and transportation. It can also include lost time or productivity.

You do not have to pay for damages or losses that:

• are not caused by your business or the goods you supplied
• relate to something independent of your business and outside your control, after the goods left your control.

Some goods may fail to meet one or more of the consumer guarantees due to a manufacturing defect or issue that would otherwise be the manufacturers fault. The consumer can ask the seller to provide a remedy, and the seller is required by law to oblige.

In this situation the manufacturer must reimburse the seller. The reimbursement amount can include any compensation paid to the consumer for reasonably foreseeable consequential losses.

A supplier has three years to ask the manufacturer for reimbursement, from the earliest of the following dates:

• the day they fixed any problems with the consumer’s goods
• the day the consumer took legal action against the supplier.

Signs that state ‘No refunds’ are unlawful.

The following signs are also unlawful:

• ‘No refunds on sale items’
• ‘Exchange or credit note only for the return of sale items’.

However, signs that state ‘No refunds will be given if you have simply changed your mind’ are acceptable.

If a customer complains to you about a purchased good and demands a remedy, your business is legally obliged to provide the appropriate remedy under the consumer guarantees provisions of the ACL.

If you do not comply, the customer can:

• report the problem to the ACCC or their local consumer protection agency, or
• have the matter heard in their local small claims tribunal or magistrates court. The Magistrate or tribunal member’s decision is legally binding.

• You must not tell customers they should approach the manufacturer or importer of the good for assistance – the seller must deal with the problem when approached.
• You must not suggest that their consumer guarantees are limited to any warranty period – the consumer guarantees apply regardless of any warranties in place.
• Do not display ‘No refunds on sale items’ signs.

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