Posted by Minna Boyle on 30 October 2018
For all businesses, your customers are your number one priority. There’s no point of running your business without them!
Even if you think you might be doing the right thing all the time, there are some things that you can’t decide on yourself – they are part of the law. Consumer guarantees are a prime example.
What Are Consumer Guarantees?
The ‘consumer guarantees’ are the automatic guarantees consumers get when they buy goods and services from Australian businesses. They are set out in the ‘Australian Consumer Law’ (ACL), which can be found in the Competition and Consumer Act 2010. You might have also heard references to the Trade Practices Act 1974, or the TPA, as that’s the old name of this legislation.
Under the ACL, consumers of goods or services are given a basic set of rights and a legal basis to seek compensation for anything that does not meet the consumer guarantees. These consumer guarantees are designed to protect the consumer, to ensure that certain minimum requirements are met when consumers purchase goods or services from Australian businesses.
When Do Consumer Guarantees Apply?
Australian businesses, and in some cases individuals, need to comply with the ACL and provide consumer guarantees. Needless to say – it’s important to be aware of what this means for your business or startup!
Consumer guarantees only apply if your customer is considered a ‘consumer’.
There are 2 main tests to define a ‘consumer’ under the ACL.
- A person who purchases goods for less than $40,000, regardless of the purpose of the goods.
- A person who has acquired goods or services that are ordinarily or regularly acquired for domestic use, including vehicles.
A person is not a ‘consumer’ if they purchase goods for the purpose of re-supply or for the purpose of using them up or transforming them in the course or production, manufacturing or repairing other goods.
If you’re unsure of whether or not your customers fall within the definition of a ‘consumer’, it’s best to be on the safe side. You can always seek legal advice if you’d like clarification for your specific situation.
What are the Consumer Guarantees?
There are different consumer guarantees that businesses must observe for goods and services.
Goods/ Products must comply with the following:
- Be of acceptable quality.
- Match descriptions made during the sales process, on packaging, labels and in promotions or advertising.
- Match any demonstration model or sample provided to the consumer.
- Be fit for the purpose you said it would be fit for.
- Come with full ownership and title (you must have the right to transfer it to the consumer).
- Not carry any hidden debts or extra charges.
- Come with undisturbed possession (so once the consumer has it, no one has the right to take it away or stop them from using it).
- Meet any extra promises about performance, condition and quality e.g. a lifetime guarantee.
- Have spare parts and repair facilities available for a reasonable time, unless otherwise stated before purchase.
Services must comply with the following:
- Be provided with due care and skill, taking all necessary steps to avoid loss and damage.
- Be fit for purpose to give the results you agreed to give.
- Be delivered within a reasonable time if there is no agreed end date.
It’s important that you assess how your business supplies goods and services, and make sure this aligns with the consumer guarantees. If you’re unsure, you can seek professional advice. At the end of the day, it doesn’t matter whether you were aware of the guarantees or not – if they apply to your business then you will be held accountable.
Guarantee for Goods of Acceptable Quality
You may have noticed that there are a lot of guarantees to be aware of! Sometimes it helps to go into more depth into what these actually mean.
One of the main consumer guarantees in relation to goods is that they must be of acceptable quality. Basically, if a consumer buys a good and that good would be considered unsafe by a reasonable person, then it does not satisfy this consumer guarantee.
There are 5 conditions that a good must satisfy to be of acceptable quality. These are:
- Fit for purpose
- Acceptable in appearance and finish
- Free from defects
A consumer could bring an action against your business if you do not comply with any of the 5 conditions of this guarantee.
How Long Do Consumer Guarantees Last?
How long a guarantee lasts depends on the goods, services and nature of the guarantee.
For example, if a consumer would reasonably expect a type of product to last 2 years and it stops working after 2 weeks, then consumer guarantees would apply. However, if it stops working after 3 years, they may not apply.
It’s also worth noting that there is a statutory limitation for bringing claims under the ACL, where consumers must bring the action within 6 years from the date of the alleged breach.
Can You Avoid Consumer Guarantees?
In short, no. If you write a customer contract that does not comply with the consumer guarantees, your contract is not enforceable. For example, you normally can’t write in your contract that you will not provide any refunds.
You can of course add more guarantees and consumer benefits in your customer contracts. Your customers will love you for it and it might be the right thing to do! An example of an extra guarantee that is commonly added by Australian businesses is giving customers the right to ‘change of mind’ returns within a certain time period.
However, doing the opposite is a big risk that could see you being investigated by the Australian Competition and Consumer Commission (ACCC).
What to Take Away…
As a business, when you’re providing goods or services to consumers you need to be aware of the consumer guarantees that impact your business practices. Checking your compliance now will save you from facing the consequences later on – no one wants to get stuck with a lawsuit or an investigation from ACCC on their hands!
If you want to check if your customer contracts or business practices are aligned with the ACL, you can always get in touch with us and we’d be happy to help you out.