Australian Consumer Law: the consumer guarantees explained

What the guarantees are

The Australian Consumer Law (ACL, Schedule 2 to the Competition and Consumer Act 2010) establishes consumer guarantees in Part 3-2. These guarantees apply to the supply of goods and services to consumers. They are designed to ensure a minimum standard of performance and quality.

When goods are supplied, the ACL outlines several guarantees. These include that the consumer receives clear title to the goods, undisturbed possession, and that there are no undisclosed securities. Other guarantees relate to the quality of the goods, their suitability for a specific purpose, and their conformity with any warranties provided.

For services, the guarantees focus on the manner in which the service is provided and its suitability for a disclosed purpose. Services must be rendered with due care and skill and be supplied within a reasonable timeframe.

Major failure vs minor failure

The remedy available to a consumer when a consumer guarantee is not met depends on whether the failure is classified as 'major' or 'minor'. This distinction is crucial in determining the consumer’s rights and the supplier’s obligations.

A major failure occurs when a reasonable consumer would not have purchased the goods or service had they been aware of the issue. Examples of major failures include goods that are unsafe, substantially unfit for their intended purpose, or services that cannot be remedied within a reasonable timeframe. When a major failure occurs, the consumer has the right to choose between a refund, replacement of the goods, or compensation for the loss in value.

In contrast, a minor failure allows the supplier to select the appropriate remedy. For minor failures, the supplier may choose to repair the goods, provide a replacement, or offer a refund. The supplier must complete the chosen remedy within a reasonable time.

Who is covered

The consumer guarantees apply to most purchases of goods or services. The monetary threshold determining coverage was lifted to $100,000 for individual goods or services bought from 1 July 2021. Purchases exceeding this amount are still covered if they are of a kind ordinarily acquired for personal, domestic or household use.

Even if a purchase exceeds the monetary threshold, it remains protected if it falls within the personal, domestic, or household use category. This ensures that consumers are safeguarded even when acquiring goods or services for these purposes at a higher value. Businesses seeking to understand their obligations regarding contracts should consider consulting an unfair contract terms auditor.

Sales between businesses (business-to-business) are generally not covered by the consumer guarantees if they fall below the monetary threshold and are not for personal, domestic or household use. However, these transactions may still be subject to protections relating to unfair contract terms.

Common supplier mistakes

Suppliers sometimes make errors that breach the Australian Consumer Law. A common mistake is refusing a refund when a consumer is entitled to one due to a major failure in a product or service. The law states that when a failure is major, the consumer has the right to choose a remedy, which can include a refund. A supplier cannot unilaterally decide to repair the item instead.

Another frequent misunderstanding is the belief that a manufacturer’s warranty replaces or limits the consumer guarantees. This is incorrect; statutory guarantees are legally binding and cannot be excluded or contracted out of by suppliers. Consumers have rights under the Australian Consumer Law regardless of any manufacturer warranties offered.

Finally, suppliers sometimes incorrectly charge consumers fees for returning faulty goods, such as restocking or freight costs. This practice is also a breach of the law. Displaying signs stating "no refunds" is also problematic as it is misleading, as the statutory guarantees remain in effect.

• Charging restocking fees on returns
• Charging freight fees on returns
• Displaying "no refunds" signage