Consumer Guarantees

Consumer Guarantees

Australian Consumer Law (ACL) requires businesses (suppliers) to provide consumers with certain guarantees for goods and service. However, consumer rights are not limitless and consumers are not always entitled to return goods or terminate services. This post will explore the circumstances in which businesses are required to provide consumers with a remedy and explain the benefit of implementing a clear returns policy which is compliant with the ACL.

If not managed properly, returns can have a negative impact on cash flow, profit margins, customer satisfaction, business reputation and future sales.

There are many reasons that a consumer may want to return their purchase or terminate a service and depending on the circumstances – the consumer may ask for a repair, replacement, refund or other remedy.

Businesses must be careful when dealing with returns and terminations to ensure that they are satisfying their responsibilities under the ACL and promoting customer satisfaction while also ensuring the ongoing viability of the business.

Consumer Guarantees

Under the ACL, there are guarantees which apply to the supply of goods and services to consumers (Consumer Guarantees). Consumer Guarantees include, for example:

  • The supplier guarantees they have the right to sell the goods;
  • The supplier and manufacturer guarantees the goods are of acceptable quality;
  • The supplier guarantees the goods are fit for any disclosed purpose;
  • The supplier and manufacturer guarantees the goods match their description;
  • The supplier guarantees the goods correspond with the sample or demo model;
  • The manufacturer that facilities for the repair of the goods, and parts for the goods, are reasonably available for a reasonable period after the goods are supplied unless otherwise agreed;
  • If applicable, the supplier and manufacturer guarantees the goods comply with any express warranty;
  • The supplier guarantees the services will be rendered with due care and skill;
  • The supplier guarantees the services will be fit for a particular or disclosed purpose; and
  • The supplier guarantees the services will be supplied within a reasonable time.

A consumer is defined in the ACL as a person who acquires goods and services for $40,000 or less, or for personal, domestic or household use or consumption, or for a vehicle or trailer acquired for use principally in the transport of goods on public roads. A person is not considered to be a consumer if they acquire goods for re-supply, to use or transform as part of a business in a process of production or manufacture, or repairing or treating other goods.

Under the ACL, consumers have a right to ask for a repair, replacement, refund or other remedy if a business has failed to satisfy its obligations in relation to the Consumer Guarantees. Further, a consumer will be able to seek damages from a manufacturer in the instance where the manufacture fails to satisfy its guarantee obligations. If this is the case, the business from which the consumer purchased the good or service will be entitled to be indemnified by the manufacturer for its costs in remedying the issue.

It is important to note that consumers are not entitled to a remedy in every circumstance. For example, businesses are not obligated to offer a remedy under the ACL where the consumer simply changes their mind. However, for various reasons some businesses have a “change of mind” policy which allows consumers to return goods under certain terms if they change their mind. If this is the case, the business must abide by the policy.

Rights and Responsibilities

Industry Legal Group have developed a guide for businesses to use when a consumer asks for a repair, replacement, refund or other remedy for goods or services acquired form the business.

Download Industry Legal Group’s full article to view.

Other issues

The Australian Competition and Consumer Commission (ACCC) has a number of powers under the ACL including the power to issue significant infringement notices for alleged contraventions.

Further, if a business limits or attempts to exclude Consumer Guarantees or otherwise avoid its obligations it could receive a significant penalty for breaching the ACL, up to $1.1 million for a body corporate and $220,000 for an individual. Criminal penalties may also be imposed. An example of a breach includes “no refund” signs or statements are unlawful except where they are expressly limited to refunds or returns for change of mind.

Trading Terms and Return Policy

It is important that all businesses have well drafted trading terms and a returns policy which is clear and compliant with the legislation.

If drafted properly, these documents will provide a necessary level of protection for businesses against avoidable claims. They will also assist to educate consumers on the relevant terms and conditions as well inform the business of its rights and responsibilities.

Need assistance?

Industry Legal Group can provide clients with information and advice on consumer law matters, including preparation of trading terms, warranties and returns policies which are compliant with the ACL. Please contact Industry Legal Group on 1300 736 435 or info@industrylegalgroup.com.au if you have any question relating to this article or to discuss any consumer law issues that arise in your business.

This article is intended for information purposes only and should not be regarded as legal advice. Please contact Industry Legal Group for specific legal advice before taking any action.

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