Topic 9-Australian Consumer Law (ACL) PDF

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The Hotel School Melbourne
Lecturer: David Parker...

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TOPIC 9 Consumers’ Rights and the Supply of Goods and Services: Australian Consumer Law (ACL) 1. SGA v ACL  S of G legislation is reasonably uniform but dated because: - It only applies to the sale of goods (not services), - These implied terms can be conditions or warranties, - It can be excluded by way of a term in the contract of sale, and - It applies to consumer and non-consumer contracts  The ACL: - Applies to sales of both goods and services - Contains consumer guarantees, NOT conditions or warranties - Terms are non-excludable - Only applies to consumer transactions What do “consumer guarantees” apply to?  Consumer guarantees apply to the supply of goods and/or services in trade and commerce to consumers by suppliers or manufacturers and provide a set of rights for the goods or services that they purchase.  The effect of the consumer guarantees is that they guarantee that a supplier or manufacturer of goods is saying that their goods are of acceptable quality and match any description. They also guarantee that any express warranties that they may give with their goods will be honoured. Some key ACL terms  There are 5 key concepts which limit the operation of the ACL: - Who is a ‘consumer’? - Who is a ‘manufacturer’ or ‘supplier’? - What ‘goods’ are covered by the consumer guarantees? (see s 51-59) - Which ‘services’ are covered? (See ss 60-63) - What does ‘trade or commerce’ cover? Who is a consumer? Australian Consumer Law (ACL)  Consumer contract Sesssion 3 (1) A person is taken to have acquired particular goods as a consumer if, and only if: - The amount paid does not exceed $40,000 OR - Goods of a kind ordinarily acquired for personal, domestic, or household use or consumption; OR - Avehicle or trailer acquired for use principally to transport goods on public roads. Sesssion 3 (1) However, subsection (1) does not apply if the person acquired the goods, or held himself or herself out as acquiring the goods: - For the purpose of resupply; or - For the purpose of using them up or transforming them in trade or commerce: o in the course of a process of production or manufacture; or o in the course of repairing or treating other goods or fixtures on land. Who is a manufacturer?  Broadly defined under the Act to include both the actual manufacturer, as well as “deemed manufacturers”.  A manufacturer includes a person who:

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Produces goods Hold themselves out to the public as a manufacturer of goods Allows their name, brand or mark to be applied to the goods, Allows another person to hold themselves out as a manufacture of goods, or Imports goods into Australia

Goods  “Goods” are tangible products and are covered by the consumer guarantees as long as they are sold in trade or commerce and bought by a consumer.  They include: - Ships, aircraft and other vehicles; - Animals, including fish; - Minerals, trees and crops; - Gas and electricity; - Computer software; - Second-hand goods; and - Any component part of, or accessory to, goods. Services  A supplier of services is someone who is providing an intangible economic activity that is consumed at the point of sale, for example, the repair of goods by a service person, a haircut or visiting a lawyer or a doctor. Under the consumer guarantees, a service provider guarantees that the services they provide are provided: - With due care and skill - Are fit for any specified purpose, and - Provided within a reasonable time (if no time is set). “Trade or commerce”  Goods must be supplied ‘in trade or commerce’ for guarantees in ss 54 – 59  Can include second hand goods Atkinson v Hastings Deering  Traditional auctions excluded Consumers’ rights against suppliers S3 (2) ss (1) does not apply if person acquired the goods, or held himself or herself out as acquiring the goods: (a) for purpose of re-supply; or (b) for purpose of using them up or transforming them, in trade or commerce: (i) in course of production or manufacture; or (ii) in the course of repairing or treating other goods or fixtures on land. “Ordinarily acquired”  Crago v Multicorp Pty Ltd - Ostrich incubator maybe ordinarily acquired by ostrich farmers, but not the general public - Not ordinarily acquired for domestic or personal use, not normally used domestically or purchased [with the intention] for personal use. Guarantee of acceptable quality s 54 (2) of the ACL (see 9.7)  Goods are of acceptable quality if they are as: - Fit for the purposes for which goods of that kind are commonly supplied - Acceptable in appearance and finish and 

- Free from defects and - Safe and - Durable - And all the rest – state the whole rule!  Supplier not responsible for defects - Pointed out to the consumer before sale; - Caused by consumer’s carelessness; - Reasonably revealed by pre-sale examination.  Similar to previous law, which implied a contractual promise of ‘merchantable quality’ - Grant v Australian Knitting Mills - Dawson v Pacific Chase Extended warranties  A supplier or manufacturer, when selling an extended warranty, must explain very clearly to the consumer what they are getting for their money.  But under the consumer guarantees there are two questions to consider: - What would a reasonable consumer have expected in terms of usage from, say, a $5,000 computer? (two years?) - If this is the case, then has the consumer a statutory right to a remedy on the basis that the laptop is not of an acceptable quality.  The answer is probably ‘yes’ and if that is the case, then the supplier must provide a remedy free of charge. Can a business put up signs such as ‘no refund’ under the ACL?  Signs or advertisements (and statements) such as ‘no refund’ that limit, or seem to have the effect of limiting, consumers’ rights are unlawful as they imply a consumer cannot get a refund under any circumstances.  Suppliers and manufacturers cannot: - Limit, restrict or exclude consumer guarantees (except under s 64A discussed later), or - Avoid their obligations by getting the consumer to agree that the ACL is not to apply. NOTE signs that state ‘No refunds will be given if you have changed your mind’ are legal Fitness for disclosed purpose S55 (2) (9.8)  A disclosed purpose is a particular purpose (whether or not that purpose is a purpose for which the goods are commonly supplied) for which the goods are being acquired by the consumer and that:  The consumer makes known expressly or by implication to - The supplier OR - A person by whom any prior negotiations or arrangements in relation to the acquistion of the goods were conducted or made OR - The consumer makes known to the manufacturer of the goods either directly or through the the supplier or the person referred to in a) i  Consumer must make known purpose for which the good will be used (“why I am buying it”)Dawson v Pacific Chase  Disclosure can be made - Directly - Through implication

- Through pre-contractual negotiations  Does not apply if no reliance by the consumer Carpet Call Pty Ltd v Chan  Can be for second hand goods Atkinson v Hastings Deering Goods to correspond with description s 56 of the ACL. (see 9.9)  This guarantee only applies where the goods were sold (or otherwise supplied) by description. The following case provides a useful illustration of the courts’ approach to the meaning of the phrase. Beale v Taylor (herald) Goods to correspond with sample s 57 of the ACL.(see 9.10)  Where goods are sold by reference to a sample or demonstration model, the consumer has an action against the supplier if the goods do not correspond with the sample or demonstration model in quality, state or condition. Guarantees may not be excluded  May be limited where goods are not normally for personal, household or domestic use  Under s 64A(1) of the ACL, a seller can limit their liability to: - Replacement of the goods; or - Repair of the goods; or - Paying for the cost of replacing the goods; or - Paying for the cost of repairing the goods. When liability can be limited  Limitation must be fair and reasonable.  Limitation clause permitted by s 64A (1) will not operate if the consumer can establish that it would not be fair or reasonable for the seller to rely on the clause s 64A (2)  The court will consider particularly s 64A(3) - The relative bargaining strengths of the seller and buyer - The extent to which the buyer had an opportunity to acquire the goods without the limitation clause - Whether the buyer knew or ought to have known of the term - Whether the goods were specially adapted for the buyer. Remedies for breachMajor failure  Remedies depend on whether the failure to comply is a major failure. Set out in s 260 of the ACL (see 9.15)  There are time limits on the right to reject goods.  The rejection period starts when goods are supplied and finishes when the defect should have become apparent. This depends on a variety of factors set out in s262(2).  Consumer may also sue for compensation and damages Remedies for breach Major failure  If the goods are rejected the consumer must return the goods and may require the supplier to provide a refund or replace the goods with same type and value.  Any replacement goods are subject to the statutory guarantees. Not a major Failure  If the breach is not a major one the supplier may remedy by - Repairing the goods - Replacing the goods with goods of an identical type - Providing the consumer with a refund s 261.

 A person receiving the goods as a gift has the same rights as a consumer Retailers’ right of indemnity  Suppliers are entitled to be indemnified by the manufacturer for damages and costs when the manufacturer is at fault under s274  Where goods are not ordinarily acquired for personal, domestic or household use, the manufacturer may limit its liability to replacing or repairing the goods: s276A Consumer rights against manufacturer  The manufacturers’ obligations to the consumer are similar to those imposed on suppliers  A consumer may sue the manufacturer for damages where goods - Are not of acceptable quality (s 271(1)), or - Do not correspond with the descriptions applied to the goods by or with the consent of the manufacturer (s 271(3)) Medtel Pty Ltd v Courtney  May seek damages under s 58: s 271(5) (failure to provide repair facilities or spare parts); s 271(5) (failure to comply with express warranty).  Manufacturers obliged to indemnify suppliers who incur losses as a result of failure to comply with obligations: s 274  Manufacturers may limit liability: s 276A Defences available to the manufacturer  Under ACL, manufacturers not liable if - The problem was caused by someone other than the manufacturer or its employees; OR - The problem was due to some cause of independent human control after the goods left the control of the manufacturer.  If quality relates to price manufacturer not liable if retailer charges price higher than their RRP.  Not responsible for failure to provide repairs and spare parts if notice given before sale to the consumer that these might not be available.  Under s 271(6) the manufacturer may repair or replace goods under an express warranty  The amount of damages the consumer may recover is set out in s 272 Rights against service providers  Section 3(3) of the ACL defines consumer contract for services (a) the value of services < $40,000 (b) the services were of a kind ordinarily acquired for personal, domestic or household use or consumption.  Services broadly defined in s 2. (9.27)  Not covered by ACL consumer guarantees (9.28): - Financial Services covered by the ASIC Act 2001 - Employment contracts - Insurance contracts - Contracts in relation to transportation or storage of goods - Supply of telecommunication services; and - Supply of gas or electricity services.  Guarantees relating to provision of services: - Guarantee of due care and skill: s 60 Read v Nerey Nominees - Guarantee as to fitness for particular purpose: s 61; Read v Nerey Nominees and

Where no time for the supply of services is fixed, a guarantee that they will be supplied within a reasonable time: s 62 Contract term that excludes, restricts or modifies the guarantees is void: s64 Service providers may limit liability Remedies set out in ACL. Remedies depend on whether failure to comply is major failure Definitions for failure are set out in s268. Termination of a contract take effect from the time the supplier is notified. -

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