Consumer Law II:

Consumer
Guarantees
Refunds: if you are asked: make sure you talk about consumer guarantees under ACL- talk about one failure of the
CG.

Use the below template to answer questions about Consumer Guarantees/ refunds:

Statutory Guarantees- Refund

‘This part of the question involves the statutory guarantees. We must establish that this product has failed to satisfy
one of the guarantees’ 1-5 are common elements, note there are different types of Consumer Guarantees i.e.
acceptable quality.

1. Person: identify the person. applicable to both manufacturer and supplier. Supplier cannot use excuse, ‘not
the manufacturer’, to relive itself from refund liability.
2. In trade or commerce: was the conduct of commercial in nature (same as s29)
3. Consumer (s3 of ACL): Who is the consumer and does it meet the terms in s3 ACL? ‘Tom is a consumer
under s3 of ACL as he paid $550 for the carton of cholates, which is less than $40,000 and it makes him a
consumer under ACL’.
4. Supply: i.e. by way of sale. ‘Tom purchases form WFM by way of sale’.
5. Goods: i.e. chocolate
6. Is the chocolate of acceptable quality (s 54)? Note: each specific guarantee has their own criteria. See notes.
7. A major or minor failure (s260): remedies for each differ. See notes.
8. Remedies: see notes

‘Magic Sentence’: ‘The supplier cannot refuse to give a refund because the goods are not in their original packaging
(s54) and it is the suppliers of the goods, who are required to give a refund for breach of the guarantees.’
Refunds and other Remedies
The ACL provides a range of specific consumer guarantees in relation to products and services. The consumer
guarantees protect consumers against goods or services that are defective in some way.

Consumer Guarantees: The ACL contains several consumer guarantees which protect consumers against problems
with good and services. If the supplier fails to comply with its obligations, the consumer (or a regulator, such as the
ACCC, on the consumer’s behalf) may take legal action to enforce the remedy.

1&2: Person and In trade or Commerce: Same definitions as s29 of ACL.

3. Supply:
- in relation to goods- supply (incl. re-supply) by way of sale, exchange, lease, hire or hire-purchase; and
- in relation to services- provide, grant or confer. (supply of gas, electricity or telecommunication service is
excluded form CG under s65.

4. Goods: broadly defined

- animals, mineral, trees and crops, gas and electricity; computer software; second hand goods and
component part of goods.
5. Services: wide range of services i.e. repair of goods. Under CG service provider guarantees that the service they
provide:
- are provided with due care and skill
- fit for any specific purpose; and
- are provided withing a reasonable time (if not time set)

6. Consumer: term defined by s3 of the ACL: a ‘consumer’ will be a person who acquires goods or services that
either:

- cost no more than $40,000 (except for a vehicle or trailer which is purchased for the purpose of transporting
goods); or
- are ‘of a kind ordinarily acquired for personal, domestic or household use or consumption’.

Acquiring services as a consumer

(3) A person is taken to have acquired particular services as a consumer if,
and only if:
(a) the amount paid or payable for the services, as worked out under
subsections (4) to (9), did not exceed:
(i) $40,000; or
(ii) if a greater amount is prescribed for the purposes of
subsection (1)(a)—that greater amount; or
(b) the services were of a kind ordinarily acquired for personal,
domestic or household use or consumption.

7. Specific Guarantees: further restriction of the above definition. Consumers must be the end user of the
goods: guarantees do not apply to goods acquired for the purpose of selling them to other persons. Nor using the
goods acquired to manufacture other goods.

Title of Goods: (S51 ACL) you cannot sell what you do not own. You cannot validly pass title in goods to another
person if you do not hold the title yourself. If only title is being passed must be state in the contract. This does not
apply to lease or hire.
Undisturbed Possession of Goods: (s52 ACL) If there are pre-existing claims on goods that a purchaser does
not know about there is a risk that the earlier lender, or another claimant, may assert ownership over the goods,
such as by physically seizing the goods. S52 assumes that a third party will not come and claim to be the true owner.
See case below.

Undisclosed Securities: (s53 ACL) Goods are free from any undisclosed securities which are any ‘securities,
charges or encumbrances’ that affect the goods (such as a loan that has been secured against the goods). Unless the
consumer has been advised, in writing, of the existence of any undisclosed securities before supply of the goods, the
guarantee will be effective.
Acceptable Quality, including Fitness for Usual Purposes: (s54 ACL). Good must be of acceptable
quality, means that: does not apply to goods sold at auction

- fit for all purposes for which of the kind are commonly supplied
- acceptable in appearance and finish
- free from defects
- safe and
- durable

Determined from POV of a hypothetical ‘reasonable consumer’. This ‘reasonable consumer’ is presumed to take
account of the following criteria, whether or not goods are of an acceptable quality:

- price (you get what you pay for)

- statements made about the goods on any packaging or labelling
- any other representation made about the goods by the manufacturer or supplier and
- any other relevant circumstances

If the description is so limited that the goods sold under the contract could only be used for one purpose, then the
goods would be unacceptable if they were of no use for that purpose.
- Legal Authority: Ryan v Great Lakes Council: an oyster farmer sold contaminated oysters to a consumer who
became ill after eating them. There was an implied condition that the oysters would be of acceptable quality;
that is, they would be fit to eat. An interesting point to note about this case is that the oyster farmer had no
reason to know that the oysters were not of merchantable quality.

Fitness for a Specific Purpose made known to the Supplier: (s55 ACL) where a consumer makes a
specific purpose for the goods known to the supplier and the goods are supplied then the goods must be fit for that
purpose. And vice versa. Excluding good sold at auction. Also, does not apply if the customer did not rely on the skill
or judgment of the person to whom they communicate their purpose.
- Legal Authority: Grant v Australian Knitting Mills: the underpants were not reasonably fit for their only
proper use because the garments contained chemicals left over from processing the wool. The plaintiff relied
on the retailer’s choice of a quality product that could be worn without being washed first, and, as this was
 not the case, there was a breach of the implied condition of fitness for purpose (or today under the ACL a
guarantee as to fitness for disclosed purpose).

Correspondence with Description: goods must match any description (other than auction) of the goods
provided by their supplier. The section also applies where the consumer has actually seen and examined the goods,
but the goods have been bought as corresponding to a description. If the purchaser ordered goods that complied
with the manufacturer’s specifications and sample, as Metal Roofing & Cladding Pty Ltd v Amcor Trading Pty Ltd,
there is no breach of the implied warranty for compliance with description.

Availability of Spare Part and Repair Facilities: (s58 ACL) The ACL guarantees that the manufacturer of
goods will take ‘reasonable action’ to ensure that spare parts and facilities for repair are ‘reasonably available’ for a
‘reasonable period’ after the goods are sold. There is an exception, however, where the manufacturer took
reasonable’ action to ensure that consumers were notified that spare parts or repair facilities would not be
available at all for the goods, or that they would not be available after a particular time.

Compliance with any Express Warranties: (s59 ACL) does not apply to good sold at auction. Suppliers
and manufacturers will comply with any express warranties they provide to consumers in respect of the goods.
‘Express warranty’ is defined in the ACL as ‘an undertaking, assertion or representation’ about:

• the quality, state, condition, performance or characteristics of goods themselves;

• the provision of services that might be required for the goods.

• the supply of parts; or

• the future availability of identical goods, or of other goods in a set that the goods purchased form a part of, that is
given in connection with the supply or promotion (advertising) of the goods, in order to encourage consumers to buy
them.
Express warranties may not replace the other guarantees and cannot limit or exclude their operation.

9. Consumer Remedies: if a supplier of goods or services fails to comply with one of the consumer
guarantees under the Australian Consumer Law (ACL) then the consumer will have a remedy. The possible
remedies in relation to goods are: • repair of the goods • replacement of the goods • payment of the cost of
repair or replacement of the goods • refund of the cost of the goods • cure of a defect in the title to the
goods.

Seriousness of the Failure: 2 type. Both have different remedies.

Major Failure: (s260 and 268) A supplier’s failure to comply with a consumer guarantee will be a major failure if
the goods or services. match any one of the following descriptions Either goods or services:

- the goods or services would not have been acquired by a reasonable consumer had they been aware
of the failure
- the goods or services are unfit for a purpose for which such goods or services are commonly
supplied (and the goods or services cannot easily be remedied to make them fit for such a purpose)
Goods only:

- the goods do not match a description or demonstration model

- the goods are unfit for a specific purpose that the consumer made known to the supplier or some other
person in the distribution chain (and the goods cannot easily be remedied to make them fit for such a
purpose)
- the goods are unsafe

NOTE: only apply to suppliers, not manufacturers.

Possible actions for a Major Failure:

If a major failure occurs, then the consumer may choose one of two different courses of action. (If the failure relates
to goods then the term ‘consumer’ includes any person who received the goods from the consumer as a gift.)

A) Open to the consumer is to recover compensation from the supplier for any reduction in the value of the
goods or services below the price paid for the goods or services. This remedy is provided by ss 259(3)(b) and
267(3)(b) of the ACL. Effectively, the consumer decides to keep the goods or services as supplied and
recovers a partial refund. Ideal for when replace is inconvenient.
B) open to the consumer is to reject the goods or terminate the contract for the supply of services (whichever
is relevant). If the consumer exercises this option they become entitled to the remedy of a refund (and, if
goods have been supplied, the alternative remedy of replacement of the goods).

Rejection of goods: (s263 ACL) In the case of goods, the consumer must:

- notify the supplier that the goods have been rejected; and
- return the goods to the supplier, unless returning the goods would be unreasonably difficult or expensive
(for example, because the goods are very large or heavy, in which case the supplier is obliged to collect the
goods at the supplier’s expense).

Once returned the supplier becomes obliged to either refund the purchase price or to replace the goods (whichever
remedy the consumer chooses).

The goods do not have to be in their original packaging. Also, the supplier may not insist that the consumer receive
credit for the returned goods. The supplier must provide a refund of the money that the consumer paid (if consumer
wants). NOTE: replacement of good must also comply with consumer guarantees.

Limitations:
 - If goods have been lost, stolen, destroyed or disposed of by consumer, damaged after delivery then
consumer has not right to notify supplier of rejection of the goods.
- The right to rejections of goods is lost after ‘a period’ (reasonable or specified) has ended.

Non-Major failure that can be Remedied: (ss259 (2) and 267 (2) ACL)if the supplier can remedy the failure by
repairing or replacing goods, or by curing the defect in the title of goods, or by refunding the cost of goods or
services, aka NMF.

- Supplier may choose form of remedy i.e. repair of goods.

- If supplier fails to or refuse to comply with a requirement to remedy a failure (or withing a reasonable time)-
consumers can notify supplier of the rejected goods or terminate services and entitled to remedies of refund
or replacement been for a major failure.

Damages: (ss259(4)-(5) and 267 (4)-(5) ACL). Failure to comply with CG- consumer provided with remedy of
damages.

- Under the ACl: foreseeable that the consumer would suffer or damage as a result of suppliers failure to
comply with a CG. Also refers to direct and consequential losses. Defence for suppliers if they can prove
‘independent of human control’.

Safety Defects and Manufacturers Liability: Manufacturers are liable to compensate any person, regardless of
whether s/he actually purchased the goods, who:
- is personally injured,
- suffers loss as the result of injury to another person,
- suffers loss due to damage to other goods (PDH goods),
- suffers loss due to damage to or destruction of land, fixtures or buildings (normally acquired for personal
use). In Thomas v Southcorp Australia Ltd, s 141 considerably extends potential liability to consequential
damage resulting from defective goods. In that case, a high-temperature cut-out switch failed in a ducted
gas heater, resulting in a fire, and seriously damaging the house and contents. Southcorp was liable to
compensate the plaintiffs because the heater was clearly defective and caused the fire.

where this is caused by a safety defect in goods made by them. How to determine whether the goods have the
safety defect? Safety defects are Goods have a safety defect ‘if their safety is not such as persons generally are
entitled to expect.’ The remedy of damages against manufacturers is dealt with by. ss 271–3 of the ACL.
Defences against Safety Defect: the burden of proof on any of the below is on the defendant.

- The defect did not exist at the time the manufacturer supplied the goods; see case below;

- The defect only exists due to compliance with a mandatory standard; s142 (b)
- The defect could not have been discovered when the goods were supplied due to the state of scientific or
technical knowledge available at that time;s 142(c): Graham Barclay Oysters Ltd v Ryan
- The goods were made into other goods and the finished product carries the defect.