Consumer Guarantees under the Australian Consumer Law

Consumer Guarantees Under the Australian Consumer Law

Consumer guarantees under the Australian Consumer Law (ACL) legislate terms included in a contract, ensuring rights when goods/services:

  • Break easily.
  • Don't work.
  • Don't perform as expected.

The ACL creates guarantees for consumers acquiring goods/services from Australian suppliers, importers, or manufacturers.

If a guarantee isn't met, remedies include:

  • Repair.
  • Replacement.
  • Refund.
  • Service performed again.

Why Consumer Guarantees?

  • Information Asymmetry: Suppliers know more about goods/services than customers.
  • Exclusion Clauses: Suppliers aim to exclude standards, but ACL imposes mandatory quality standards for relevant consumer acquisitions.

Consumer Guarantee Checklist

  1. Applicability: Acquisition of goods/services by a consumer (Section 3).
  2. Trade or Commerce: Guarantees apply to suppliers in trade or commerce.
  3. Exclusions: Specific transactions are excluded.
  4. Which Guarantees Apply: List in legislation.
  5. Exclusion Clauses: Interaction with statutory consumer guarantees.
  6. Remedies: Customer entitlements for breaches.

Acquisition of Goods/Services by a Consumer

One must satisfy either of these criteria (Section 3):

  • Price of goods/services is $100,000\$100,000 or less.
  • Goods/services are a 'Paduk' type (personal, domestic, household use), regardless of price.

Consumer guarantees do not apply if goods are acquired for resupply or use up in manufacture. Goods acquired for resupply or use up in manufacture excludes businesses who acquire goods and are not the end user.

Section 3

  • A person acquires goods as a consumer if:
    • The price is less than $100,000\$100,000 or
    • The goods are of a kind ordinarily acquired for personal, domestic, or household use (Paduk).
  • Up until recently the threshold was $40,000\$40,000.
  • Section 3.3 mirrors provisions for services.

The 'Paduk' Test

  • Objective test: Focus on the type of goods, not intended use.
  • 'Ordinarily acquired' means regularly, but needn't be principally or predominantly.

Examples:

  • Considered Paduk: Industrial carpet, alarm system.
  • Not Paduk: Photocopier, prime mover truck, large farming tractor.

Goods acquired for resupply or use in production/manufacture are not consumer acquisitions. For example, Consider a bakery purchasing flour:

  • If I purchase flour from the supermarket for home use, it is covered by consumer guarantees.
  • The baker is using it up in manufacture and putting it into bread; therefore, it is not covered. Even if the baker resells the flour, they won't be protected.
  • End-user requirement: protection does not extend to items used up in a business and then resupplied.

Assessing Amount Paid

Sections 3(4) to 3(9) provide details on mixed supplies and other related issues.

Paduk Gateway

The Paduk test differs between consumer guarantees and unfair contract terms regimes.

  • Consumer Guarantees: Objective test of whether goods/services are ordinarily acquired for personal/domestic/household use.
  • Unfair Contract Terms: Focuses on the subjective purpose of the customer acquiring for personal/domestic use.

Example:

  • An individual buys a tractor for their private garden for more than $100,000\$100,000. Consumer guarantees likely don't apply, but unfair contract terms might if it's a standard form contract with the domestic purpose met.

Relevance of Paduk gateway is diminishing due to expansion of other gateways.

  • Increased price threshold for consumer guarantees in 2021.
  • Application of unfair contract terms to small business contracts in 2016.

Supply 'In Trade or Commerce'

This determines applicable consumer guarantees.

In trade or commerce means the supply of goods or services in the context of running a business.

  • Selling a car privately is generally not trade or commerce.
  • Selling secondhand goods on eBay occasionally is not trade or commerce, unlike running an eBay shop.

Specific Exclusions

Guarantees don't apply to:

  • Insurance contracts (regulated separately).
  • Transportation/storage of goods (potentially due to industry pressure).
  • Financial products/services (regulated by ASIC).
  • Recreational services (liability can be limited due to a past insurance crisis).