New statutory consumer guarantees introduced

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Recent Amendments to the Trade Practices Act have introduced uniform statutory consumer guarantees to replace the existing system of implied conditions and warranties found in various Federal and State fair trading laws.

The government has adopted a staggered roll-out of particular aspects of the new regime due to concerns from the business community about their ability to comply with the new requirements by 1 January 2011. The statutory amendments and new Regulations are being rolled-out as follows:

• Stage 1, commencing on 1 January 2011, which includes exemptions regarding unsolicited advertisements, unsolicited consumer agreements and certain requirements to report death or serious injury or illness where similar requirements exist under other legislation;
• Stage 2, commencing on 1 July 2011, includes requirements for repair notices relating to consumer goods; and
• Stage 3, commencing on 1 January 2012, relates to warranties against defects.

What goods and services do the guarantees apply to?

The new regime will apply to goods and services of a kind ordinarily acquired for personal, domestic, or household use or consumption (but not to supplies of gas, electricity or telecommunication services) as well as goods and services where the cost is less than $40,000.

This means that the statutory guarantees will not apply to goods that are purchased for the purpose of resupply, or to goods utilised in the manufacturing process. The guarantees will also not apply to insurance services or services that relate to the transportation or storage of goods for the purposes of a business, trade, profession or occupation carried on or engaged in by the person for whom the goods are transported or stored.

Guarantees relating to the supply of goods

There are a number of guarantees that have been introduced by the amendments that relate to the supply of goods. These include:

• Guarantee as to title – this is a guarantee that the supplier has the right to dispose of the property in the goods to the consumer;
•  Guarantee as to undisturbed possession – this is a guarantee that the consumer has the right to undisturbed possession of the goods;
• Guarantee as to undisclosed securities – this is a guarantee that the goods will be free from any security, charge or encumbrance (except for those disclosed to the consumer) when the property in the goods passes to the consumer;
•  Guarantee as to acceptable quality – this guarantee extends and replaces the previous ‘merchantable quality’ warranty.  This is a guarantee that the goods will be fit for all the purposes for which goods of that kind are commonly supplied, as well as being acceptable in appearance and finish, free from defects, safe and durable. These matters are considered from the point of view of a reasonable consumer having regard to the relevant circumstances relating to the supply of the goods;
• Guarantee as to fitness for any disclosed purpose – this is a guarantee that the goods are reasonably fit for any disclosed purpose, and for any purpose for which the supplier represents that they are reasonably fit;
• Guarantee relating to the supply of goods by description – this is a guarantee that the goods correspond with the description;
• Guarantees relating to the supply of goods by sample or demonstration model - this is a guarantee that the goods correspond with the sample or demonstration model in quality, state or condition and that the consumer will have an opportunity to compare the goods with the sample;
• Guarantee as to repairs and spare parts – this is a guarantee that the manufacturer of the goods will take reasonable action to ensure 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; and
• Guarantee as to express warranties – this is a guarantee that the manufacturer of the goods will comply with any express warranty given or made by the manufacturer in relation to the goods.

Guarantees relating to the supply of services

The amendments also introduce a number of guarantees that relate to the supply of services. These include:

• Guarantee as to due care and skill – if a person supplies, in trade or commerce, services to a consumer, there is a guarantee that the services will be rendered with due care and skill;
• Guarantees as to fitness for a particular purpose - if the consumer makes known to the supplier any particular purpose for which the services are being acquired by the consumer, there is a guarantee that the services, and any product resulting from the services, will be reasonably fit for that purpose; and
• Guarantee as to reasonable time for supply - this is a guarantee that the services will be supplied within a reasonable time.

Can these guarantees be avoided?

To strengthen the protective nature of this new regime, any contractual terms that attempt to exclude, restrict or modify the guarantees will be void.

Can a supplier limit their liabilities?

A supplier of goods or services that are not of a kind ordinarily acquired for personal, domestic or household use or consumption may limit its liability to replacement or repair of the goods, or the cost of doing so. However, any attempt to contractually limit the liability of a supplier of goods or services that are of a kind ordinarily acquired for personal, domestic or household use or consumption will be void.

However, as is the case under existing law, manufacturers are required to indemnify suppliers in respect of the costs of complying with the guarantee obligations related to acceptable quality, descriptions applied to goods by manufacturers, and fitness for a purpose that a consumer makes known to a manufacturer.

Additional obligations

Suppliers may be required to display notices informing consumers of their rights under these provisions. Failure to comply with such an order is an offence of strict liability and may result in penalties of up to $50,000 for a body corporate and $10,000 for an individual.

What remedies are available when guarantees are not complied with?

In general terms, consumers are entitled to have a supplier offer a refund, replacement or repairs if the standards required by a guarantee are not met. The applicable remedy will depend on which guarantee has not been complied with and whether or not the failure is ‘major’ or ‘minor’. Damages will also be available from the manufacturer or supplier in certain circumstances.

These remedies must be provided to consumers within a reasonable time, if not the consumer may have the failure remedied elsewhere and have the supplier pay for the remedy.

Contact Details:

Brisbane

Philip Vickery
Partner
T: +61 (0)7 3135 0632
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Melbourne

Michael Linehan
Partner
T: +61 (0)3 9321 9807
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Sydney

Donna Bartlett
Partner
T: +61 (0)2 8083 0420
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