Businesses must guarantee the products/services they sell under Australian Consumer Law (ACL). In this post we’ll uncover 5 of the most important guarantees businesses should look out for when selling.
The following guarantees only apply if you are selling, hiring or leasing products/services for:
- under $40 000 or
- over $40 000 which are of personal or household use
Consumer guarantees won’t apply to products/services worth more than $40 000 that are not used for personal or household use. As such consumer guarantees don’t apply to purchase of machinery for businesses as an example. However, guarantees cover business vehicles and trailers irrespective of cost if they are used mainly to transport goods.
1. Products/services must be of acceptable quality
When selling products/service businesses must ensure they are:
- Fit for all the purposes normally implied in the type of good
- Acceptable in appearance and finish
- Free from minor defects
- Safe
- Durable
Fit for purpose means that the consumer should be able to use the good as intended. The purpose of the good by the consumer does not need to be known as long as the purpose is common.
Acceptable in appearance and finish, and free from minor defects are relatively flexible definitions. As a rule of thumb, the product should be at a quality which a reasonable consumer would purchase.
Safe and durable vary according to the type of product/service provided. Safe does not equate to absolutely free from risk. For instance, lawn mowers have a certain degree of risk if not used properly. As such, manufacturers include warning labels and safety instructions to warn risk of injury or death. However, any product/service sold to a consumer must be safe for general use. The duration of durability of a product depends on what a reasonable consumer would expect for the product to last. For example, products such as permanent fixtures should last longer than temporary fixtures.
2. Products/services must be fit for its intended purpose
Apart from products being of acceptable quality, they must also be fit for its intended purpose. As implied before, fit for purpose can apply to the common use of the type of good. However, businesses often disclose a product’s purpose in product advertisements. As such any representations must match the intended purpose of the product. If the product fails to be fit for its intended purpose a consumer guarantee has been breached. For example, if a business advertises a vacuum cleaner but a customer purchases and it fails to maintain suction thus preventing it from cleaning as advertised, a consumer guarantee has been breached.
3. Products/services must match any sample or demonstration model and description
Businesses should be careful when providing a description of their products/services. This particularly applies to online businesses as customers rely on photos of the products along with worded descriptions to determine whether to purchase. If you sell an item that does not match the description or photo to a reasonable extent, you have violated a consumer guarantee.
Additionally, sample or demonstration models must match the actual product being sold. For instance, if a customer comes to a store and asks to buy the same model as displayed and received a different model that did not match in function or appearance, a consumer guarantee has been violated.
4. You must satisfy any express warranties
Express warranties are any extra promises or representations made about the quality or standard of a good. Sales commercials often contain to entice a customer to buy a product. Under ACL, these representations must hold true.
When providing express warranties, consumers guarantees will always apply. Businesses often use extended warranties to lengthen the coverage of their manufacturer’s warranty. This provides customers with ‘peace of mind’, and can also be found in the bill of sale. However, businesses must be careful that extended warranties do not mislead customers to think they are paying for rights automatically provided under ACL.
5. Repair, replacement and refunds
ACL entitles consumers to repair, replacement or refund if there is a breach of consumer guarantees. However, businesses do not need to provide a repair, replacement or refund if a customer changes their mind and the product follows consumer guarantees. This is due to the fact that no consumer guarantees have been breached.
If a consumer has a minor problem with a product, businesses can choose to give a repair instead or a replacement or refund. You must conduct repairs within reasonable times or the customer can demand for a replacement or refund. Alternatively, business can cover completion of repair costs at another business or compensate for the customer for the drop in value below the price paid.
In contrast, major problems are likely to be remedied by replacement or refund. A product holds a major problem when it clearly fails to follow any one or more consumer guarantees. Additionally, business can determine if a replacement or refund is eligible based on other factors such as the type or product to determine how long a product should last for.
Ultimately, businesses must ensure they are providing products that work as described. The Australian Competition and Consumer Commission (ACCC) is the government body regulating consumer guarantees. If you are a business and need clarification on consumer guarantees, considering speaking to a Competition Lawyer.
