How Do Consumer Guarantees Apply to Businesses?
Are you a business who sells goods or services? Do you know your consumer obligations? Read this article to understand how they apply to you.
In an earlier article, we spoke about What are ‘consumer guarantees’? That article focused on the consumer’s perspective and how they can claim their guarantee. This article will focus more on the other party involved in that context, the business.
Before we jump into how consumer guarantees apply to businesses, let’s do a quick overview of this topic. Consumer guarantees are specific obligations the supplier and/or retailer has to honour and assure the working condition of the product to consumers. These guarantees come with the purchase of services or products and aim to protect the consumer. They cover most items with a few exceptions mentioned in the article earlier. The Australian Competition & Consumer Commission (ACCC) outlines consumer guarantees under the Australian Consumer Law (ACL).
Looking at the opposite side of consumer guarantees and specifically for the businesses these guarantees apply to, we need to be wary of what impact they have on operations. As a business owner, you should be aware of what these consumer guarantees are and how you have to comply with them.
The rules outlined in the ACL set out the circumstances under which a business is required to provide a consumer with a remedy. The businesses that fall under this group are those provide goods – by selling, leasing or hiring – or services to consumers in Australia. In addition, manufacturers and importers must also comply with certain consumer guarantees.
Guarantees Applying to Goods & Services
Businesses must guarantee that those goods and services:
- Acceptable quality – safe, lasting, no faults, look acceptable and do what normally expect them to do
- Are fit for any purpose that the consumer made known before purchasing (either expressly or by implication) or for the purpose which the business said it would be fit for
- Accurately described
- Match any sample or demonstration model
- Satisfy any express warranty
- Have a clear title, unless otherwise advise the consumer before the sale
- Come with undisturbed possession, so no one has the right to take goods away from or to prevent consumer from using them
- Are free from any hidden securities or charges
- Have spare parts and repair facilities reasonably available for a reasonable period of time, unless consumer is given other advice
Breach of Guarantees
If you sell a product that fails to meet one or more of the consumer guarantees, they are entitled to a remedy – either a repair, replacement or refund depending on the circumstances. The seller can choose one of these options if the problem is minor. However, if the problem is major or can not be fixed they have to be given the option to choose:
- Reject goods and obtain full refund or replacement
- Keep goods and seek compensation for reduction in value of goods
A major problem is:
- Stopped someone from buying it if they had knowledge of it
- Significantly different from the sample or description
- Substantially unfit for its common purpose and can not be fixed within a reasonable time
- Does not do what the consumer asked for
Compensation for Damages & Loss
The customers can seek compensation for those damages and losses they have suffered due to a problem with your product or service if you could have reasonably foreseen the problem. Essentially, they can recover losses as a result of your failure to comply with a guarantee. Damages include cost caused to the consumer as a result of the issue with the product or service. Usually financial in nature, but can also include lost time or productivity as well. As a business, you do not have to pay compensation:
- Not caused by your business or goods you have supplied
- Independent of your business and outside your control, after they left your control
For an in-depth guide for businesses when it comes to these guarantees have a read of the ACL’s PDF. We advise that you consult a consumer lawyer to better understand what those customer guarantees are and how they apply to your operations.
Abhinav is a legal intern at Lawpath as part of the content team. Currently in his 3rd year studying a Bachelor of Laws at Macquarie University (Major in Banking, Corporate, Finance & Securities Law). He is keen to learn more about Mergers & Acquisitions in the future.