Have you purchased a faulty product and the supplier has refused you a refund because the manufacturer’s warranty has expired?
Does your new motor vehicle need to go back to the dealer for constant repairs?
Is the supplier trying to avoid responsibility for product faults by shifting blame to the manufacturer?
In circumstances like the above, it is important to know what your legal rights are – and what steps to take next.
The Australian Consumer Law
The Australian Consumer Law (the ACL) came into force in 2011 and introduced a uniform law for consumer transactions throughout Australia.
Under the ACL, a “consumer” is a person who acquires:
- any type of good or service costing up to $40,000 (this amount will likely be increased in the next few years);
- a good or service which is normally used for a personal, domestic or household purpose (without any upper monetary limit on the purchase price); or
- a commercial road vehicle used mainly for the transportation of goods.
Courts have interpreted the words “personal, domestic or household purpose” broadly and therefore the ACL will apply to goods such as luxury motor vehicles with a purchase price over $40,000 – even if they are subsequently used in a business. The ACL will also apply where goods are leased or obtained via hire purchase.
The consumer protections contained in the ACL will generally not apply to products purchased from one-off sales by private sellers (for example, at a garage sale or school fete), products purchased at an auction or products purchased for re-supply or for use in a manufacturing process.
Consumer Guarantees in the ACL
The ACL prescribes various “consumer guarantees” for the supply of goods, including that goods:
- are of acceptable quality (i.e. goods must be acceptable in appearance and finish, free from defects and faults, safe and durable);
- are fit for any purpose which the purchaser made known to the supplier;
- match their description (for example, as contained in an advertisement or a statement made by a sales representative);
- match any sample or demonstration provided by the supplier (for example, a motor vehicle test drive or a display product); and
- are free of any hidden security interests, charges or rights of third parties.
- It is important to remember that:
- the consumer guarantees prescribed by the ACL cannot be excluded or modified by the supplier – i.e. they set a minimum legal benchmark for all consumer transaction. Significant financial penalties have been imposed on companies that have made statements in their contractual documentation, advertising or product labels inconsistent with the ACL consumer guarantees;
- the consumer guarantees are not in any way limited by the terms of a manufacturer or supplier warranty; and
- the consumer guarantees apply to the sale of second hand products and also to all repair works performed by the supplier or manufacturer, including the installation of replacement parts.
- The ACL also contains similar consumer guarantees in relation to the supply of services.
The ACL introduced a new suite of remedies for consumers where goods fail to meet one or more of the consumer guarantees.
Where the fault with a product is regarded as a “minor failure” then the supplier has the right to choose whether to either repair or replace the product or to provide a refund of the purchase price.
Where the fault with a product is regarded as a “major failure” then the consumer has the right to choose whether to either reject the product and receive a full refund or replacement product – or keep the product on the basis that it is repaired.
It can often be difficult to determine whether a fault amounts to a “minor” or “major” failure and consumers must be careful not to reject goods for a fault which may not amount to a “major” failure. Factors to consider include the nature, seriousness and number of fault/s, when those fault/s arose, whether the fault/s can be easily and quickly repaired, the nature and price of the products and whether the fault/s create any safety issues (for example, a defective vehicle engine).
Consumers must also be mindful that their right to reject a product suffering a “major” failure can be lost in certain circumstances. For example, where the goods have been destroyed or damaged, where the goods have been permanently attached to other property or where too much time has elapsed from when the product was first purchased and/or when the fault first arose.
It may also be possible for consumers to obtain compensation from suppliers where loss has been caused by either a minor or major failure. For example, the cost of hiring a replacement vehicle during a lengthy repair process. However, not all ancillary loss will be compensable – only loss which is reasonably foreseeable.
Claims against the manufacturer
A consumer may also have a direct right to claim against the product’s manufacturer. This could be crucial where the supplier has disappeared or gone into liquidation – or is not being responsive to your communications. In most cases, the manufacturer will be a large multinational company with an Australian subsidiary and will have processes in place to deal with consumer claims.
The ACL prescribes that the following “consumer guarantees” apply to manufacturers:
- that their goods are of acceptable quality;
- that their goods will satisfy all descriptions made by the manufacturer; and
- that they will take reasonable steps to provide spare parts and to make available repair facilities for a reasonable time after the purchase of their products.
However, a manufacturer will not be liable for faults to goods caused after they have left the manufacturer’s control (for example, if the product is damaged on the shop floor).
The ACL does not provide a right for consumers to obtain a refund or replacement product directly from the manufacturer – however consumers can seek compensation directly from a manufacturer for any decrease in value of the goods or any ancillary loss suffered by the consumer. In many cases, manufacturers may agree to provide a full refund or replacement product if the product is returned – even where there is no express manufacturer’s warranty or where it has expired.
Summary and Tips
- many consumers are unaware of their rights under the ACL and wrongly believe that their rights are limited to the terms of the manufacturer’s warranty;
- when problems develop with products it is important to act quickly and keep all relevant communications in writing;
- obtain photos and video recordings of the faults (with dates);
- insist on obtaining documentation describing the nature of all repairs performed and the installation of any replacement parts;
- consider carefully whether there may be a “major failure” and whether you have a proper basis to reject the product;
- consider whether to make a claim directly on the manufacturer;
- put the supplier and manufacturer on notice of any ancillary loss being caused by the faulty product and keep documents to prove the amount of such loss.