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Consumer guarantees and warranties – what are my obligations as a business owner?

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The Small Business Lawyer often receives enquiries from business owners enquiring about what their obligations are when a customer makes a complaint about a product or service they have provided.

The Australian Consumer Law (“ACL”) provides consumers with rights and remedies against suppliers and manufacturers of goods and services.

The ACL requires your business to guarantee the goods and services that you sell. This includes goods that fail due to a manufacturing defect or an issue that is the manufacturer’s fault. As a reseller of their goods, you are obliged by the same law to guarantee the goods. Likewise, you are guaranteed as a consumer of the manufacturer.  Therefore, whilst you are legally obliged to provide a remedy for your customer – repair or replace depending on the warranty and situation – the manufacturer must also reimburse your business.

The reimbursement amount can include any compensation paid to the consumer for reasonably foreseeable consequential losses, i.e. you should be reimbursed by the manufacturer for whatever amount it cost you to appease your customer.

A supplier has three years to seek reimbursement from a manufacturer, from the earliest of the following dates:

  • the day that you fixed any problems with the consumer’s goods;
  • the day the consumer took legal action against your business (if applicable).

The latter should only be an issue if you were unable to remedy the situation, i.e. neither a repair nor a replacement was an option for the situation.

Your customers can seek compensation for damages and losses they have suffered due to a problem with goods or services (in addition to any other remedy provided) if you could have reasonably foreseen the problem. In other words, customers can also recover losses that would probably result from your failure to meet a guarantee.

Damages include the cost caused to the consumer as a result of the problem with the product or service. This is usually financial, such as costs of repairing damaged carpets as a result of a faulty leaking washing machine, inspection and transportation. It can also include lost time or productivity.

You do not have to pay for damages or losses that:

  • are not caused by your business or the goods you supplied;
  • relate to something independent of your business and outside your control, after the goods left your control.

Australian Consumer Law does not guarantee goods or services sold by your business that cost more than $40,000 that are normally used for business purposes (for example, installing industrial air conditioning to a factory premises).

Additional exceptions apply in some circumstances. These include:

  • Goods purchased at a traditional auction;
  • Goods purchased to be resold or transformed into a product that is on-sold;
  • Services for transportation or storage of business goods;
  • Fitness for purpose of professional services provided by a qualified architect or engineer.

Different laws apply to:

Consumers’ rights are not limitless, and the consumer guarantees do not require you to provide a remedy unless one of the guarantees has not been met.

For example, you may not be required to provide a remedy if a consumer:

  • simply changes their mind, decides that they do not like the purchase or has no use for it anymore;
  • discovers that they can buy the goods or services cheaper elsewhere;
  • has damaged the goods by using them in a way that was unreasonable.

If you require further advice about your obligations under Australian Consumer Law, contact us for a free 20 minute consultation.


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