Consumer Guarantees – What Business Owners Need to Know

Consumer guarantees protect consumers’ rights when purchasing goods or services. As a small business owner, it is essential to have a clear understanding of these guarantees to ensure compliance with Australian Consumer Law (ACL). It is crucial to understand these obligations and to comply with them for three key reasons.

1. Avoid significant potential fines for noncompliance.
2. Protect your business reputation and brand and
3. Maintain positive relationships with customers.

Let’s delve into what consumer guarantees entail and how they impact businesses.

Consumer Guarantees: Sale of goods

Under the ACL, the consumer guarantees related to goods encompass several aspects:

Guarantee as to Title: Consumers have the right to obtain goods free from any legal encumbrances or undisclosed securities.

Guarantee as to Undisturbed Possession: Unless limitations on title are disclosed such as a security interest, consumers are entitled to have undisturbed possession of the goods they purchase.

Guarantee of Acceptable Quality: Goods must be of acceptable quality, free from defects, and fit for their intended purpose.

Guarantee of Fitness for Disclosed Purpose: If a consumer expressly or implicitly communicates a specific purpose for purchasing goods, they should be reasonably fit for that purpose.

Guarantee of Matched Description: Goods must match the description provided by the seller, whether it’s in marketing materials or product listings.

Guarantee of Matched Sample or Demonstration Model: If a sample or demonstration model is shown to the consumer, the goods supplied must match it in terms of quality and characteristics.

Guarantee of Spare Parts and Repair Facilities: Manufacturers must ensure reasonable availability of spare parts and repair facilities for a reasonable period after supplying the goods.

EXAMPLE: It’s not ok, for instance, to sell a product that clearly states a ‘pack of two’ products, then only ship one product, and expect the customer to accept only one, because you made a mistake on the website description.

 

Consumer Guarantees: Supply of Services

The ACL also imposes consumer guarantees on the supply of services, which include:

Guarantee of Due Care and Skill: Service providers must exercise due care and skill when providing consumer services.

Guarantee of Reasonable Fitness for a Particular Purpose: If a consumer expressly or implicitly makes a particular purpose known, the service and any resulting product must be reasonably fit for that purpose.

Guarantee of Achieving Desired Result: When a consumer expressly or implicitly communicates the desired result they wish to achieve through a service, the service provider must ensure it is of such nature, quality, and condition to achieve that result.

It’s important to note that consumer guarantees cannot be excluded, restricted, or modified by contract. However, in specific circumstances, liability for failure to comply with certain guarantees (except guarantees as to title, undisturbed possession, and undisclosed securities) can be limited.

EXAMPLE: It’s important to avoid making promises you can’t deliver or control. This is a common issue in the coaching industry, or sales and marketing, where results depend on factors outside your control.

Who is a consumer?

We normally think of consumers as individuals buying goods and services from a business for personal use. Australian Consumer Law (section 3) defines a consumer as a purchaser of goods and services for personal, domestic or household use, goods and services purchased for less than $100,000, whether by an individual or business.

Goods purchased for re-supply or incorporated into other goods in manufacture are excluded from the consumer protections provided by the Consumer Guarantees contained in the ACL.

Warranties and Guarantees

Businesses should be cautious when offering extended warranties and ensure they provide additional benefits beyond the consumer guarantees already provided by law. Misleading consumers into paying for benefits they are already entitled to by law can contravene the ACL.

TIP: Get familiar with what your industry requires regarding warranties and guarantees. Don’t create a false extended warranty where an ACL requirement already exists.

Being compliant

To prevent contravention of consumer guarantees and ensure compliance with the ACL, businesses can take the following steps:

Conduct a Comprehensive Review of Business Documentation: Review all business documentation, including marketing materials, sales contracts, warranties, and terms and conditions, to ensure they accurately represent consumer guarantee rights and remedies.

TIP: Book a contract review with me ASAP.

Review Website Material for Compliance: For online businesses offering goods and services to consumers in Australia, review website content to ensure it aligns with the requirements of the ACL and accurately reflects consumer guarantee rights.

Provide Regular Staff Training: Conduct ongoing training and education sessions to ensure staff members know ACL compliance requirements, including consumer guarantees. This will help minimise the risk of inadvertent contraventions and promote a risk management culture.

Compliance with consumer guarantees under the Australian Consumer Law is paramount for small businesses. Understanding the guarantees and taking proactive steps to prevent contraventions will protect businesses from legal consequences, build trust, and enhance customer satisfaction. By respecting consumer rights, businesses can establish a reputation for reliability and professionalism, fostering long-term success in the marketplace.

Remember, this article provides general information and should not be considered legal advice. For specific guidance tailored to your business needs, please consult a qualified legal professional familiar with Australian Consumer Law (like me!) and its application to your industry. Book a complimentary chat today.