‘Every time a consumer buys goods or services, they are entering into a contract with the seller. The Trade Practices Act says that every one of these contracts contains a number of obligations that sellers must honour. In legal language, these are ‘implied’ into the contract and exist even if they are not set out in writing.
There are two types of obligations:
Statutory Conditions.
Statutory Warranties.
- Statutory conditions
- Goods must be of merchantable quality having a level of quality and performance that would be reasonable to expect given their price and description. And free from defects that were not obvious at the time of purchase.
- Goods must be fit for their intended purpose – they should be suitable for any particular purpose the buyer made known to the seller.
- The goods must match the description given to the consumer, or the sample shown.
- A consumer must receive clear title to the goods – that is, the seller must be entitled to sell the goods.
- Statutory warranties
In addition to the legal obligations that the Act says are a part of any contract between a consumer and a seller, some businesses offer extra promises about their goods and services, even though the law does not require them to.
These promises, often called voluntary or extended warranties, provide extra customer protection if problems arise after a sale. This kind of promise, if it is offered, is in addition to consumers’ statutory rights which cannot be overruled.
The statutory warranties on Goods require that:
- The consumer will enjoy quiet possession of the goods.
- The goods are free from any charge or encumbrance not disclosed or known to the consumer.
Statutory warranties on Services require that:
- Any service must be carried out with due care and skill.
- Any materials supplied in connection with the service must be reasonably fit for the purpose for which they are supplied.
- The service, and any materials supplied in connection with the service, should be reasonably fit for any particular purpose the consumer made known to the seller.
Consumers’ legal rights in case of breach of statutory conditions or statutory warranties:
If goods do not meet a statutory condition or statutory warranty, it is a breach of the contract between buyer and seller. When this happens, consumers are entitled to a remedy from the seller.
Types of remedies include
refunds,
having goods replaced
or having goods repaired.
Refunds
There are some circumstances where consumers are entitled to receive a full refund for goods that breach a statutory condition.
Consumers can cancel a contract for goods that breach a statutory condition by:
• returning the goods to the seller, or notifying the seller of the problem, within a reasonable time after the consumer has had a reasonable opportunity to inspect the goods (generally, this means before the consumer has used the goods a lot)
• not disposing of, losing or destroying the goods.
The consumer must also:
• have taken reasonable care of the goods
• not have damaged the goods by using them in a way they were not meant to be used
• be able to prove they bought the goods from the seller.
Full refund:
If a consumer cancels their contract of sale with the seller, they are entitled to insist on a full refund.
A seller may not insist the consumer receive another form of remedy (such as repair or replacement goods) or insist that the refund be issued as store credit.
A consumer is generally entitled to receive any refund in the form of their original payment. For example, if they paid for an item with a credit card, it is reasonable for the seller to give the consumer a credit card refund.
If goods were purchased on an instalment plan, consumers are entitled to a refund of any payments made and to have any outstanding balance on the goods cancelled.
If faulty goods have to be returned to the place where they were bought, it is reasonable for the seller to pay appropriate freight costs.
Other types of remedies
If a good does not meet a statutory condition or statutory warranty after a consumer has owned it for some time or used it a lot, it is still a breach of contract. However, the consumer may not be entitled to rely upon the right under the Act to cancel or rescind the contract and claim a full refund, but may still be entitled to another form of remedy from the seller such as:
• the replacement of the goods, or the supply of equivalent goods
• repair of the goods, or paying for the cost of repair.
Problems with services – remedies
Services that do not meet a statutory warranty also breach the contract between consumer and seller. The consumer is entitled to a remedy for this breach of contract which can include:
• having the services supplied again
• payment of the costs of having the services supplied again
• compensation for any loss they suffer.
The form of remedy depends on what the consumer and seller can agree is acceptable or, if they cannot negotiate a remedy, it will be up to a court or tribunal to decide what is reasonable in the circumstances in accordance with the law.
Statutory rights are not limited to a set time period. Instead, they apply for the amount of time that is reasonable to expect, given the cost and quality of the item.
This means a consumer may be entitled to a remedy under their statutory rights after any manufacturer’s voluntary or extended warranty has expired. For example, it is reasonable to expect that an expensive television should not develop a serious fault after 13 months of normal use. In this case, the consumer could argue the item was not of merchantable quality and ask for it to be repaired, even if the manufacturer’s voluntary warranty had expired.
Who must provide a remedy, seller or manufacturer?
Seller – Each sale is a contract between the seller and the consumer. So if the seller breaches the contract by providing goods that do not meet a statutory warranty or condition, it is their responsibility to provide a remedy.
If a seller has to return goods to a manufacturer for assessment or repair, the seller should arrange delivery.
The law allows sellers to recover the cost of the remedy from the goods’ manufacturer or importer, if the problem was related to a manufacturing fault.
Consumers’ responsibilities – goods
The law aims to give consumers and sellers a fair go. It is not designed to protect consumers if they are careless or make unreasonable demands.
There are several circumstances when consumers are not entitled to a remedy from the seller.
Sellers do not have to give refunds, credit or exchanges if consumers:
• change their minds, decide they do not like the goods or have no use for them (except in cases where other legislation provides for a ‘cooling off’ period – for example, door-to-door sales)
• discover they can buy the goods cheaper elsewhere (except where the seller provides a guarantee that the goods cannot be purchased cheaper elsewhere)
• examine the goods before buying and ought to have seen any obvious fault
• had the defect drawn to their attention before buying (for instance, when goods were labelled as seconds, or faults were clearly marked)
• damage the goods by using them in a way they were not meant to be used.
Consumers’ responsibilities – services
A service provider cannot be held responsible for the result if:
• a consumer did not make it clear what they wanted done, unless it was clear from the circumstances what the consumer wanted.
• a consumer insisted on having the service carried out in a particular way, but does not like the result.
• the service relates to the transportation or storage of goods for the consumers’ business purposes.
• an insurance contract.
Misleading consumers about their rights
Statutory rights are consumers’ rights which are implied in all consumer contracts by the Act. They cannot be changed, limited or refused by a seller.
It is against the law for a seller to do anything that leads consumers to believe their rights are limited, or do not apply – for example, by claiming that no refunds will be given under any circumstances.
Any misleading claims a business makes about a consumer’s statutory rights are invalid and do not affect a consumer’s right to obtain a remedy for a breach of a statutory condition or warranty.
Store return policies and ‘no refund’ signs
Some sellers have a policy on refunds and returns and may choose to display signs so consumers are aware of these before buying.
For example, signs that state ‘no refunds’ or ‘no refund on sale items’, could lead consumers to believe they have no right to a refund under any circumstances, which is untrue because if a statutory condition has been breached, the consumer may be entitled to a refund.
Policies that set a time limit, such as ‘no refunds after 30 days’, can be misleading because statutory rights have no time limits, other than what is ‘reasonable’.
Similarly, insisting consumers return goods unopened, or in their original packaging may be misleading (as these are not required to claim a remedy under statutory rights).
‘Store credit’
A consumer is generally entitled to receive any refund in the form of their original payment. For example, if they paid for an item with a credit card, it is reasonable for the seller to give the consumer a credit card refund.
It is misleading for a seller to insist that a refund be issued as store credit.
Passing on responsibility for a remedy to a manufacturer.
Because each sale is a contract between the buyer and the seller, consumers are entitled to insist that the seller provide them with a remedy, even if a problem is due to a manufacturer’s fault.
It is a breach of the Act for sellers to mislead consumers about this right – for example, by claiming they can do nothing and that the consumer must contact the manufacturer for a remedy.
In some circumstances it may be reasonable for a seller to return the item to the manufacturer to establish the cause of the fault – for instance, if the good has been used extensively or was purchased some time ago. With technical goods such as cameras or mobile phones the seller may be unable to assess whether the consumer has damaged the good in some way. In these circumstances, the seller should arrange delivery of the item to the manufacturer.
Services – ‘no responsibility’ policies
Service providers must also not mislead consumers about their rights – for example, by implying that consumers have no rights if services are not carried out with due care and skill.
Misleading claims may include:
• No responsibility for loss or damage.
• Goods left for repair at your own risk.
• All care but no responsibility.
Extended warranties
Sellers sometimes give consumers the option of buying an extra warranty that provides protection for a specified period, often for some time after a manufacturers’ warranty runs out.
Before buying an extended warranty, consumers should decide whether the services and protection being offered are worth the money, and in particular whether the extended warranty provides protection beyond their statutory rights.
Because an extended warranty is usually a separately sold contract, what is covered in the ‘fine print’ may not be the same as in the manufacturer’s voluntary warranty. Therefore consumers should be clear about what protection is being offered, and should not be pressured into purchasing one on the spot.
There are a number of questions consumers should ask to determine whether an extended warranty is good value:
• Does the extended warranty offer a higher level of protection than consumers’ statutory rights? Consumers should be certain that an extended warranty does not simply duplicate the protections available under their statutory rights.
Consumers’ right to a remedy for goods that fail a statutory condition or warranty has no set time limit but instead depends on what would be reasonable, given the cost and quality of the item. This means that consumers’ statutory rights may entitle them to have defective goods replaced or repaired after any voluntary or extended warranty has expired.
• Are there any important restrictions or conditions? For instance, is the warranty only valid if the goods are regularly serviced?
• When does the extended warranty start?
Some extended warranties start from the date they are bought, not when the manufacturer’s voluntary warranty expires.
• Will any remedy be equal to the goods’ original price? The remedies offered under some extended warranties may depreciate (reduce in value) over time. This means that if there is a problem, only part of the purchase price may be refunded or lesser value goods offered as a replacement.
• If the goods have to be sent for repair, who pays freight costs?
• Are there some kinds of problems the warranty does not cover? Some extended warranties may not cover damage caused by accidents or water damage, for example.
Second-hand goods
Consumers’ statutory rights apply whether the goods are new, ‘seconds’ or second-hand. Depending on the circumstances, a consumer can expect these goods will meet the statutory conditions and warranties listed in this guide.
Goods bought at auction
Consumers who buy goods at a private auction, where an auction house sells on behalf of a vendor, are not covered by all statutory rights. In these transactions, the auction house (or auction website) is not usually a part of the contract between buyer and seller, so they are not obliged to provide a remedy if goods are not fit for their intended purpose, are not of merchantable quality or do not match their description. However, the law says that consumers who buy goods in auctions are entitled to receive ‘clear title’ to the goods.
Online auctions –
There are different kinds of online auctions. Some businesses use the internet to auction goods on behalf of sellers in a way similar to traditional auctions. There are also websites that provide a forum for private and business sellers to list items for auction, but do not become involved in the transaction. In both cases consumers’ rights are limited as they are in traditional auctions. There is one exception: Businesses selling at a fixed price – services sold by businesses for a fixed price (that is, a ‘buy it now’ price) are covered by the same statutory warranties and conditions that apply to other non-auction sales.
Goods bought online or overseas
Australian internet sellers – goods and services bought online must meet the same statutory conditions and warranties as for other kinds of sales. Consumers’ statutory rights are also the same.
Overseas internet sellers – although the statutory rights implied by the Act may apply to contracts between Australian consumers and overseas businesses, there may be practical difficulties in obtaining a remedy from an overseas-based business. ‘
