Consumers and Contracts

Consumer Guarantees

Minimum Standards for Retail Sales of Goods or Services

The Australian Consumer Law ('the ACL') contains consumer guarantees which are automatically incorporated into consumer contracts, that is, they are implied terms of the contract, or statutory warranties, in addition to any other warranty a purchaser may have. The ACL came into effect on January 1 2011 replacing equivalent sections of the Trade Practices Act 1974 (Cth) which became the Competition and Consumer Act 2010 (Cth) on that date. The ACL is adopted as a law of the Australian Capital Territory: Fair Trading (Australian Consumer Law) Act 1992 (ACT) s 7.

These consumer guarantees are adaptations of what is found in the Sale of Goods Act 1954 (ACT) ('SGA'). If for one reason or another the ACL does not apply (see below), then the same conditions and warranties will probably apply. Important differences between the implied terms under the ACL and the SGA are:

• the terms implied under the SGAapply to any goods purchases not just to consumer purchases;
• the terms implied under the SGAcan be excluded by express provision in the contract whereas this is not possible under the ACL(subject to one exception); and
• theACL covers services as well as goods.

In this Chapter, only the ACL will be covered.

The first question to ask is: does a contract exist? Most transactions that consumers complete will amount to a contract, whether they are for a good (for example, a toaster) or a service (for example, dry-cleaning). If no contract exists no terms will be implied.

Second, only a party to the contract may rely on the implied terms for protection. Someone who receives something as a gift from the person who purchased the goods is usually not covered by the legislation. However, there is an important exception to this under the manufacturers' warranties provisions of the ACL which enables a consumer to sue a manufacturer directly (see Who is a consumer?).

The ACL implies these protections into contracts covered by the legislation. The ACL then provides very extensive remedy provisions which give the customer the right to replacement, repair or possibly rejection of the goods or services and recovery of the price (see What Remedies are Available?).

In any consumer purchase it is very important to keep a record of the purchase. As will be seen in the next paragraph, the sales docket is more important than the so-called 12-month warranty. The fact that a particular retailer supplied goods or services triggers the various protections under the ACL. It is therefore important o be able to prove where the goods or services were purchased.

The ACL provides that the supplier must provide proof of purchase where the price is $75 or more or, where the price is less than $75, must provide proof of purchase if requested to do so by the consumer (s 100). Proof of purchase will usually be satisfied by:

• a tax invoice;
• a cash register receipt so long as it identifies the goods or services purchased;
• a credit card or debit card statement;
• a handwritten receipt;
• a lay-by agreement;
• a confirmation or receipt number provided for a telephone or internet transaction.

A consumer also has the right to demand an itemised bill for services (s 101).

The 12-month warranty and extended warranties

It is important to note that these statutory, non-excludable guarantees override any "warranty" provided by a retailer or manufacturer. The ubiquitous 12-month warranty provided with new goods gives the impression that a defect that appears more than 12 months after purchase cannot be the subject of a consumer's complaint (it is "out of warranty"). This is not correct. The implied terms discussed below say nothing about the time that the terms last for. If, for example, a DVD player breaks down 15 months after purchase (assuming that it has been used normally), it is not fit for purpose or of merchantable quality. The consumer therefore has rights (discussed below) and the "12-month warranty" is irrelevant. What is important in order to invoke the various protections provided by the ACL is to be able to prove who supplied the goods or services - see Minimum Standards for Retail Sales of Goods or Services above.

Some retailers will try to resist a consumer's complaint about unsatisfactory goods by claiming that the consumer is out of warranty. The retailer should be told politely, but firmly, about the ACL. It is also misleading conduct for the retailer to use the 12-month warranty to resist a consumer complaint. The maximum penalty for this is $1.1 million (s 151(1)(m)). The ACCC has responsibility to prosecute this kind of behaviour.

Extended warranties usually involve the customer being persuaded to purchase a longer warranty. These should be treated with caution because they may only provide the same protection as is already provided under the legislation. Further, they are usually outsourced, that is, the retailer does not take responsibility for the extended warranty and the customer finds he or she is dealing with a completely different company. The extended warranty terms should be examined closely. The fine print may provide the company with excuses not to meet any claim under the extended warranty.

The ACL s 29(1)(n) provides that a supplier of goods or services must not make a false or misleading representation concerning a requirement to pay for a contractual right that is wholly or partly equivalent to any condition, warranty, guarantee, right or remedy, including the consumer guarantees discussed here. This section is clearly aimed at extended warranties.

The ACL provides for the possibility of regulations being passed to prescribe the requirements for warranties against defects (that is, 12-month or extended warranties) (s 102). If and when such regulations are passed, suppliers must comply with them (s 103).

What Sorts of Contracts do the ACL Consumer Guarantees Apply to?

The ACL applies to contracts for the sale of goods (including a lease of goods) or for the supply of services by a supplier in the course of its business to a consumer. In short, this legislation applies to all retail consumer purchases. It also covers some business purchases (see Who is a consumer? below).

What are the limitations of the ACL?

The ACL guarantees do not apply to the supply of gas, electricity and telecommunications services (s 65(1)(b)).

The most important guarantees from the consumer's perspective (acceptable quality and fitness for purpose) do not apply to auction sales.

What suppliers are bound?

The ACL applies to "persons" which includes companies and unincorporated sole traders. The supply must be "in trade or commerce" and so private sales are not covered.

Governments are bound by the ACL only in so far as they carry on a business. If a government body is selling either goods or services then it is almost certainly carrying on a business and so would be bound by the consumer guarantees.

Who is a consumer?

The ACT s 3 defines a consumer of goods or services as:

• a person who purchases goods or services costing less than $40,000; or
• in the case of goods or services costing more than $40,000, a person who purchases goods or services which are of a kind ordinarily acquired for personal, domestic or household use or consumption (for example, a car, a painting, a kit home; but not factory machinery, or elaborate electronic equipment for a business); or
• a purchaser of a commercial road vehicle

so long as the person did not acquire goods, or hold himself or herself out as acquiring goods, for the purpose of re-supply or for the purpose of using them up or transforming them, in trade or commerce, in the course of a process of production or manufacture or of repairing or treating other goods or fixtures on land.

A commercial road vehicle means a vehicle or trailer acquired for use principally in the transport of goods on public roads.

The effect of this is that anyone or any business who acquires goods or services costing less than $40,000 will be a consumer provided that they did not acquire them for the purpose of reselling them (for example, a milk bar owner purchasing stock) or using them up in production or manufacture or repair (for example, a shoemaker purchasing leather for shoes). This means that business transactions under $40,000 are covered, for example, the purchase by a business of a computer for $25,000. If the price is less than $40,000 the goods or services do not have to be used for personal, domestic or household use of consumption to be covered by this legislation.

Although not free from doubt, the $40,000 limit applies to each item. If a business bought 5 computers for a total of $125,000 but each computer cost $25,000, then this would be a consumer purchase.

Section 3 deals with circumstances where goods or services are bought as part of a mixed supply (that is, along with other goods or services) and the particular price is not stated for the individual item in which case a deemed price is attributed to the item.

If the goods or services cost more than $40,000, then they must be of a kind that are bought for personal, domestic or household use or consumption for the implied guarantees to apply. A person who bought a large industrial lathe for personal use probably would not come within the definition of "consumer" because the goods were not of a kind ordinarily acquired for personal, domestic or household use or consumption. On the other hand, a business that purchased very expensive furniture (over $40,000) probably would be protected.

The consumer includes a person who received goods as a gift from the purchaser of the goods (s 266). This means that the remedies discussed below at What Remedies are Available? can be used by the gift recipient against the retailer.

Can the protection afforded by the ACL be excluded?

The protection provided by the ACL is dependent upon whether the sale is of

1. goods or services ordinarily acquired for personal, domestic or household use; or
2. goods or services ordinarily acquired for other purposes (usually this will be in the course of business).

In the first situation, where the ACL implies terms into a contract, any term of the contract which attempts to exclude, restrict or modify the protections offered by the ACL is void and of no effect (s 64). This covers nearly all situations where the consumer is a person buying goods for personal use.

Remember that the definition of "consumer" includes goods or services which may be used for business purposes so long as the price is $40,000 or below. It is legitimate in a business sale of goods or services covered by the ACL for the seller to limit its liability to the cost of replacement or repair of goods or the re-supply of services (s 64A). This must be done by express provision in the contract. Further, it must be fair and reasonable in the circumstances of the case for the supplier to rely on the express provision. The onus is on the purchaser to establish that it is not fair and reasonable. Some guidance on the factors to take into account in determining whether reliance on the limitation of liability clause is reasonable are set out in s 64A(4).

Under s 139A of the Competition and Consumer Act 2010 (Cth) it is possible for recreational service providers to exclude liability for death or personal injury except where death or injury was caused by reckless conduct. This section was added as an ill-considered response to the so-called "insurance crisis". Recreational services means a sporting activity or a similar leisure-time pursuit; or any other activity that involves a significant degree of physical exertion or physical risk which is undertaken for the purposes of recreation, enjoyment or leisure.

What Protection does the ACL Provide?

Goods

The principles of protection in relation to goods provided by the ACL are:

• that the seller has good title to the goods the subject of the sale (s 51);
• that the buyer will have undisturbed possession (s 52);
• that the goods are free from any security, charge or encumbrance (s 53);
• that the goods are of acceptable quality unless bought at auction (s 54);
• that the goods are fit for the purpose for which they are purchased unless bought at auction (s 55);
• that the goods bought or hired on the strength of a description conform to that description unless bought at auction (s 56);
• that, where sale is by sample or demonstration model, the goods correspond with the sample or demonstration model unless bought at auction (s 57);
• a guarantee that the manufacturer of the goods will take reasonable action to ensure that facilities for the repair of the goods, and parts for the goods, are reasonably available for a reasonable period after the goods are supplied unless the goods were bought at auction (s 58);
• a guarantee that the manufacturer or supplier of the goods will comply with any express warranty given or made by the manufacturer or supplier in relation to the goods (s 59).

A. What goods are covered by the ACL?

In the ACL, "goods" has the meaning normally attributed to that word including second-hand goods, and also includes items such as vehicles, animals and computer software (s 2) but not, for the purpose of consumer guarantees, gas or electricity (s 65).

B. What if the seller does not have the right to sell goods?

It can happen in consumer transactions that the owner of the goods agrees to sell them (or agrees that at some future time to sell them, as occurs in hire-purchase transactions) but in fact does not have the right to do so, that is, does not have title to the goods.

Where another person has a right to the goods and the seller neglects to tell the buyer, the seller will be in breach of contract.

For example, this often occurs in the sale of second-hand motor cars, when it may turn out that the person selling, or purporting to sell, the car does not have the right to do so. When the true owner comes along to claim the car, the consumer will lose it. The ACL s 51 makes it a condition of all contracts of sale, or agreements to sell on hire purchase, that the person supplying the goods under the contract has the right to sell. This does not necessarily mean that the consumer will be able to retain the goods, but it does mean that if the supplier does not own the goods and as a result of this the consumer loses what has been bought, the consumer will be able to sue the supplier for any loss suffered as a result (usually the purchase price plus any other damage suffered).

C. Undisturbed possession

The ACL s 52 guarantees that the buyer will enjoy undisturbed possession of the goods. This would be so even if the goods were leased or bought on hire purchase and title remained in the supplier.

D. Free from any security, charge or encumbrance

The ACL s 53 guarantees that the goods are free from any security, charge or encumbrance unless the supplier has disclosed a security, charge or encumbrance or it has been created with the consumer's consent.

E. Goods must be of acceptable quality

Where a person supplies goods to a consumer in the course of business, there is an implied condition that the goods supplied are of acceptable quality (ACL s 54). This means that the goods must be as:

(a) fit for all the purposes for which goods of that kind are commonly supplied; and

(b) acceptable in appearance and finish; and

(c) free from defects; and

(d) safe; and

(e) durable;

as a reasonable consumer fully acquainted with the state and condition of the goods (including any hidden defects of the goods), would regard as acceptable having regard to the following:

(a) the nature of the goods; and

(b) the price of the goods (if relevant); and

(c) any statements made about the goods on any packaging or label on the goods; and

(d) any representation made about the goods by the supplier or manufacturer of the goods; and

(e) any other relevant circumstances relating to the supply of the goods.

These criteria provide a flexible test that caters for different circumstances. Second-hand goods, for example, cannot be expected to be in the same condition as one would expect for brand new goods.

One question to ask is whether a reasonable person who wanted goods of that type would be prepared to accept the goods in that condition. It will not always be sufficient that the goods are fit to perform the purpose for which goods of that sort are normally used. For instance, if a consumer purchases a new car and the car arrives with scratched paintwork, then a reasonable person would not accept the car. The car is therefore not of acceptable quality, even though it is fit for the purpose for which cars are used.

The guarantee of acceptable quality will not apply in the following situations:

1. where defects in the goods have specifically been drawn to the consumer's attention before a contract is made; or

2. if the consumer examined the goods before the contract was made, and a reasonable examination ought to reveal that they were not of acceptable quality; or

3. the goods were bought at auction.

F. Goods must be fit for a particular purpose

Where the seller is made aware by the consumer of the purpose for which goods are required or the seller represents that the goods are reasonably fit for a particular purpose, then the goods must be reasonably fit for that purpose (ACL s 55). This applies whether or not the goods are commonly supplied for that purpose. This guarantee does not apply where the consumer has not relied on the skill and judgment of the person selling the goods or where it would be unreasonable to do so. Nor does it apply if the goods are bought at auction.

For people purchasing goods from a seller in the course of the seller's business, the purchaser must show that

1. the particular purpose for which the goods are required was made known to the supplier, either expressly or by implication, or the supplier volunteered that the goods were suitable for a particular purpose; and

2. the purpose was made known to the supplier in such a way as to show that the supplier's skill and judgment was relied upon.

Although at first sight these requirements appear rather onerous, the courts have taken a liberal approach which is favourable to consumers. In the case of goods which only have one particular purpose, requirement (1) will be satisfied by merely placing an order for the goods.

In consumer cases, requirement (2) will be satisfied, for example, by the fact that the consumer went into the supplier's shop. In effect the consumer is said to rely on the seller's skill in selecting the goods.

G. Sale by description

The ACL provides that where a person, in the course of a business, supplies goods to a consumer by description (other than at an auction) there is an implied condition that the goods correspond with the description (s 56).

Many consumer transactions are by description, that is, the consumer does not actually see the goods being purchased. This may occur in two ways:

1. goods are ordered from a distance, for example, by telephone, without ever seeing them; or

2. more commonly, a consumer may, for instance, ask for a tin of fine-ground coffee, or select a tin labelled fine-ground coffee from a supermarket shelf.

Both of these are sales by description. In the latter case it can be argued that the consumer relies on the description on the label (compared with the situation where the tin is opened and the contents examined). If the tin does not contain fine-ground coffee then the consumer may take advantage of the protection offered by the ACL. Note that s 56(2) provides that supply of goods is not prevented from being supply by description merely because a consumer selects goods exposed for sale or hire.

If the sale is by reference to a sample as well as by description, then it is not sufficient that the goods correspond to the sample if they do not also correspond with the description (s 56(3)).

H. Protections when goods are bought by sample

A few consumer transactions are of the type where the consumer buys by reference to a sample of the goods or a demonstration model. For example, a consumer may buy carpet by reference to a sample shown in a samples book. In this case, the ACL s 57 provides that where this is done in the course of the seller's business (other than by auction) it is a condition of the contract that:

1. the bulk of the goods will correspond with the sample in quality;

2. the consumer will have a reasonable opportunity of comparing the bulk with the sample; and

3. the goods will be free from any defects rendering them unacceptable that would not be apparent on a reasonable examination of the sample.

In the example given, if the sample of the carpet shown to the consumer was a pure wool carpet and the bulk of the carpet delivered to the consumer turned out to be a blend of wool and synthetic, the consumer will be entitled to reject the carpet delivered.

It is most important that the consumer reject the goods as soon as the defect is discovered and preferably not accept the goods at all. If the goods are accepted, the right to terminate the contract may be lost, and the consumer will be forced to rely on a remedy for damages. This of course may not be satisfactory because the court will award damages on the basis of the difference between the price of, in this example, a wool carpet and the carpet of wool and synthetic material. A consumer who does not wish to accept a wool and synthetic carpet under any circumstances but nonetheless accepts delivery of the goods may have to accept the carpet and be content with what can be gained by way of damages.

I. Repairs and spare parts

Section 58 guarantees that the manufacturer will take reasonable action to ensure that facilities for the repair of the goods, and parts for the goods, are reasonably available. This guarantee is given by the retailer in the usual case. It is difficult to know what action can be taken against the retailer if this guarantee is not honoured, apart from suing the retailer for damages. An action for damages can also be brought against the manufacturer ( s 271(5)) but often this is not practical.

J. Express warranties

Under s 59 of the ACL any express warranties given by the retailer or the manufacturer must be honoured. This applies to, for example, the 12-month warranty. That must be honoured but it is in addition to the rights provided by the ACL. It is not a substitution for those rights.

The same applies to an extended warranty that is purchased by the consumer.

Services

A. What services are covered by the ACL?

Services are widely defined in s 2 of the ACL and include most things normally thought of as services and include contracts for work (but not employment), including professional work, provision of recreational and amusement facilities, a contract between banker and customer and a contract for the lending of money.

Specifically excluded are services involving the transportation or storage of goods for the purposes of a business, trade, profession or occupation carried on or engaged in by the person for whom the goods are transported or stored and insurance (s 63).

B. What protection is offered in relation to services?

In every contract for the supply of services in the course of a business there will be an implied warranty that the services will be rendered with due skill and care (s 60).

When a consumer expressly or by implication makes known to the service provider any particular purpose for which the services are required, or the result that is desired to be achieved, there is an implied guarantee that the services supplied under the contract, and any product resulting from the services, will be reasonably fit for that purposes (s 61). However, where the circumstances show that the consumer does not rely on the supplier's skill or judgment, or it is unreasonable to do so, this term does not apply (s 61(3)). Nor does this guarantee apply in respect of services of a professional nature by a qualified architect or engineer (s 61(4)). If the time for delivery of the services is not expressly fixed, then the service provider must supply the services within a reasonable time (s 62).

What is the Position with Finance Agreements?

In cases where a consumer purchases from a supplier, and then a separate finance contract is entered into with a finance company (a "linked credit provider"), there are special provisions in ss 278-286 of the ACL. These sections are complex provision but the essence of them is that the consumer may have rights against not just the retailer but also the credit provider if the credit provider is the finance company regularly used by the retailer for providing loans to customers.

On the other hand, if the customer makes his or her own arrangements to borrow money for a purchase of goods or services, then only the retailer is liable for defective goods or services.

What Remedies are Available?

Remedies against the retailer

The ACL ss 259-277, which came into effect on 1 January 2011, brought about very major changes to the remedies available to consumers when goods or services are unsatisfactory, that is, they do not conform to the consumer guarantees discussed above in What Protection does the ACL Provide? . The following remedies are available:

In respect of defective goods, the consumer may:

• reject the goods for a major failure and obtain a refund;
• ask for repair of the goods;
• ask for replacement of the goods;
• sue for damages.

In respect of defective services the consumer may:

• ask for defective services to be remedied;
• terminate the services contract if response is unsatisfactory;
• claim damages.

An important concept is that of "major failure" in respect of goods and services (s 260 (goods) and s 268 (services)). A major failure is where:

(a) goods or services would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure; or

(b) goods depart in one or more significant respects:

(i) if they were supplied by description: from that description; or

(ii) if they were supplied by reference to a sample or demonstration model: from that sample or demonstration model; or

(c) goods or services are substantially unfit for a purpose for which goods of the same kind are commonly supplied and they cannot, easily and within a reasonable time, be remedied to make them fit for such a purpose; or

(d) goods or services are unfit for a disclosed purpose that was made known to:

(i) the supplier of the goods; or

(ii) a person by whom any prior negotiations or arrangements in relation to the acquisition of the goods were conducted or made;

and they cannot, easily and within a reasonable time, be remedied to make them fit for such a purpose; or

(e) in the case of services,

(i) the services, and any product resulting from the services, are not of such a nature, or quality, state or condition, that they might reasonably be expected to achieve a result desired by the consumer that was made known to the supplier; and

(ii) the services, and any of those products, cannot, easily and within a reasonable time, be remedied to achieve such a result; or

(f) the goods or services are not of acceptable quality because they are unsafe.

Goods - rights to repair, replace, or reject and refund and damages

Where a defect in goods can be remedied and the defect is not a major failure (see above), the customer, or a person to whom the customer has given purchased goods (s 266), can require the retailer to remedy the defect within a reasonable time (s 259(2)) so long as the defect was not due to some independent event that occurred after the goods left the retailer's control. This means that the retailer must (s 261):

• repair the goods;
• replace the goods; or
• refund the price.

If the retailer refuses, or fails to respond within a reasonable time, the consumer may (s 259(2)):

• have the goods repaired elsewhere and recover the cost from the retailer; or
• reject the goods.

If the defect cannot be remedied or the defect is a major failure, the customer, or a person to whom the customer has given purchased goods (s 266), can either reject the goods (see below) or claim damages measured by the difference between the price paid and the value of the defective goods (s 259(3)).

It is also possible for the consumer to sue the retailer for damages for any consequential losses incurred because of the defective goods (for example, if a defective toaster caused a fire) (s 259(4)). However, because of the definition of "consumer", business purchases under $40,000 are covered and it is permitted under s 64A for a business to limit its liability to the cost of replacement or repair in respect of goods purchased for business and not domestic purposes (see Can the protection afforded by the ACL be excluded?).

The consumer may take action under against the retailer whether or not the goods are in their original packaging (s 259(7)).

Whenever goods are replaced, the same consumer guarantees apply to the replacement goods (s 264).

Rejection of goods

The consumer may reject the goods if they have a major failure, they cannot be repaired or the retailer has not responded by offering repair or replacement.

To do so, the consumer must return the goods explaining why they are being rejected (ACL s 259(3)(a) and s 263(2)) or must notify the retailer to come and collect them if the goods are not transportable (s 263(2)(b)). The retailer must then refund the price of the goods or replace them (s 263(4)). The retailer cannot require the consumer to buy other goods in lieu of a refund (s 263(5).

Defective goods cannot be rejected (s 262) if:

(a) the rejection period (see below) for the goods has ended; or

(b) the goods have been lost, destroyed or disposed of by the consumer; or

(c) the goods were damaged after being delivered to the consumer for reasons not related to their state or condition at the time of supply; or

(d) the goods have been attached to, or incorporated in, any real or personal property and they cannot be detached or isolated without damaging them.

The rejection period is the period within which it would be reasonable to discover the defect having regard to:

(a) the type of goods; and

(b) the use to which a consumer is likely to put them; and

(c) the length of time for which it is reasonable for them to be used; and

(d) the amount of use to which it is reasonable for them to be put before such a defect becomes apparent.

If goods are rejected and a refund is paid, then any service contract that goes with the goods can be terminated (s 265). The customer should notify the service provider if that party is a separate entity from the retailer. The customer is then entitled to a refund representing the remainder of the unused services.

Services - remedies

If the defective services can be remedied and the defect does not constitute a major failure (see [22.6.5.1] above), the customer can require the service provider to remedy the failure (s 267(2)(a)). If the service provider fails to respond or respond within a reasonable time, the customer can have the defective services remedied by another service provider and recover the cost from the original service provider (s 267(2)(b(i)) or terminate the service contract (s 267(2)(b)(ii).

If the defective services cannot be remedied or they constituted a major failure, the customer can terminate the services contract or recover damages measured by the difference between the price paid and the value of the defective services (s 267(3)). The customer can also recover damages for any consequential losses, for example, a fire caused by defective installation of roof bats (s 267(4)).

To terminate the contract the customer should, so far as possible, notify the service provider. Once terminated, the customer is entitled to a refund of the price for any unused services (s 269(3)).

If a services contract is terminated any associated contract for goods can be terminated also. The goods must be returned to the supplier (or, if too difficult to transport, the supplier should be notified to come and collect them) and a refund must be paid by the supplier (s 270).

Remedies against the manufacturer

Minimum standards for goods are enforceable against manufacturers. The ACL provides a right of action to a "person affected" (which means the purchaser or a person who has received the goods as a gift) against a manufacturer who supplies faulty products, that is, goods that are not of acceptable quality, do not conform to a description, do not have spare parts or repair facilities or are in breach of an express manufacturer's warranty (s 271). Under the law of contract the purchaser has no rights directly against a manufacturer because there is no contract with the manufacturer. The legislation provides a statutory right to enforce minimum standards of quality against the manufacturer.

"Manufacturer" is extensively defined in s 7 and includes an importer and a supplier whose brand appears on the goods.

The person affected can seek damages against the manufacturer (ss 271-2) or, if the manufacturer has given an express warranty (usually a 12-month warranty), require the manufacturer to replace or repair the goods. If this does not happen, then the person can sue for damages for breach of the express warranty. The damages claimable include the cost of returning the goods to the manufacturer. The right to damages may be sought whether or not the goods are in their original packaging (s 271(7)).

When goods have been purchased for business purposes, the manufacturer's liability to pay damages to the business consumer is not limited in the way that the retailer may be able to limit its damages, namely, to the cost of replacement or repair (see below).

A claim for damages must be brought within three years of the date on which the defect became obvious or should have been detected (s 273). Note this is not within three years of purchase.

Any attempt by the manufacturer to exclude these provisions is void (s 276).

If a retailer has to incur expense to meet a claim, the retailer has a right of indemnity against the manufacturer (s 274). If the indemnity claim relates to goods not of a kind ordinarily acquired for personal, domestic or household use or consumption, the manufacturer's liability to the retailer is limited to the cost of replacement or repair of the goods unless such limitation of liability would not be fair or reasonable in the circumstances (s 276A)..

A separate Part of the ACL provides rights against a manufacturer in respect of dangerous goods that cause injury, death or property damage (see Rights against Manufacturers in respect of Dangerous Goods).

The right to claim against a manufacturer is usually not very useful because the manufacturer may not be close to hand whereas the retailer will usually be in the locality. So it is usually simpler to complain of faulty goods or services to the company that supplied them.

Rights against Manufacturers in respect of Dangerous Goods

Part 3-5 of the ACL deals with liability of manufacturers and importers for goods which have a safety defect that causes injury. In contrast to the consumer guarantees discussed above, Part 3-5 is about dangerous goods rather than goods that do not perform properly. Section 9 provides that goods are have a safety defect if their safety is not such as persons generally are entitled to expect, having regard to such matters as their marketing, packaging, price, instructions that come with the goods and their normal use.

Who can claim?

An individual who has suffered personal injuries (s 138) or a person dependant on the injured person (s 139) can claim against a manufacturer (which includes an importer in the same way as discussed at Remedies against the manufacturer above) for damages. In addition if goods are defective and cause damage to a person's goods (s 140) or real property (s 141) an action for damages can be brought. If a person dies as a result of injuries caused by defective goods, the cause of action survives for the benefit of his or her estate under State and Territory legislation (s 145).

If the injuries are covered by worker's compensation, then no liability arises under these provisions (s 146).

Unknown manufacturer

If the manufacturer is unknown, the consumer can require the retailer to provide the name of the manufacturer. If the retailer fails to do this, then the retailer is taken to be the manufacturer (s 147).

Defences

The manufacturer may defend a claim in the following ways (s 142):

• the defect did not exist at the time of supply by the manufacturer;
• the defect existed only because there was compliance with a mandatory standard for the goods;
• the state of scientific or technical knowledge at the time when they were supplied by their manufacturer was not such as to enable the defect to be discovered;
• the goods were incorporated as part of other goods and those other goods were defective.

If the reason why the goods were defective was because of compliance with a Commonwealth mandatory standard, the Commonwealth can be made liable for damages (s 75AL).

Damages may be reduced to the extent that the injured party was at fault in failing to safeguard his or her own safety (Competition and Consumer Act 2010 (Cth) s 137A). .

Time limits

An action must be brought within three years of the plaintiff becoming aware, or ought reasonably to have become aware, of the alleged loss, the defect and the identity of the person who manufactured the goods (s 143(1)). A claim cannot be brought more than 10 years after the supply by the manufacturer of the goods (s 143(2)).

No exclusion

Any attempt to exclude or modify the operation of Part 3-5 is void (s 150).