It is time to dust off those terms and conditions of sale or supply. The scope of goods and services subject to consumer guarantees is being expanded. You need to consider whether the goods and services sold by your business automatically come with consumer guarantees under the Australian Consumer Law. If they do, you may need to make changes to your terms and conditions of sale to comply.
What are consumer guarantees?
Under the Australian Consumer Law, goods and services supplied to a “consumer” automatically come with certain guarantees prescribed by the law. These guarantees include:
- for goods, that they are of acceptable quality and are reasonably fit for any purpose represented by the supplier or disclosed by the consumer; and
- for services, that they will be rendered with due care and skill and will be provided in a reasonable timeframe.
Businesses are prohibited from excluding, limiting or modifying the consumer guarantees in any way in their terms and conditions. Failure to meet the consumer guarantees will mean that the consumer can claim various remedies provided for under the Australian Consumer Law, which include a repair, replacement or refund and, in some cases, compensation for damages and loss.
When do goods and services come with the consumer guarantees?
The critical test is whether the goods and services are being supplied to a “consumer”. At present, a good or service is taken to be supplied to a “consumer” if the amount payable for them is $40,000 or less. Goods and services can also be taken to be supplied to a “consumer” if they are over $40,000, but are of a kind ordinarily acquired for personal, domestic or household use.
What is changing?
Effective from 1 July 2021, the monetary threshold for the supply of goods is set to increase from $40,000 to $100,0001. This amendment followed the recommendations of the Australian Consumer Law Review which found that the level of protection afforded to consumers by the consumer guarantees has been eroded over time due to inflation and the increase is warranted in order to restore the level of coverage to consumers in real terms.
Due to a drafting anomaly in the new regulations, the increased threshold doesn’t currently apply to services, even though it was clearly the intention that the increased threshold would apply to both goods and services. We expect this to be rectified by parliament before these changes become effective.
What does this mean for business?
This change means that suppliers who have previously been able to escape the consumer guarantee regime because their goods and services are valued over $40,000 may find that their goods and services are now caught. It will be important for any businesses selling goods and services over $40,000 to reassess whether the consumer guarantees apply to them. If they do, the terms and conditions of sale or supply, as well as sales and refunds policies, should be reviewed as they will likely need an update.
Businesses newly caught by the consumer guarantee regime will need to make sure that the remedies they offer for faulty goods and services are consistent with those mandated by the Australia Consumer Law, which, of course, may be more extensive than those currently being offered by the business on a voluntary basis.
It is not all bad news for business. On the flipside, businesses in Australia purchasing goods and services will be able to rest assured that any goods and services up to the increased value of $100,000 will come with the consumer guarantees and they can avail themselves of the remedies under the Australian Consumer Law in the event they don’t meet the minimum standards required by the consumer guarantees.
What else has changed?
These developments to the consumer guarantee regime follow changes that became effective on 9 June 2019 to the mandatory wording required to be contained in voluntary warranties against defects given by businesses in addition to the consumer guarantees2. The mandatory wording required to be included in warranty documents is intended to ensure that consumers are aware that any warranty against defects operates in addition to the consumers’ rights under the Australian Consumer Law.
Up until 9 June 2019, the mandatory wording was only required in connection with a supply of goods alone, but this has now been extended to the supply of services or a supply of goods combined with services. If you haven’t done so already, we recommend that any businesses supplying services or goods combined with services should consider whether the wording of their warranty documents is compliant.
1. Treasury Laws Amendment (Acquisition as Consumer – Financial Thresholds) Regulations 2020 (Cth)
2. Competition and Consumer Regulations 2010 (Cth), regulation 90
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This document is for general information only and cannot be relied upon as legal advice.