Can you guarantee that your business is prepared for the amendments to the Australian Consumer Law and consumer guarantees regime?

Corporate & Commercial 13 January 2021

From 1 July 2021, the monetary threshold in the definition of ‘consumer’ in the Australian Consumer Law (as set out in Schedule 2 of the Competition and Consumer Act 2010 (Cth)) (the ACL) will increase from $40,000.00 to $100,000.00.

This means that, from 1 July 2021, businesses which sell or supply goods or services which have a value up to $100,000.00 will be required to comply with the consumer guarantee regime in the ACL, in the sale or supply of those goods or services.

This amendment will have impacts for businesses, particularly those businesses engaging in the supply of commercial, industrial or agricultural goods or services, the cost of which exceeds the current monetary threshold.

It is important that businesses understand and ensure compliance with their increased obligations prior to 1 July 2021.  For businesses who already operate subject to the consumer guarantees regime in respect of all or part of their goods / services, now is a good time to review your current standard contracts and policies/procedures, to ensure compliance with the ACL and specifically the consumer guarantees regime.

Amendment to the ACL

Currently, the ACL provides that a ‘consumer’ is a person (including a company or business) who acquires:

1. goods or services up to the value of $40,000.00;

2. goods or services of a kind ordinarily used for personal, domestic or household purposes; or

3. goods which consist of a vehicle or trailer acquired for use principally in the transport of goods on public roads.

As noted above, from 1 July 2021, the financial threshold will increase from $40,000 to $100,000.  The amendment will apply in relation to good or services acquired on or after this date.

As a result of the amendment, some businesses, including commercial, industrial and agricultural businesses, who were not previously subject to the ACL consumer guarantees regime (because goods or services manufactured, sold or acquired by these businesses exceeded $40,000.00) will now become subject to the regime.

What is the consumer guarantees regime under the ACL?

The consumer guarantees regimes is contained in Part 3-2 of the ACL and are a set of rules that apply to goods and services acquired by a consumer and set out the circumstances under which a business is required to provide a consumer with a remedy.  The consumer guarantees apply in addition to and regardless of any express warranties which are given by a supplier or a manufacturer of a good or service.

The consumer guarantees

The consumer guarantees are set out at Division 1 of Part 3-2 of the ACL, and are as follows:

1.  Businesses that sell goods to consumers guarantee that the goods:

(a) have clear title;

(b)  come with undisturbed possession;

(c) are free from any hidden securities or charges;

(d) are of acceptable quality;

(e) are fit for purpose;

(f) correspond with their description;

(g)  correspond with any sample or demonstration model; and

(h)  satisfy any express warranty.

2. Businesses that supply services guarantee those services:

(a) will be provided with due care and skill;

(b) will be fit for an express or implied purpose; and

(c) where no time is agreed, provided within a reasonable time.

Manufacturers also have obligations under the consumer guarantees regime, including that goods manufactured:

1. Are of acceptable quality;

2. Have been accurately described;

3. Satisfy any express warranty; and

4. Have spare parts and repair facilities reasonably available for a period of time (unless the consumer is advised otherwise).

If the guarantees are not met, then depending on the circumstances and whether the issue is considered a minor or major fault, the consumer is entitled to a replacement, repair, further service to rectify the problem or refund (and in some cases compensation for any consequential loss).

Express warranties against defects

Part 3-2 of the ACL also provides specific obligations on businesses in relation to express warranties against defects.  Businesses that make provide warranties against defects in relation to goods or services covered under Part 3-2 must ensure that the consumer is furnished with specific information as set out in the Competition and Consumer Regulations 2010 (Cth) (the Regulations).

In addition, the business must also include in any warranty against defects specific details of the consumer’s rights in respect of the guarantees under the ACL, which cannot be excluded.  The Regulations mandate specific text in this respect, which must be included as a clause in any warranty against defects.

What should I be doing to prepare for 1 July 2021? 

For all businesses, but particularly those businesses who have not previously been required to comply with the consumer guarantees regime, it is important you consider the following prior to 1 July 2021:

1. Review the terms and conditions of your standard contracts for supply goods or services to ensure that they will be ACL compliant after 1 July 2021.  Any term of a relevant contract which is inconsistent with the requirements of the ACL entered into on or after 1 July 2021 will be void and may be held to be misleading and/or deceptive;

2. If your business provides any express warranties against defects as part of the supply of goods or services, you must ensure that the requirements of the ACL are being met in this respect.  This includes providing information as required by the ACL to the consumer at the time of acquisition, along with incorporating the mandatory text into any relevant documents; and

Ensure that your employees are aware of the changes and any new obligations upon the business.  Your employees are the ones who are likely to be on the front end of the sale and supply of goods and services. As such, it is essential that your employees understand how the changes to the ACL will apply, in particular the consumer guarantees, to ensure all representations made by employees comply with the consumer guarantees and to reduce the risk of claims being made by consumers.  You may need to consider amending any policy or processes in the workplace, and/or undertake additional training with employees.  This is especially important for businesses which may not have been previously subject to the consumer guarantees regime.

How can Coulter Roache assist?

Coulter Roache are able to provide advice and guidance on your obligations under the ACL, how the amendment will affect your business and review and advise on any current and future standard contracts, warranties and other documents, to ensure you and your business understand and are prepared for the amendment to take effect.

More broadly we are available to assist and advise businesses and consumers on their rights and obligations under the ACL.

Contact Us

If you require advice or further information in relation to this article, please contact our corporate & commercial team.

Contact Form or call us on 03 5273 5273

Liability Limited by a scheme approved under Professional Standards Legislation