What the law says
Industry Specific Requirements
When you receive a complaint you should know in advance what is required in your industry. In addition, there are other legal matters to consider and some of the most important are listed below.
There are some matters that you are required by law to do when you make arrangements about goods and services and you cannot make an agreement not to do them.
Sometimes, the law will only apply if the person or organisation who obtains the goods and services is a ‘consumer’.
Some of the most relevant legislation in this area is The Australian Consumer Law, 2011 (ACL) which aims to protect consumers and ensure fair trading across Australia. You may need to consider and comply with the duties in the ACL.
To be kept informed about competition and consumer law updates which relate to small businesses you can subscribe to the ACCC’s Small Business Information Network (SBIN) which is a free information service. Simply email your name and business details to firstname.lastname@example.org
Make sure you are aware of your legal obligations, if any, which might apply specifically to your business. Make sure your agreements are well written and clear – get some advice about drafting agreements if you need to.
Legal Framework: Consumer Law
(Please note that most content has been sourced from Australian Consumer Law, Consumer Guarantees: A Guide for Businesses and Legal Practitioners (ACL, 2010)
When a business makes an agreement about goods and services the agreement will usually set out the cost, time frames and the nature of the services. A well written agreement can assist to ensure that everyone understands what is required and can reduce complaints. There are some matters that you are required by law to do when you make arrangements about goods and services and you cannot make an agreement not to do them. Sometimes, the law will only apply if the person or organisation who obtains the goods and services is a ‘consumer’. The main areas of law that can apply in relation to complaints are set out below:
The Australian Consumer Law
The Australian Consumer Law, 2011 (ACL) aims to protect consumers and ensure fair trading across Australia. Business owners must consider the ACL and the duties it confers.
What constitutes Goods and Services?
All goods that are sold in trade and commerce and bought by a consumer are covered by the ACL. However there are some exceptions. This includes second-hand, leased or hired goods but does not include goods bought before the 1st of January 2011, from one-off sales from private sellers, at auctions where the auctioneer is an agent for the owner, when the good costs in excess of $40,000 and is normally purchased for business purposes, for on-sell or re-supply, or is used as part of a business to produce something else or repair other goods or fixtures. Furthermore, goods are not “goods” for the purposes of the ACL if the buyer is not considered a “consumer” as per the ACL definitions.
The ACL covers all forms of service up to the cost of $40,000 and in excess of $40,000 if it is normally acquired for non-commercial use. If the service is used for commercial purposes and costs more than $40,000, or was purchased before 1 January 2011, or is an insurance contract or transportation or storage of goods for a consumer’s business, trade profession or occupation then the service is not covered by the ACL.
‘Goods’ under the ACL
All goods sold in trade or commerce and bought by a consumer
|Goods bought after the 1st January 2011||Goods bought before the 1st January 2011|
|Second hand goods||Bought from private, one-off sellers (for example, from a garage sale)|
|Leased goods||Bought at an auction where the auctioneer is acting as an agent for the owner|
|Costing more than $40,000 but normally used for personal or domestic use (for example, car or landscaping)||Costing more than $40,000 when it would normally be purchased for business use (for example, machinery or farming equipment)|
|Where a 'consumer' is someone who buys goods up to $40,000 (for example, a fridge, photocopier,...)||Goods that are bought by a person to on-sell or re-sell|
|A 'consumer' who buys a vehicle or trailer (no matter the cost) which is predominantly used to transport goods||If the buyer of the goods is not considered a 'consumer' under the definitions of the ACL|
|Hired goods||Goods used to produce something else or repair other goods or fixtures|
“Services” under the ACL
All services sold in trade or commerce
|Services bought after the 1st of January 2011||Services bought before the 1st of January 2011|
|All forms of services up to $40,000||Services that cost more than $40,000 and used for commercial purposes|
|Services in excess of $40,000 if normally acquired for non-commercial use||Insurance contract|
|Transportation or storage of goods for a consumer's business, trade profession or occupation|
The Nine Guarantees – A checklist
|1||Goods are an acceptable quality when sold to the consumer|
|2||Goods are reasonably fit for any purpose that was specified by either the consumer or the supplier|
|3||Description of goods is accurate|
|4||Goods will match any demonstration, model or description provided|
|5||Any express warranties or extra promises made about the goods will be satisfied|
|6||Clear title, unless the supplier alerted the consumer to the limited title|
|8||Goods will remain (unless in certain circumstances) free from any securities or charges, and|
|9||The manufacturer or importers will take reasonable steps to provide spare parts and repair the goods for a reasonable time after the purchase|
Services: Consumer Guarantees
Services must be provided with due care and skill (avoiding loss or damage) and must be completed within a reasonable time (which depends on the type of service and applies when there is no time set). Also, just as goods must be fit for purpose (see above), so too must services. This means the service must be reasonably fit for any purpose or achieving the result specified by the consumer, and any product resulting from the service is also fit for purpose. Note, this does not apply to architects and engineers.
Breach of a Consumer Guarantee
Goods and services a business owner sells must meet consumer guarantees (see listed above).
If the goods or services do not meet these guarantees the supplier has the choice of providing either a repair, replacement or refund. If there is a major failure the consumer may reject the goods and chose a refund, replacement or compensation for any drop in value if applicable.
Guarantees stipulated under the ACL cannot be excluded by a supplier or contracted out of. Business owners must not display ‘no refunds’ signs. This includes ‘no refund on sale items’ or ‘exchange or credit note only for return of sale items’ signs. It is permissible though to have a sign that reads, ‘no refunds will be given if you have simply changed your mind’. Civil and criminal penalties may apply.
Tip: Remember “The Three R’s” – Repair, Replace, Refund
Tip: Remember “The Three R’s” – Repair, Replace, Refund
Goods and services that are not for personal, domestic or household purposes can be subject to limited guarantees. This means a supplier may limit remedies for faulty goods or services.
Recreational Service Providers and Excluding Guarantees
If the business provides recreational service they may limit their liability for death and personal injury but not property loss.
Compensation for Consequential Loss
Consequential loss is often financial but can also include loss of time or productivity along with other things. If a consumer suffers consequential loss due to problems with a service or goods, the consumer may claim for this loss from the supplier. The compensation should put the consumer in the place they would have been if there had not been a problem with the goods or services. The loss must be ‘reasonably foreseeable’.
Manufacturers: Problems with Goods and Services
For a brief overview please see the section on the ACL above (paragraph 1). If the small business manufactures goods meaning:
- Putting goods together or making them,
- Has their name on the goods, or
- Imports the goods from an overseas maker that does not have an office in Australia,
… then the business may still be required to fix some problems with the goods as per Division 2 of Part 5-4 the ACL 2011. The manufacturer will be required to fix a problem/supply a remedy when the goods are not of an acceptable quality, do not match the description or require repairs and spare parts. Manufacturers must honour any additional express warranties they made about the goods, for example a one year manufacturer’s warranty. However with or without an express warranty the manufacturer must act in accordance to the consumer guarantees.
Note that when a manufacturer sells directly to consumers they are acting as suppliers in this context and not manufacturers.BACK - Complaint Outcomes & Record Keeping NEXT- Templates & Tools