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Consumer Guarantees under the ACL

Sangita likes to do all her shopping online. She has discovered lots of online shops on Australian websites since coming to Australia from India to study. She has family in Australia and wanted to thank them for their hospitality and support by buying them gifts for Diwali, last year.

Sangita knew that Myers Stores is a large department store and that it has an online store. She thought it would be good to buy from Myers because of the variety and because she had heard that Myers has a good returns policy. She wanted her family to be able to exchange her gifts if they wanted something different

Sangita bought lots of small items that were a success with her cousins. But she was very unhappy with the following:

Sangita bought her Aunt Shindu a rice cooker because her aunt always had so much rice to cook for her family. Sangita ordered a rice cooker that was on special for $59.95. When her aunt opened the parcel that had arrived for her, she found a box that said ‘rice cooker’ on the outside but inside was an electric fry pan.

Sangita bought her Uncle Ramdas an electric drill. Her uncle was often busy around the house fixing things and sometimes she would hear him mutter ‘ if only I had a drill’. Sangita was happy to find a drill for $69.95 online. Her uncle was very excited with his gift and immediately set up the drill in order to drill holes for clothes hooks in the bathroom. Unfortunately as soon as he turned the drill on there was a smell of burning, the drill became very hot and then would not work.

Sangita bought her cousin Pooja an electric toothbrush. Pooja was always worrying about her teeth and brushing them three times a day to make them look white. Sangita had told Pooja not to eat so many sweets but Pooja loves chocolate. Sangita contacted the online sales assistant via the online chat forum and asked if the electric toothbrush she had picked out, which cost $49.95, could be operated with batteries and main power because Pooja would want to carry the toothbrush with her. The online sales assistant assured Sangita that the toothbrush operated with batteries or could be plugged into mains power. Pooja was happy to receive the toothbrush but disappointed when she examined it and found that it could not be operated with batteries.

When Sangita took her purchases back to Myers in store to return them, the sales assistant at an information counter referred her to her online receipts, which she had downloaded and printed off, and which said:

‘Myers Stores offer no refund, exchange or replacement for items purchased online.’

Consumer Guarantees under the ACL

Sangita entered into transactions with one “Myers Stores” through their online portal which she had been browsing. Once the ordered products were delivered various latent defects were found in the products. By virtue of Australian Commercial Law the transactions should ideally be protected and Sangita should have remedies available for the same (Corones 2014).

Issue

The issue here is to determine if:

  • ACL applies to Sangita’s transaction relating to the rice cooker she purchased from “Myers Stores”
  • What implied guarantee has been breached by the seller.
  • Remedies available to Sangita.
  • Effect that the statement in the receipt.

Rule

Schedule 2 to the Competition and Consumer Act, 2010 (cth) defines and regulates Australian consumer law (ACL) (Howells and Weatherill 2017). According to Section 3 of the ACL a transaction that is below $40,000 and is entered into for a household/domestic purpose would fall under the ambit of ACL as long as they are made in the capacity of the ultimate consumer (Hunt 2015).

Section 56 of the ACL embodies various consumer guarantees which cannot be amended, modified or avoided by a person who is acting in the capacity of a seller in a consumer transaction (Dietrich 2015). Section 259 of the act provides for remedies in case the seller in a consumer transaction breaches one or more of the consumer guarantees (Knake 2013). This section provides that in case Section 56 is breached and the breach is a major failure to observe implied consumer guarantees then the buyer would have the right to reject the delivery of goods and demand compensation for any form of reduction in value [Section 259 (3)] and claim damages for any foreseeable loss or damage [Section 259 (4)] (Howell 2015).

Section 23 (1) of the ACL provides that any unfair term incorporated into a standard contract would be deemed void. Section 24 (c) of the ACL states that any contractual term that causes detriment to the rights of any party to the contract would be declared as an unfair term and thus in effect would be void (McKendrick and Liu 2015).

This was a transaction that was entered into for the purchase of a rice cooker. A rice cooker was bought as a household/domestic good and thus would fall within the ambit of Section 3 of the ACL.

The product delivered by “Myers Stores” does not fit the purpose it was purchased for and thus is a breach of the implied consumer guarantees embodied in Section 56 of the act. Since this is a major failure to observe consumer guarantees Sangita would be entitled to reject the goods and claim compensation for any reduction in value as prescribed in Section 259 (3) and/or claim damages for the same as prescribed in Section 259 (4) of the act.

Case Study: Sangita's Online Shopping Experience

The statement in the receipt causes a detriment to the rights of Sangita and thus under the provisions of Section 24 (c) it would be deemed an unfair contractual term. Thus following the provisions of Section 23 (1) of the ACL the term contained in the receipt would be deemed void.

Conclusion

  • Sangita’s transaction is covered by the ACL.
  • Myers Stores breached the consumer guarantees embodied in Section 56 of the ACL.
  • Sangita would have the remedies prescribed in Section 259 (3) and (4) of the ACL.
  • The term contained in the receipt would be deemed void.

Issue

The issue here is to determine:

  • If the transaction is covered by the ACL.
  • What implied guarantee has been breached by the seller.
  • Remedies available to Sangita.
  • Effect that the statement in the receipt.

Rule

As provided for in Section 3 of the ACL a transaction that is under $40,000 and if it is purchased in the capacity of the ultimate consumer it would fall within the ambit of the ACL (Pearson 2017). Section 54 (1) of the ACL states that in consumer transactions the goods delivered must be of acceptable quality this is an implied consumer guarantee (Barratt, Seear and Lancaster 2017). Thus the goods delivered to the buyer must adhere to a particular standard of durability and acceptability. In the judgment in E v Australian Red Cross Society (1992) 31 FCR 299 the court held that “acceptable quality” would be construed as safe and durable (Corones 2014).

Section 260 of the ACL states that when a person acting in the capacity of a seller in a consumer transaction fails to observe consumer guarantees and the same is a major failure to observe them the consumer would be entitled to reject the goods and demand compensation for any reduction in value (Fatma and Rahman 2015). Thus this section of the ACL provides an optimum safeguard for the rights of the buyer. This provides the buyer with a remedy that would entitle him to reject the goods sold to him which do not meet the purpose or are otherwise unacceptable and also provides him with an option to claim compensation for the breach (Thampapillai 2015).

It has been provided in the given case study that Sangita had purchased an electric drill for her Uncle for household consumption.  Sangeeta had paid $69.95 for the electric drill. Therefore, it can be stated that Sangita is a consumer as per the provisions of section 3 of the ACL which has been provided in Schedule 2 of the Competition and Consumer Act 2010. Section 3 of the ACL states that any person who purchases any good or services worth less than 40, 000 for personal and household use can be termed a consumer. Thus in this case Sangita can seek to enforce her consumer rights against Myers Pty. Ltd.

It can be stated in accordance with the facts of the case, that the electric drill purchased by Sangita emitted smoke after it was used for the first time. The consumer guarantee which has been provided in section 54(1) of the ACL states that goods supplied by any person who is engaged in trade or commerce must be of acceptable quality unless such goods had been purchased by the consumer from an action. It was further provided in the aforementioned section that goods provided by any person who engages in trade and commerce must not deliver any goods which contain safety defects. Thus in this scenario, it is evident that the consumer guarantee of Sangita which has been provided in section 54(1) of the ACL had been breached.

Analysis

In this given scenario it is evident that the electric drill was not of acceptable quality and therefore Sangita wil have the right to reject the electric drill as per the provision of section 260 of the ACL. It can be stated that section 260 provides the consumers the right to reject the goods in case of a major breach of consumer guarantee.

In this case it has been provided that the store had a written term in the contract of sale of goods which stated “Myers Stores offer no refund, exchange or replacement for items purchased online”. However, such clause to exclude the liability of Myers Stores in this given situation would not be effective as the section 64 of the ACL implies that an attempt to restrict, exclude or modify the consumer  guarantees would  not be effective. Section 29 further states that any person who tries to exclude, restrict or modify the consumer guarantees could be held liable for prosecution for indulging in the actions.

Conclusion

Thus, to conclude it can be stated that Sangita has the right to reject the electric drill as it is in breach of her consumer guarantee and the exclusion clause would be in effective.      

Issues

  • Whether the transaction falls within the purview of the Australian Consumer Law
  • What implied guarantees of Sangita had been violated in this scenario
  • What remedies are available to Sangita for breach of her consumer guarantees
  • Whether the exclusion clause would be effective in limiting the liability of the Myers Pty. Ltd.

Rule

Section 3 of the ACL which has been provided in schedule 2 of the Competition and Consumer Act 2010 states that any person who purchases any goods or services worth less than 40, 000 for personal and household consumption can be termed a consumer (Tynan 2015).

In sections 51-59 of the ACL provides the consumer guarantees to consumers in relation to title, undisclosed securities, undistributed possessions, fitness for purpose and of acceptable quality (Stewart 2015).  

The consumer guarantee which is relevant in the given scenario is guarantee in relation to fitness for particular purpose which has been provided in section 55.

It has been provided in section 55(1) of the ACL that goods which are supplied by any person in trade and commerce must be fit for the particular purpose. In section 55(2) a disclosed purpose has been defined as a purpose for which the consumer has acquired the goods and when he has expressly notified the supplier the same to the supplier.

It can be stated that section 260 provides the consumers the right to reject the goods in case of a major breach of consumer guarantee. However, the aforementioned section is only applicable if there has been a major breach of consumer guarantee which are in relation to breach of the provisions of sections 54, 55 and 56 (Lewins 2016).

Conclusion

Further it has been provided in section 64 of the ACL, that any attempt to exclude, restrict or limit the consumer guarantees provided to consumers would be ineffective (Cockburn 2013). In section 29 of the ACL, it has been provided that any person who engages in the attempt to restrict, exclude or modify the consumer guarantees could be liable for prosecution.

It has been provided in the given case study that Sangita had purchased the electric drill for her Uncle for household consumption.  Sangeeta had paid $49.95 for the electric drill. Therefore, it can be stated that Sangita is a consumer as per the provisions of section 3 of the ACL which has been provided in Schedule 2 of the Competition and Consumer Act 2010. Section 3 of the ACL states that any person who purchases any goods or services worth less than 40, 000 for personal and household consumption, can be termed a consumer. Thus, in this case Sangita can seek to enforce her consumer rights against Myers Pty. Ltd.

In this given scenario, it has been provided that the electric tooth brush failed to operate with batteries. However, it has been provided that Sangita had asked whether the toothbrush would operate with batteries, to which the online sales person assured her that the toothbrush would operate with batteries. Therefore, in this case it is evident that the goods failed to comply with the consumer guarantee in relation to fitness for particular purpose. Therefore, it can be inferred that the provisions of section 55 had been breached.

Sangita in relation to the breach of consumer guarantee has the right to reject the goods which in accordance with the provisions of section 260 of the ACL. This is because there was a major breach of her consumer guarantees.

Myers Stores Pty Ltd cannot rely on the exclusion clause as per the provisions of section 64 of the ACL. It is evident that giving effect to the exclusion clause would result in breach of consumer guarantee.

Conclusion

Thus, to conclude Sangita can reject the good as it was not fit for th particular purpose why she bought it and that the exclusion clause would have no effect.

Reference list

Barratt, M.J., Seear, K. and Lancaster, K., 2017. A critical examination of the definition of ‘psychoactive effect’in Australian drug legislation. International Journal of Drug Policy, 40, pp.16-25.

Cockburn, T., 2013. Responsibility, values and the courts' role. Precedent (Sydney, NSW), (115), p.2.

Corones, S., 2014. Australian Competition and Consumer Commission v. TPG Interney Pty Ltd., Forrest v. Australian Securities and Investments Commission: Misleading Conduct Arising from Public Statements: Establishing the Knowledge Base of the Target Audience. Melb. UL Rev., 38, p.281.

Corones, S.G., 2014. Competition law in Australia. Thomson Reuters Australia, Limited.

Dietrich, J.O.A.C.H.I.M., 2015. Liability arising from contract and under the australian consumer law.

Fatma, M. and Rahman, Z., 2015. Consumer perspective on CSR literature review and future research agenda. Management Research Review, 38(2), pp.195-216.

Howell, N.J., 2015. Revisiting the Australian code of banking practice: is self-regulation still relevant for improving consumer protection standards. UNSWLJ, 38, p.544.

Howells, G. and Weatherill, S., 2017. Consumer protection law. Routledge.

Hunt, K.M., 2015. Gaming the system: Fake online reviews v. consumer law. Computer Law & Security Review, 31(1), pp.3-25.

Knake, R.N., 2013. Legal Information, the Consumer Law Market, and the First Amendment. Fordham L. Rev., 82, p.2843.

Lewins, K., 2016. Cruise Ship Operators, Their Passengers, Australian Consumer Law and Civil Liability Acts: Part Two. Austl. & NZ Mar. LJ, 30, p.12.

McKendrick, E. and Liu, Q., 2015. Contract Law: Australian Edition. Palgrave Macmillan.

Pearson, G., 2017. Further challenges for Australian consumer law. In Consumer Law and Socioeconomic Development (pp. 287-305). Springer, Cham.

Stewart, T., 2015. Unreasonable, unconscionable and oppressive contract terms in South African and Western Australian Consumer Law (Doctoral dissertation, University of Johannesburg).

Thampapillai, D., 2015. THE AUSTRALIAN CONSUMER LAW. Australian Commercial Law, p.374.

Tynan, D., 2015. Australian consumer law [Book Review]. Bar News: The Journal of the NSW Bar Association, (Summer 2015), p.78

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