Consumer law and the providing of goods and services

Any small business owners that have dealings with the public will have to adhere to the provisions of the Australian Consumer Law (the ACL) which is set out in Schedule 2 of the Competition and Consumer Act 2010 (the Act). With the introduction of the ACL, a regime of consumer guarantees have been implemented which deals with title, sale by description, acceptable quality, fitness for disclosed purposes, sale by sample or demonstration model, and consumer guarantees relating to service. For any small business owner who is dealing with the general public, it is vital that a basic understanding of the provisions of the ACL and what the laws entail, is essential to ensure that your customers are being treated fairly and in-line with the laws.

Title to goods

The ACL implies guarantees to title and allows consumers to enjoy quiet possession and freedom from encumbrances. The implied consumer guarantees flows two ways between the seller and the buyer.

First, the seller has an implied consumer guarantee to sell any goods, or the right to sell the goods when an agreement to sell a property arises, while the consumer has the implied guarantee that they will have undisturbed possession, as outlined in s 52 of the ACL which states:

“Guarantee as to undisturbed possession
   (1)  If:

      (a)  a person (the supplier) supplies goods to a consumer; and
      (b)  the supply is not a supply of limited title;

there is a guarantee that the consumer has the right to undisturbed possession of the goods.

   (2) Subsection (1) does not apply to the extent that the consumer's undisturbed possession of the goods may be lawfully disturbed by a person who is entitled to the benefit of any security, charge or encumbrance disclosed to the consumer before the consumer agreed to the supply

   (3) If:
      (a) a person (the supplier) supplies goods to a consumer; and
      (b) the supply is a supply of limited title;

there is a guarantee that the following persons will not disturb the consumer's possession of the goods:
      (c) the supplier;
      (d) if the parties to the contract for the supply intend that the supplier should transfer only such title as another person may have--that other person;

      (e) anyone claiming through or under the supplier or that other person (otherwise than under a security, charge or encumbrance disclosed to the consumer before the consumer agreed to the supply).

      (4) This section applies to a supply by way of hire or lease only for the period of the hire or lease.”

Additionally, there is also an implied guarantee in s 53 of the ACL that goods are free from an undisclosed charge or encumbrance.

Goods sold must meet the description

It may seem obvious that when a person purchases anything that the description of the goods being sold, will match with the actual expectations of the customer as articulated in s 56 of the ACL. However, it should be emphasised that the section is concerned with only the identity of the goods rather than quality.

In order for the section to operate, the following three conditions must be met:

• there must be a contract for a sale of goods by description: this requirement is strictly interpreted and Australian case law has stated that it does not matter if the buyer has seen and examined the goods in question – the only requirement is that the goods align with the description (Beale v Taylor [1967] 1 WLR 1193);
• words of description must be used: (per Elder Smith Goldsborough Mort Ltd v McBride [1976] 2 NSWLR 631); and
• the goods must be in compliance with the description: (per Varley v Whipp [1900] 1 QB f13).

Both the seller and manufacturer must fulfil the requirement that goods sold must match the description in their course of business. However, manufacturers may escape the obligation once the goods are out of their control.

Goods must be of acceptable quality

Under the implied provisions of the ACL, goods sold to the public are to be of acceptable quality, but on the proviso that the consumer has had a chance to examine the goods in question (per Thornett & Fehr v Beers & Son [1919] 1 KB 486).

Acceptable quality essentially means that the goods must be reasonably fit for all of the purposes which that type of good is purchased in reference to the price, and the nature of the goods. Additionally, the goods must also be in merchantable quality for a reasonable time period after purchase.

The ACL extends the liability to both the manufacturer and seller, however, the manufacturer will no longer be liable for the goods if it has become unmerchantable after it has left their control, or after 10 years.

Goods must be fit for disclosed purpose

Section 55 of the ACL implies that all goods sold will be reasonably fit for their disclosed purpose where:

• the seller is aware of the particular purpose in which the goods are required by the buyer; and
• the buyer shows reliance on the skill and judgment of the seller.

Goods sold which are by sample or demonstration model

When goods are sold by reference to a sample, the ACL implies that every contract for sale shall correspond with the sample or demonstration model, with the obligation extending to both the seller and manufacturer. In order for the s 57 provisions to operate, only one of the following three conditions needs to be breached:

• the bulk shall correspond with the sample in quality;
• the buyer shall have a reasonable opportunity of comparing the bulk with the sample;
• the goods must be free from any defect which would not be apparent on a reasonable examination of the sample.

Consumer guarantees and services

The ACL under ss 60 and 62 provides that that services provided will be fit for any disclosed purposes and that delivery will be within a reasonable time period.