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Consumer Protection

A consumer is a person who purchases goods or services for personal or household use. Most consumer dealings are based on the law of contract. Central to the common law rules of contract is the assumption of a bargain freely struck between equal parties. However, most consumer goods are manufactured, marketed and sold by large corporations operating on a world wide basis.

In recognition of the fact that consumers do not have the same level of knowledge, expertise, experience and resources as business corporations, a national consumer legislative scheme (“the Australian Consumer Law”) has been created with the cooperation of Federal and State governments to protect consumers from unscrupulous traders.

The main pieces of consumer protection legislation are:

This section examines some of the key consumer protection legislation. A prudent consumer should however acknowledge the responsibility of "smart shopping". To be satisfied with the goods or services you buy and to get value for money:

  • shop around carefully and obtain several quotes before you buy - compare products and services on the basis of quality and price;
  • make sure you get a detailed written quotation for any repair, maintenance or construction work;
  • ensure that the person who does the work is licensed with the appropriate authority;
  • do not be rushed; it is your time and your money;
  • do not pay a deposit unless you are really sure that you want the goods or services;
  • if you change your mind you are not automatically entitled to get your money back; you are generally only entitled to a refund if the goods are faulty;
  • make sure you know the total cost of all fees and charges if you are buying on credit;
  • be sure to get the trader's promises (including guarantees and warranties) in writing;
  • you have the right to have all documents fully explained to you by the trader - however it is your responsibility to read and understand all documents before you sign them;
  • you have a right to a receipt for goods and services you pay for, keep them along with contracts and guarantee documents, and fill out any guarantee slips and send them off soon after you buy;and
  • GST must be included in all prices.

Unsatisfactory Goods and Services

Complaints about the quality of goods and services are unfortunately very common. Most consumer problems fall into the following categories

  • the goods or services are unsatisfactory
  • the consumer has been misled by the trader
  • the trader has acted unreasonably

Contract law determines disputes between consumers and traders. The law of contract is described in the first section of this chapter, see: contracts.

Laws created by both State and Federal parliament create rights for consumers in relation to defective goods, misleading statements relating to goods and services and unfair practices by traders.

Competition and Consumer Act 2010 (Cth)

The Australian Consumer Law ( schedule 2 of the Competition and Consumer Act 2010 (Cth)) applies to contracts for goods or services sold in the course of business up to a maximum value of $40 000. The consumer may be an individual or a company.

Where the value of the contract exceeds $40 000 the Act still applies if the goods are of a kind ordinarily bought for personal, domestic or household use or consumption. The most important limitation is that the Act only applies where the trader is a corporation (exceptions are contained in Sections 5 and 6). Most large stores are corporations while smaller local traders may not be.

The Act also excludes private sales and auctions. It is not possible for consumers to give up waive their rights under the Act, or for traders to exclude them. Where there has been a breach of a term implied by the Act a consumer has the right to rescind the contract, see: consumer remedies.

Sale of Goods Act 1895 (SA)

The Sale of Goods Act 1895 (SA) applies only to contracts for the purchase of goods.

There is no maximum value of the contract where protection stops nor does it apply only to consumers. It applies to all buyers, even companies.

Although the conditions of 'fit for purpose' and 'merchantable quality' only apply to goods that are sold by traders, other implied conditions and warranties even apply to private sales.

Unlike the Competition and Consumer Act 2010 (Cth) ( the Australian Consumer Law), the conditions and warranties implied by the Sale of Goods Act 1895 (SA) can be excluded or the liability of the seller can be limited by the terms of a contract [s 54].

However, a seller will not be helped if she or he breaches a fundamental term of a contract, for example, if the goods supplied are so different in description as to be different goods. In addition, the exclusion will only protect a seller acting in the performance of the contract, not if acting outside the contract, for example, wilful misconduct. People affected should seek legal advice.

Implied conditions

The Australian Consumer Law incorporates certain terms into consumer contracts. Unless otherwise stated, all references below are to the Competition and Consumer Act 2010 (Cth) Schedule 2 (“the Australian Consumer Law”).

That the Seller has the Right to Sell

A consumer buying goods assumes that the supplier/seller transfers ownership of the goods to the them. Sometimes a person in possession of goods purports to sell the goods when in fact they have no right to do so. If someone who is the true owner seeks to obtain the goods from the consumer after sale, the consumer can bring a claim against the supplier/seller on the basis this implied condition has been breached [Competition and Consumer Act 2010 (Cth) Schedule 2 s 51].

Goods are Fit for the Purpose for which they are Sold

Where a supplier is made aware, either expressly or implicitly, of the particular purpose for which the buyer requires the goods, there is an implied condition that the goods will be reasonably fit for that purpose [Competition and Consumer Act 2010 (Cth) Schedule 2 s 55 and Sale of Goods Act 1895 (SA) s 14]. The definition of ‘particular purpose’ used by the Australian Consumer Law is broader and extends to any purpose made known to the supplier (expressly or implicitly) whether or not it is a purpose for which the goods are commonly supplied [s 55]. However, where it can be shown that the consumer did not rely on, or it was unreasonable for the consumer to rely on, the skill or judgment of the supplier the implied condition will not occur.

Goods are of acceptable (merchantable) quality

When goods are sold there is an implied condition that the goods are of acceptable quality. This means that they must be fit for the purpose for which goods of that kind are commonly bought, as is reasonable to expect having regard to any description applied to them, the price (if relevant) and all other relevant circumstances [s 54]. See also Sale of Goods Act 1895 (SA) s 14.

This does not cover those defects that the consumer was aware of or should have found having had a chance to inspect the goods before purchase [s 54(7)].

Goods should fit their description

Goods are sold by description where a consumer does not see the actual item purchased. For example, the consumer examines only a display model, an illustration on a container or a catalogue. To breach this condition it must be shown that the goods do not comply with the description or identity of the goods, rather than non-compliance with quality. For example, a bowl that sold by description as black when it is in fact white [s 56]. See also Sale of Goods Act 1895 s 13.

Sale by sample

Not many consumers buy by reference to a sample of goods. It might happen if a consumer is buying a wool carpet from a sample. Where goods are sold by reference to a sample either where it states so in the contract, or it can be implied that the goods are supplied by reference to a sample, the contract is subject to three conditions [ s 57]:

  • that the goods will match with the sample (or demonstration model) in quality
  • that the consumer will have a reasonable opportunity of comparing the goods with the sample
  • that the goods will be free from any defects making them not of acceptable quality and that would not be apparent on a reasonable examination of the sample.

For example, if the sample of wool carpet referred to above turns out to be a blend of wool and synthetic, the buyer can reject the carpet. It is important that the buyer rejects the goods as soon as the defect is discovered as it may not be possible to return the goods. Under s 15 of the Sale of Goods Act 1895 (SA) similar provisions exist.

Guarantees

In a contract, a guarantee (also referred to as a warranty) is an undertaking that if certain terms of a contract are breached then any losses suffered by the innocent party will be compensated.

In addition to any specific clause in a consumer contract that provides a guarantee for the consumer, the law says that every consumer contract has some "implied" guarantees. These guarantees exist even if a contract does not mention them. In addition, a contract cannot say that the implied guarantees do not apply.

Implied guarantees for services

The Australian Consumer Law (Cth)

Sections 60 – 62 of the Australian Consumer Law ( Schedule 2 of the Competition and Consumer Act 2010 (Cth) ) imply several guarantees into every contract for services. The supplier guarantees that services will be rendered with due skill and care; that materials used will be fit for the purpose for which they are required and that supply will occur within a reasonable time.

A consumer may explain the particular purpose for which she or he requires the services in order to show that he or she relied upon the supplier’s judgement. There is an implied guarantee in the contract that the materials and services will be reasonably fit for that purpose and are of a nature and quality that might reasonably be expected to achieve that result.

The Australian Consumer Law (Competition and Consumer Act 2010 (Cth) Schedule 2 s 4) defines services to include any rights, benefits, privileges or facilities that are given by a trader under a contract for, or in relation to:

  • the performance of work (with or without the supply of goods);
  • providing facilities for amusement, entertainment, recreation or instruction;
  • where payment is made in the form of a royalty, tribute, levy or similar;
  • banking services;
  • a contract in relation to the lending of money.

However, the definition does not include rights or benefits that are provided by the supply of goods or the performance of work under a contract of service.

Services not covered by guarantees under the Australian Consumer Law are:

  • a contract of insurance;
  • the transportation or storage of goods for the purposes of a business, trade, profession or occupation carried on or engaged in by the person for whom the goods are transported or stored.

[Competition and Consumer Act 2010 (Cth) Schedule 2 s 63]

Under the Fair Trading Act 1987 (SA) liability for suppliers of recreational services can be modified, excluded or restricted, notwithstanding the provisions of the sections 60 and 61 of the Australian Consumer Law (see Fair Trading Act 1987 (SA) s 42). Recreational services includes services consisting of participation in sporting activities or similar leisure pursuits or any other activity that involves a significant degree of physical exertion or risk, undertaken for recreation, leisure or enjoyment. Suppliers of such services can modify liability provided the term is: (i) in the prescribed form; (ii) brought to the attention of the consumer prior to the provision of the services and (iii) agreed to by the consumer in the prescribed manner.

Implied guarantees for goods

The Australian Consumer Law

Under the Australian Consumer Law there are implied guarantees that:

  • a buyer shall enjoy the use of the goods free from any interference;
  • that no person other than the supplier has a undisclosed interest, ownership or mortgage over those goods.

[Competition and Consumer Act 2010 (Cth) Schedule 2 ss 51-52]

A similar provision exists in the Sale of Goods Act 1895 (SA) [s 12].

Manufacturers’ warranties

It is unusual for a consumer to purchase goods direct from a manufacturer as most goods are purchased from a retailer. Although the consumer has not entered into a contract directly with the manufacturer the Australian Consumer Law provides consumers with rights against manufacturers. Under the Act manufacturers must provide goods that are of acceptable quality, are fit for their purpose, match the description in the contract and are the same as any samples given to the consumer before making the agreement [ss 54-57].

Manufacturers must also take reasonable action to ensure that facilities for repairs and parts are reasonably available for a resonable period after the goods are supplied [s 58].

Manufacturers must also comply with any express warranties they give in relation to the goods [s 59].

False and Misleading Practices

A common complaint of consumers is that they were made to enter into a contract for the purchase of goods as a result of some flase or misleading advertisement, or as a result of a misrepresentation, made by a salesperson as to the quality, nature or performance of the goods.

These matters are mostly covered by the Australian Consumer Law [Competition and Consumer Act 2010 (Cth) Schedule 2]. Australian Consumer Law matters come within the jurisdiction of the Federal Circuit Court.

The following are some of the more common problems:

  • misleading or deceptive conduct
  • unconscionable conduct
  • false or misleading representations about goods or services
  • measurements
  • multiple pricing
  • bait advertising
  • referral selling
  • harassment or coercion.

Anyone who suspects a trader is doing the wrong thing should contact Consumer and Business Affairs or the Australian Competition and Consumer Commission in the first instance.

Misleading or deceptive conduct

The Australian Consumer Law [Competition and Consumer Act 2010 (Cth) Schedule 2 s 18] prohibits conduct that is misleading or deceptive, or is likely to mislead or deceive. A major problem area is misleading or deceptive advertising. Also included are activities such as offering for sale motor cars in which the odometers have been wound back, or selling packets of food or soap powder which do not contain the stated weights. For the purpose of determining whether conduct is misleading or deceptive the courts have determined that:

  • proof of intent to deceive is not required
  • it is not necessary to establish actual deception
  • the crucial factor is the capacity or tendency to deceive.

There are specific requirements covering representations about the country of origin of goods in Part 5-3 Competition and Consumer Act 2010 (Cth), Schedule 2.

Unconscionable conduct

Suppliers are not allowed to take unreasonable advantage of consumers in supplying goods or services. The courts look at all the circumstances of a deal including the relative bargaining power between consumer and the supplier, the need for particular terms, the complexity of any documents, the use of unfair sales tactics or other pressure and the price for which the goods or services might have been obtained from someone else.

The protections under the Australian Consumer Law apply only to dealings for goods and services that are ordinarily for personal or household use.

Unconscionable conduct is not defined, but the Act sets out criteria which can be used as a check list to determine if conduct is unconscionable [Competition and Consumer Act 2010 (Cth) Schedule 2 s 21]. They are:

  • is the supplier in a substantially stronger bargaining position than the consumer?
  • has the consumer, as a result of the conduct, entered into a contract with harsh conditions that are unnecessary to protect the company's interests?
  • could the consumer understand the documents? (e.g. is there any language difficulty or mental incapacity?)
  • were any unfair pressures, or unfair tactics used? (e.g. door to door sale without an appointment)
  • was the amount paid for the goods higher than elsewhere or could the consumer have obtained the goods from another supplier on better terms?

False or misleading representations

It is an offence under both Commonwealth and State legislation to induce another party to enter into a contract by using false or misleading representations. Generally traders are not allowed to make false claims about anything that could be used to persuade a person to enter into a contract for goods or services.

Commonwealth law

It is an offence under the Australian Consumer Law to make false or misleading representations about goods or services [Competition and Consumer Act 2010 (Cth) Schedule 2, s29]. Examples include misrepresentations as to:

  • a particular standard, quality, value, grade, composition or style
  • a particular history or previous use
  • goods being new
  • that a particular person has agreed to acquire goods or services
  • the availability of facilities for the repair of goods or of spare parts for goods
  • the place of origin of goods (see also Part 5-3 Competition and Consumer Act 2010, Schedule 2)
  • that goods or services have sponsorship, approval, performace characteristics, uses or benefits
  • price
  • testimonials for the good or service.

Maximum penalty (see s 151 Competition and Consumer Act 2010 (Cth) Schedule 2):

  • Fine of up to $1,100,000 (for a body corporate)
  • Fine of up to $220,000 (for individuals)

It is also an offence to make false or misleading representations about the sale of land (s.30).

An example of a misleading representation is marketing a cordial claiming it contains fruit extracts when it does not (see ACCC v Cadbury Schweppes Pty Ltd [2004] FCA 516).

Where a claim or representation has been made to promote the supply of goods or services a supplier can be served with a notice (a substantiation notice) by the Australian Competition and Consumer Commission (ACCC) requiring them to:

  • give information and/or produce documents to substantiate the claim or representation;
  • give information and/or produce documents to substantiate the quantities or periods relevant to the supply of the goods or services.

[Competition and Consumer Act 2010 (Cth) Schedule 2 s 219]

State law

The Misrepresentation Act 1972 (SA) makes it an offence to induce another party into entering a contract by misrepresentation and provides for criminal sanctions to be imposed [s.4].

If a business makes a false representation inducing a consumer to enter a contract, to pay money, to transfer land or personal property then the trader and/or the agent or employee making the representation are both guilty of a criminal offence.

Maximum penalty:

  • Fine of up to $100,000 (for bodies corporate)
  • Fine of up to $20,000 (for individuals)

What is a misrepresentation?

A misrepresentation is a false statement or intentional misstatement used to induce a person to enter into a contract.

Defences

Under s 4(3) the following defences apply to a prosecution for misrepresentation:

  • If the person who made the statement believed on reasonable grounds that it was true; or
  • Where the defendant is not the person who made the misrepresentation:
  • they took all reasonable precautions to prevent the commission of the offence by persons acting on their behalf or in their employment; or
  • the defendant did not know, and could not reasonably be expected to have known, that the representation had been made or was untrue.

Civil actions and exclusions

In addition, the Misrepresentation Act 1972 (SA) allows a number of civil actions for a consumer to take (see: Contracts) even in the case of a private sale. It also provides that contracts which say they exclude or restrict liability for any misrepresentation made before the contract shall be of no effect unless a court decides that it is fair and reasonable in all the circumstances of the case [s 8].

Other offences

Measurements

Pre-packed articles can often contain misleading information as to the actual weight or measure of the items. The National Measurement Act 1960 (Cth) details the requirements for pre-packaged articles and prescribes the offences and penalties that apply where a package contains misleading information as to the true weight of its contents.

Multiple pricing

The Australian Consumer Law prohibits the charging of the higher price in instances where multiple pricing appears for an item [s 47]. If goods have more than one displayed price the supplier must offer the items for sale at the lower of the two displayed prices.

Bait advertising

Bait advertising refers to the practice of advertising goods or services at a price designed to attract interest, whilst failing to ensure that there are reasonable supplies of the goods and services to respond to the likely demand. This can be an honest mistake on the part of the supplier, however, sometimes businesses knowingly engage in the practice with the intention of convincing consumers to purchase a more expensive product due to unavailability of the advertised item (sometimes referred to as a ‘bait and switch’ scam). Section 35 of the Australian Consumer Law (Schedule 2, Competition and Consumer Act 2010 (Cth)) prohibits this practice.

Referral selling

Referral selling involves a supplier offering benefits (e.g. a rebate or commission) for a consumer to purchase goods and services if the consumer will provide referrals for other prospective consumers. This practice is prohibited under s 49 Australian Consumer Law.

Harassement or coercion

It is illegal for a supplier or trader to use physical force, undue harassment or coercion in connection with the supply or possible supply of goods or services. The same provision applies to dealings connected to payment for goods or services; the sale of an interest in land or payment for an interest in land (s 50).

Anyone who suspects a trader is doing the wrong thing should contact Consumer and Business Affairs or the Australian Competition and Consumer Commission.

Some specific areas of Consumer Protection

Unsolicited consumer agreements

Protections that previously existed for ‘door to door’ and telephone sales are now covered by the Australian Consumer Law as unsolicited sales, or “unsolicited consumer agreements”.

Under the Australian Consumer Law, an unsolicited consumer agreement has the following characteristics:

  • It is an agreement for the supply of goods or services;
  • made as a result of negotiations between a dealer and the consumer;
  • it does not take place in a retail context i.e. negotiations occur either at a place other than the supplier’s business or trade premises (e.g. consumer’s home, a display booth in a shopping centre), or by telephone; and
  • the consumer did not invite the dealer to attend or make a telephone call for the purpose of entering into negotiations relating to the supply of those goods or services; and
  • the total price under the agreement is not determined at the time the agreement is made or, if it is determined, is more than $100.

[Competition and Consumer Act 2010 (Cth) Schedule 2 s 69].

To be covered by the protections of the Australian Consumer Law it is essential that the supplier make the first approach to the consumer. This may be by phone, by letter (addressed to the consumer) or in person at the consumer’s home, work or any place where the trader normally does not do business. If the consumer contacts the trader first and invites the trader to her or his home, any contract entered is not an unsolicited consumer agreement.

It can be difficult in certain circumstances to determine whether the consumer is the one who has initiated contact but the provisions of the Australian Consumer Law ensure that where there is any dispute there is a presumption that the agreement is an unsolicited consumer agreement and the onus is on the supplier to prove otherwise [Competition and Consumer Act 2010 (Cth) Schedule 2 s 70].

Examples of unsolicited consumer agreements include when a supplier:

  • door knocks offering to sell goods or services or inviting the consumer to switch to a different service provider;
  • telephones the consumer offering to sell goods or services;
  • leaves a missed call message on the consumer’s voicemail/answering machine asking for them to respond;
  • approaches the consumer in the common area of a shopping centre and offers to sell the consumer goods or services.

More complicated examples include where a consumer invites a supplier to provide a quote for the supply of goods and services. This contact in itself is not an unsolicited consumer agreement so that if a supplier attempts to enter into negotiations to sell a product or later attempts to contact a consumer to do so, the resulting agreement would be considered an unsolicited consumer agreement. If, however, a consumer approaches the supplier after they have provided a quote to accept it or negotiate different terms, this would not be classified as an unsolicited consumer agreement.

Party plan sales

Party plan sales are specifically excluded from the definition of an unsolicited consumer agreement. The circumstances that meet the criteria for a party plan event are set out in Part 6 of the regulations to the Competition and Consumer Act 2010 (Cth).

Consumers must attend an event on the understanding (express or implied) that the purpose of the event is to negotiate for the sale of goods or services to one or more people and three or more people must be invited (although not necessarily all must attend). Finally, the inviter (presumably this means the seller or the seller’s representative, although it is not clear) must be in the same premises as the consumers.

Permitted hours for negotating an unsolicited consumer agreement

A supplier must not call on a consumer for the purpose of negotiating an unsolicited consumer agreement or for a related purpose [ Competition and Consumer Act 2010 (Cth) Schedule 2 s 73].

  • at any time on a Sunday or public holiday; or
  • before 9 am on any other day; or
  • after 6 pm* on any other day (or after 5 pm on a Saturday) – after 8 pm for telemarketing calls.

Disclosure of identity and purpose

Suppliers are required to clearly advise as soon as is practicable and before they begin negotiations, that their purpose is to seek agreement to a contract for the supply of goods and services. They must also provide details as to their identity i.e. a name and address [s 74].

Suppliers are obliged to leave premises immediately if asked to do so and prohibited from further contact for at least 30 days [s.75].

Penalties can be imposed for suppliers who breach these provisions.

Cooling off rights

Consumers have the right to terminate an unsolicited consumer agreement, either orally or in writing, within 10 business days of negotiating the agreement [s.82]. This is referred to as a ‘cooling off’ period. During the cooling off period the supplier must not supply any goods or services or accept payment from the consumer [s 86].

Where an unsolicited consumer agreement is terminated within the cooling off period the agreement is taken to have been rescinded by mutual consent and is void.

If goods have been provided the consumer must return any goods not consumed or arrange for the supplier to collect them within a reasonable time [s.85]. If the supplier fails to collect the goods within 30 days after having received notice of termination of the contract then the goods become the property of the consumer [ s 85(2)].

The consumer will be liable to pay compensation if they return goods in a less than reasonable state. However, they will not be responsible for any damage or depreciation that occurs in the course of normal use of the goods or as a result of circumstances beyond their control.

If services have been provided before the contract has been terminated the consumer can be required to provide payment for the services provided [s 85(6)].

Cooling off for other reasons

In certain circumstances the length of the cooling off period may be extended.

If the seller or their representative:

  • calls outside of the permitted hours without being invited by the consumer; or
  • does not identify the purpose of the visit; or
  • does not inform the consumer of their right to ask the seller to leave at any time; or
  • does not provide proof of identity before discussing their product with the consumer; or
  • leave when asked

the cooling off period is extended to 3 months from the day after the signing of the contract [s 82(3)].

If the seller or their representative:

  • fails to inform the consumer of their cooling off rights; or
  • contravenes the requirements for the content of an agreement set out in ss 78-81 of the Australian Consumer Law, Competition and Consumer Act 2010 (Cth) including the provision of a notice regarding the right to cool off; or
  • supplies goods or services or accepts payment from the consumer*

the cooling off period is extended to 6 months from the day after the signing of the contract [s 82(3)(d)].

*From 2012 if the total contract price is less than $500 and the supply is for goods only, the purchaser may receive some or all of the goods.

Borrowing to purchase unsolicited goods or services

Consumers may purchase goods or services under an unsolicited consumer agreement by way of credit provided by a third party credit provider. The Australian Consumer Law makes no provision for the termination of credit contracts associated with the purchase of unsolicited goods or services where a consumer exercised the right to cool off, notwithstanding that the consumer agreement is void on cooling off and other related contracts are also automatically void [Competition and Consumer Act 2010 (Cth) Schedule 2 s 83].

Part 7 of the National Credit Code (NCC) provides for the termination of applicable credit contracts where a consumer terminates a contract, either by cooling-off or for some other reason. Note that Part 7 of the NCC does not only apply to unsolicted consumer agreements, but also applies to the termination of any type of consumer contract.

In order for the provisions to operate, certain conditions must be met:

  • The credit provider must be a linked credit provider; and
  • The credit contract must be either a tied continuing credit contract or a tied loan contract.

    A “linked credit provider” is a credit provider:

  • who has a contract arrangement or understanding relating to the supply of the goods, or
  • to whom the supplier regularly refers consumers to obtain credit; or
  • whose forms or offers of credit are, by arrangement, made available by the supplier to persons
  • with whom the supplier has an arrangement under which contracts or applications for credit from the credit provider may be signed by persons at the premises of the supplier [National Consumer Credit (NCC) Code s 127]

A tied continuing credit contract might be a credit card or overdraft facility, the provider of which is linked to the supplier [s 127(2)]. Using a normal credit card or overdraft to pay for the goods or services is unlikely to be caught by this provision.

A tied loan contract is a loan contract where the credit provider knows or ought reasonably to know that the consumer entered into the contract for the purpose of purchasing the goods or services supplied by the supplier and, at the time of the contract, the credit provider was a linked credit provider of the supplier [s 127(3)].

If the consumer exercises the right to cool off, thereby rendering the consumer agreement void, the consumer is also entitled to:

1. in the case of a tied loan contract – terminate the contract; or

2. in the case of a tied continuing loan contract – a refund of the amount of credit and interest charges paid in relation to that credit [NCC s 135].

The supplier is required to inform the credit provider that the sale contract has been rescinded and failure to do so attracts a criminal penalty [s 135(6)]. The requirement to inform is limited to credit provided in relation to unsolicited consumer agreements.

An entitlement to terminate a tied credit contract may be exercised only by notice in writing by the 'other party to the contract' [s 137]. The other party to the contract is usually the consumer.

There may be situations where the supplier may refuse, neglect, overlook or be unable to inform the credit provider (such as following the appointment of an external administrator or liquidator). Therefore the consumer should act prudently and comply with s 137 at the same time as terminating the sale contract to ensure that the credit provider does not take action in reliance on the tied credit contract.

Second hand motor vehicles

In South Australia, the sale of secondhand cars by businesses is regulated by the Second-hand Vehicles Dealers Act 1995 (SA), and any references in this section are to this Act.

By contrast, buying a secondhand car from a private seller has few protections for a purchaser. More information about buying from a private seller is set out below.

Secondhand Car Dealers

No person may carry on a business of selling second hand motor vehicles unless she or he is licensed to do so [s 7]. The definition of what consitutes dealing in under the legislation has been expanded to catch “backyard” (unlicensed) traders. Under s 50 a person will be presumed to be a dealer if:

  • they have bought (or offered to buy), or sold (or offered to sell), at least 4 second hand vehicles during a 12 month period, or
  • they and a close associate have bought (or offered to buy), or sold (or offered to sell), at least 6 second hand vehicles during a period of 12 months.

Before granting a licence the Commissioner of Consumer Affairs must be satisfied that all the people concerned with the business are of good character and repute and are fit to sell or buy second hand motor vehicles [s 9]. The Commissioner must also be satisfied that the business has sufficient resources to meet the requirements of the Act. If an unlicensed person carries on the business of buying and selling second hand motor vehicles she or he commits an offence and can face a penalty up to $100 000 [s 7].

Display of Information

Dealers must give certain information to any potential buyers [s 16] and notices setting out the information must be attached to the vehicle. The information includes:

  • the name and address of the last owner of the vehicle in addition to the trade owner;
  • the reading on the odometer at the time that the vehicle was acquired from the owner referred to above;
  • the cash price of the vehicle;
  • the model (if any) and the year the vehicle was first registered;
  • such other particulars as may be prescribed under the Act.

This information must also be displayed at any auction where second hand vehicles are sold.

Statutory Duty to Repair

Defects in a vehicle which make it unroadworthy or illegal to drive at the time of delivery to the purchaser must be repaired or made good by the dealer regardless of the price paid for, or the distance travelled by, the vehicle [s 23(7)].

In addition to the pre-condition that a car is roadworthy when delivered, dealers have a duty to repair defects in secondhand cars dependent on the price paid for the car, its age and distance travelled.

If the car was first registered more than fifteen years before the sale or driven more than 200 000 kilometres, there is no duty by the dealer to repair (aside from ensuring that it is roadworthy).

The duty to repair by the dealer is also limited by time or distance driven:

  • under $3000 - no warranty, although vehicle must be roadworthy
  • $3001 - $6000 - 2 months or 3000 kms, whichever occurs first
  • over $6000 - 3 months or 5000 kms, whichever occurs first

In calculating the warranty period, the time that the vehicle is with the dealer for repairs does not count. The duty does not apply tyres or the battery (unless those would make the car unroadworthy), or to reasonably apparent defects in upholstery or paintwork [ss 23(6),(7)]. A dealer does not have to repair any defects in a radio, cassette player, compact disc player, refrigerated air-conditioner, sunroof or any camping or recreational accessory if the dealer has exempted liability in the Section 16 Notice given to the purchaser.

The dealer is also not responsible for repairs to damage caused by an accident or deliberate act by someone, or normal wear and tear. Insurance may cover accidental damage.

Purchasers may also have rights under the Australian Consumer Law in relation to a secondhand vehicle. For more information the consumer guarantees relating to acceptable quality of goods see here.

It is possible for a consumer over 18 years of age to waive the dealer's duty to repair, although the consumer cannot waive his or her rights in relation to applicable consumer guarantees under the Australian Consumer Law. Before signing the waiver, the consumer must be given a Notice that explains the consequences of giving up the right to insist that the dealer repairs defects to the car. The consumer's signature must be witnessed by a JP, solicitor or proclaimed bank manager who is independent of the dealer.

The witness has the duty to ensure that the consumer understands the effect of the waiver before witnessing the signature. It is an offence carrying a maximum fine of $8000 for a dealer to, in any other way, attempt to modify or exclude the rights under this Act. This includes letting the consumer believe that the vehicle is only for sale if the consumer waives the warranty rights [s 33].

Repairs to the car under the duty to repair must be done to acceptable industry standards. A consumer is also required to deliver the car to the dealer for the repairs to be done, to give the dealer a reasonable opportunity to fix the problem. [s 24]

If the dealer cannot or will not repair the car in a reasonable time, a consumer is entitled to get assistance from Consumer and Business Services for a conciliation conference. If this does not resolve the problem it may be necessary to apply for a Magistrates Court order.

If it is not possible or safe to deliver the car to the dealer, and the dealer is put on notice of the consumer's intention to have the repairs done by another repairer, it may be possible to claim the cost of the repairs from the dealer on application to the Magistrates Court.

The duty by a secondhand dealer to repair does not apply to motor cycles or to vehicles purchased at auction or immediately after an auction.

Cooling off period

Consumers also have the right to rescind (cool-off) a contract for a secondhand car bought from a dealer by delivering a written notice to the dealer within 2 business days of the signing of the contract.

A dealer cannot require a purchaser to make any payment before the cooling period expires other than a deposit of not more than 10% of the contract price. If the contract is cancelled by the purchaser within the cooling off period, the dealer must refund any deposit paid, less 2 % of the contract price or $100, whichever is the lesser. The refund must be paid by the end of the next business day and the dealer faces a penalty of up to $5000 (or $500 expiation fee) if they fail to comply.

During the cooling off period, both physical possession and legal title for the vehicle remains with the dealer, who must allow the purchaser reasonable access to inspect the vehicle. The right to rescind the contract does not apply if the purchaser takes possession of the car. Other rights may exist under the Australian Consumer Law relating to the consumer guarantee as to acceptable quality or misleading and deceptive conduct and if there is a problem, it is wise to get legal advice regarding a remedy as soon as possible.

A purchaser can waive their right to a cooling off period but must sign a form indicating that they are aware of the implications of doing this. It is an offence for a dealer to influence or attempt to influence a purchaser to waiver his or her right to withdraw from the contract and a penalty of up to $20 000 applies [s 33(5a)]. In addition, they can be pursued for damages in the Magistrates Court by any individual who can show that they have suffered a loss or damage as a result of the offence.

Effect of cooling off period on credit contract

A credit contract will not take effect until after the expiration of the cooling off period or, in the event that the purchaser waives their right to withdraw, until a waiver has been signed.

If a purchaser withdraws from a sales contract within the cooling off period, any credit contract entered into in relation to the purchase will be void and any security taken by the credit provider will be discharged [s 18B(9)].

Other Considerations when buying from a dealer

Any security held by a lender over the car is automatically discharged if it is bought from a dealer in the normal course of the dealer's business. A purchaser is also entitled to undisturbed possession of the car, as well as clear title. These guarantees apply under the Australian Consumer Law.

Private sales

Buying a car privately offers few protections for the purchaser. However, there are a few steps that a purchaser can take before buying to avoid problems.

A private seller has no duty to repair a secondhand car. As a result it is essential to have the car checked over mechanically first. If any substantial claims are made by the seller regarding the car, such as its ability to tow a trailer, or year of manufacture or odometer reading, it is very wise to check the information for yourself. There is also no cooling off period when buying secondhand.

If you rely on something the seller told you about the car, and it was easy to check independently, and that information turned out not to be true, it could be a misrepresentation and may entitle you to ask for compensation. Get legal advice as soon as possible about your rights.

Money owing on the car

It is very important to ensure that there is no money owing on the car before you buy. You can obtain a certificate from the Personal Properties Securities Register (PPSR) for a small fee. The PPSR is a national register and is available on-line at www.ppsr.gov.au. A certificate can be printed at the same time.

You will need to know the VIN of the vehicle to do the search as it is the only information that will identify the vehicle. Owner details are not required. The certificate also shows details regarding any reports regarding the stolen or written off history of the vehicle, assuming that information is reported. The search can be done by staff at PPSR if you cannot search on-line. If a certificate is obtained that shows there is no registered interest over the car, you will have until the end of the next day to complete the purchase to remain protected.

If you buy a car privately, you should always check the PPSR. If there is a registered security interest, you will lose the car if the lender repossesses it. Even if the seller says there is no security interest and no money owing, you should check for yourself on the PPSR. It may be very difficult to recover the purchase price from the seller once the lender repossesses the car, even though you have the right to ask for your money back,

The PPSR also records information about whether or not the car has been previously written off (economic write-off) or reported stolen. An economic write-off can be reregistered after strict testing, but a car that has suffered severe damage cannot, and must be taken off the road.

You can contact the PPSR by phone on 1300 007 777 (1300 00PPSR).

Video resources

Following changes that were made to the law about second-hand vehicle dealing in 2010, Consumer and Business Services (formerly the Office of Consumer and Business Affairs) created these video resources:

Second-hand dealers and pawnbrokers

The Second-hand Dealers and Pawnbrokers Act 1996 (SA) regulates the activities of second hand dealers and pawnbrokers. While not requiring that second hand dealers be licensed, anyone setting up business must notify the police. A person will be prohibited from conducting business if convicted of an offence of dishonesty or a prescribed offence, or if the person is an undischarged bankrupt or subject to a composition or deed or scheme of arrangement [Second-hand Dealers and Pawnbrokers Act 1996 s 6]. Where a dealer is a company the same restrictions apply to any directors.

The Act contains many restrictions on dealers which if breached incur a fine of up to $2 500. For example dealers are required to keep detailed records of all transactions. Dealers must also retain goods for at least ten days after they are acquired although they may dispose of them after three days if full details of the purchaser are recorded [Second-hand Dealers and Pawnbrokers Act 1996 (SA) s 10]. Dealers must notify the police if they suspect that goods are stolen and may be disqualified from business if stolen goods are found on their property on three occasions within the previous 12 months [Second-hand Dealers and Pawnbrokers Act 1996 (SA) s 11].

A person who finds his or her stolen goods on a second-hand dealer's premises may apply to the Magistrates Court for the return of the goods.

The Act also contains new rights for people who pawn their goods. The minimum period a pawnbroker must retain any pawned goods will be one month. At the end of the redemption period the pawnbroker must sell the goods by auction. The person who pawned the goods can inspect the record of the sale and if the goods sold for more than is owing to the pawnbroker, the balance must be paid to the person who pawned them. Unjust transactions and unconscionable charges by pawnbrokers are subject to the Consumer Credit Code, see: Consumer credit.

Telemarketing

Telemarketing is a term commonly applied to sales that are made by telephone or by marketing products on television.

Commonwealth legislation including the Australian Consumer Law (see Competition and Consumer Act 2010 (Cth) Schedule 2) and the Telecommunications Act 1991 (Cth) applies to sales made through electronic media such as the telephone or television. The use of services such as cable television may complicate consumer remedies even further.

Sales made through the use of electronic media are a relatively new, but rapidly expanding area. Issues of concern include:

  • privacy, see: Privacy
  • where disputes should be heard, for example, if the trader is in New South Wales but the consumer is in South Australia, where should any legal proceedings take place?
  • contacting traders for a refund or exchange if only a postal address is provided. Problems also arise in determining the cost of transport or postage in the event of a refund

Where disputes arise the Australian Direct Marketing Association has a code of conduct which determines acceptable behaviour of traders, but this code is only binding on the association's members. In addition, the Australian Competition and Consumer Commission has in place a Code of Practice on Distance Selling for telemarketing, mail orders and other forms of direct marketing where consumers buy goods or services without visiting the trader's premises. It covers:

  • the use of mailing lists, protection of consumers' privacy, the use of information and the right to be removed from lists and to not be contacted
  • fair trading practices that prohibit false and misleading claims and gives consumers the right to cancel contracts
  • requirements that there be full and clear explanation of all terms and conditions and that traders must always properly identify themselves
  • accessible dispute resolution schemes.

Do not call register

This is a service provided by the Australian government to enable people to be excluded from telemarketer lists. Registration is free and can be done online, by phone or by post. Once your name has been registered telemarketers are legally prohibited to stop contacting you; however, it can take up to 30 days for telemarketing firms to receive the latest updates to the register so the effect of registration is not necessarily immediate.

There are exemptions for public interest organisations such as charities and political parties.

There is a complaints process if you believe there has been a breach of the register. For more information see the Do Not Call website.

Pyramid sales

A pyramid selling scheme is one in which goods or services are sold and the participants in the scheme receive payment or other benefit for introducing other people into the scheme as new participants. As each new participant is introduced to the scheme, the original participant moves further up the 'pyramid' and, depending upon the rules of the scheme, ultimately receives some payment or benefit, usually consisting of a contribution from each new participant. As there is usually a practical limit on the number of people willing to participate in the scheme, it is usually those who join the scheme at the start who receive some benefit whereas those joining at a later stage often have to make a payment but receive no benefit in return.

The Competition and Consumer Act 2010 (Cth) [Schedule 2 s 44] makes it an offence to participate in such a scheme, or to promote one. Under the Competition and Consumer Act 2010 (Cth) Schedule 2 the maximum fines are $220 000 for a person and $1 100 000 for a corporation.

Competition and Consumer Act 2010

Under section 80(1) of the Competition and Consumer Act 2010 (Cth) an injunction can be obtained to stop a breach of the Act. For example, to prevent the publication of misleading or deceptive advertising. In addition, the Act enables the Minister or the Australian Competition and Consumer Commission (ACCC) to apply for an order directing publication of an advertisement to rectify the misleading information [s 86D].

Where a corporation or person breaches the Act the court can grant a wide range of further orders varying the contractual relationship between a consumer and a trader. Such orders may include a payment for damages or an order directing work to be done, as well as an order to refund the money or return the property [ s 87]. The Act also allows an action for damages caused by the contravention of the Act [s 236].

The expense of such an action may be lessened by two devices. First, a consumer can rely on the result of a prosecution by the ACCC in proving her or his civil case. Prosecutions by the ACCC are, however, generally restricted to cases of national importance. In practice, consumers will not often be in a position to take advantage of this provision. Secondly, the Act provides that legal or financial aid may be given in certain circumstances.

It should be stressed that a consumer can only seek an ancillary order or damages under the Act if she or he can show that the loss is the result of a contravention of the Act. For example, if a company breaks a law that prohibits deceptive conduct and a consumer suffers loss as a result (by relying on such deceptive conduct) then she or he may seek damages under the Act.

This example should be contrasted with a situation where a consumer seeks damages for the breach of an implied term. In this case, the consumer may rely on the statutory condition created by the Act, but sue for damages at common law. The reason for this is that the remedies given by the Competition and Consumer Act only operate in relation to contraventions of the Act. Where the Act prohibits certain conduct, engaging in that conduct amounts to a contravention of the Act. On the other hand, the Act does not always prohibit conduct but instead creates certain legal rights (for example, the implied conditions in contracts or manufacturers' warranties). A breach of a statutory implied condition or warranty gives the consumer a right to seek damages or rescission at common law, not under the Act. This is a very complex area of law and legal advice should be sought.

Consumers can seek advice on these rights from the Consumer and Business Services or the Legal Services Commission.

Industry Specific Guides for Businesses

To aid in the understanding of how the Australian Consumer Law applies to specific industries, ACCC and Consumer and Business Services has produced the following industry guides:

Whitegoods and Electrical

Personal Services

Motor Vehicles Sales and Repairs NB This guide applies to the purchase of new motor vehicles. For further information about the purchase of secondhand vehicles under state legislation, see here.

Rental Cars

Travel and Accommodation

The guides provide a useful summary of the Australian Consumer Law with examples.

Ticket Scalping

The practice of buying tickets and then reselling them for a profit when an event sells out poses some extremely complex problems for both sellers and buyers.

The Major Events Act 2013 (SA) makes it an offence for a person to sell tickets for a declared major event without the permission of the organiser at a price higher than 10% of the face value of the ticket, and imposes significant fines for doing so. However, this is dependent on the declaration that an event is ‘major’, which may not necessarily apply to all events such as concerts or sporting events. See S9.

However, it does not provide affected consumers with a remedy, particularly given that illegal contracts are unenforceable.

Live Performance Australia has developed the Ticketing Code of Conduct which can be accessed here. The Code does not have the force of law but is approved by the ACCC, and includes provisions designed to address ticket scalping.

Buying tickets to any event from a private seller (especially online) carries with it certain risks and buyers need to exercise caution when buying tickets other than from the original promoter.

1. The tickets may not be genuine. This is something that the buyer will only find out when it is too late, and it is otherwise almost impossible to check to see if the tickets are genuine;

2. The tickets may not arrive in time for the event. Again, it is impossible to ensure that tickets arrive prior to the start of the event, or even at all;

3. The booking agency or concert or event promoter is likely to include in the terms and conditions of sale of the ticket a provision to the effect that on-selling of the ticket for profit will mean that the ticket is cancelled and the holder of the ticket will be refused entry.

This last point is discussed in more detail in eBay International AG v Creative Festival Entertainment Pty Limited (ACN 098 183 281) [2006] FCA 1768, where the Court found that, on the basis of misleading and deceptive conduct under S52 of the Trade Practices Act 1974 (Cth), the promoter could not rely on a similar contractual term to cancel tickets bought from resellers on eBay.

The Court’s conclusion related to the difficulty that the promoter had in detecting whether tickets were on-sold for profit, and the fact that any buyer other than the original buyer would have been unaware of the term prohibiting re-sale at a profit. The Court also described its decision as “unfortunate” (notwithstanding the correct application of the legal principles) because of the obvious exploitative nature of ticket scalping.

Caution needs to be exercised when buying tickets from on-sellers. If there are problems with receiving tickets within time to attend an event, or forged tickets or tickets that a promoter has decided to cancel, seek advice immediately. If tickets were bought using a credit card, assuming that there is something wrong with the tickets or the tickets did not arrive in time, it may be possible to seek a chargeback via your Bank.

Travel Reforms

On 1 July 2014, the Travel Agents Act 1986 (SA), along with similar legislation in other states, was repealed. As a result, the Travel Compensation Fund (TCF) is being wound up, and travel agents will no longer need to be licenced. The reason for the reform was that many travellers are booking travel and accomodation on-line or arranging travel directly from airlines or other providers.

Travellers will remain protected under the consumer guarantee regime and other provisions of the Australian Consumer Law, including unfair contract terms.

Travel agents will be able to obtain accreditation from national bodies such as the Australian Federation of Travel Agents, which may offer some protection in the event of the insolvency of either an agent or a supplier. However, accreditation is voluntary.

Consumer Remedies

If a consumer has a complaint against any trader or credit provider there are a number of different ways in which she or he might pursue that complaint. In considering which alternative to adopt, the consumer should bear in mind the expense, the likely time which would elapse before obtaining a remedy (if any) and the most effective means to achieve the desired result. It is suggested the consumer seek legal advice about the complaint because in most consumer disputes the loss or damage suffered is insufficient to make going to court a meaningful option.

Direct negotiation

A consumer who has a complaint should try to resolve the problem with the trader in the first instance. As a first step, the consumer should enquire as to whether the business has a customer service charter. Below are some steps to consider when negotiating with a trader:

  • Identify the exact nature of the problem
  • Find any copies of receipts, warranties and other documents related to the purchase of the goods/services which are the subject of the complaint.
  • Go back to the supplier/trader as soon as you have a problem - don't delay. Explain the problem calmly and in as much detail as possible. Tell them how you would like the problem solved. Remember to give the supplier time to look into the problem and get back to you. They may need to contact their head office or get a second opinion.

Every effort should be made to have the complaint solved by the supplier/trader; however, if the supplier/trader has looked into your complaint fully and it is not resolved to your satisfaction you can bring your complaint to a relevant external dispute resolution body. You can usually phone for advice about your complaint but if it needs an investigation you will probably need to write.

Before phoning or writing to the appropriate external dispute resolution organisation, make sure you have spoken to the supplier/trader and that you have all the relevant documents. You will need to supply as much information as possible. This could include:

  • Your contact details - name, address, and phone number
  • A brief description of what happened or what went wrong
  • How this problem has affected you
  • What steps you have already take to sort out the problem

The relevant organisation will look into your problem. If they are unable to help you further they should put you in touch with someone who can. Sometimes there will be complaints which a dispute resolution organisation will have no power to investigate. You should be kpt informed about the progress of the investigation. If the supplier/trader contacts you during this time, you should cooperate and try to get the problem sorted out as quickly as possible.

Writing a letter of complaint

Before writing a letter of complaint you should contact the supplier/trader and speak to them about the problem. If you are not satisfied with the way your complaint was handled it is a good idea to write a letter addressed to a more senior person such as the sales manager or customer service manager. Keep a dated copy of any letters you send, and give them reasonable time to respond to your letter (say 4 weeks).

If you are again not satisfied with their response you may wish to take the matter further and contact an organisation which may be able to help with your dispute. They may also require that your complaint be put in writing. Attach a copy of your first complaint letter and copies of any other relevant documents.

When writing a letter of complaint you should:

  • include your name and contact details
  • state the date and place where the problem occurred
  • describe what happened without getting lost in minor details
  • state the details of the purchase of the goods or services (eg which store, when, price etc)
  • if you rely on any information or representations about the goods or services, your should quote these directly and identify the person who made them by name or at least title
  • explain what action you have already taken to remedy the problem
  • end your letter with something like “I look forward to your response” to encourage a reply
  • sign and date your letter, and keep a copy.

Assistance from government agencies

The Australian Competition and Consumer Commission (ACCC) is charged with a general enforcement role in relation to the Competition and Consumer Act 2010 (Cth) and, where appropriate, consumer grievances should be referred to the Commission.

Consumer and Business Services is a South Australian Government body whose functions include the following:

  • receive and act upon complaints from consumers;
  • carry out investigations and research into matters affecting the interests of consumers;
  • publish reports and provide information on consumer matters;
  • give advice to consumers on the protection provided under the law;
  • report on matters of importance to the Minister of Consumer Affairs;
  • in certain limited circumstances, take legal action on behalf of a consumer.

These functions enable Consumer and Business Services to give wide protection to consumers in everyday transactions, whether the sum of money involved is large or small.

The main statutes supervised by CBS are:

CBS has broad powers to require any person (whether a consumer or a trader) to provide information and to produce books and records for inspection by the commissioner or her or his authorised officers. Authorised officers are also entitled to enter any premises for the purpose of inspecting any goods on those premises.

Complaints can be lodged with CBS over the telephone. However, consumers are required to try to resolve the dispute with the trader first. For further information on how CBS can help and how to lodge a dispute or complaint see Lodge a Complaint on the CBS website.

Going to court

If a dispute cannot be resolved by negotiation with the trader, a consumer can commence legal proceedings in the Magistrates Court. However, before commencing proceedings, it is essential to obtain legal advice regarding any alternatives to resolving the dispute. Also ask if there are any options for being compensated for consequential loss arising out of faulty goods or services.

A claim under the Australian Consumer Law must be commenced on a Form 9. The types of claims can include:

  • Breach of a consumer guarantee relating to acceptable quality (goods)
  • Services that have not been provided in a reasonable time, or are not provided with due care and skill
  • Misleading and deceptive conduct, or unfair contract terms

If a settlement has been negotiated with a trader with the assistance of Consumer and Business Services, and the trader has failed to comply with the terms of that settlement (assuming it has been put in writing), an application can also be made to the Magistrates Court to enforce the agreement - see S8A of the Fair Trading Act 1987 (SA). Again it is best to obtain legal advice before taking this step.

Damages and rescission

If a consumer buys goods and on delivery of the goods discovers them to be defective in some way (for example, they do not correspond with their description, are not saleable, or are not reasonably fit for their purpose), there will arguably be a breach of implied guarantee (see Implied guarantees). Consumers generally have two options. Firstly, not to accept the goods and to recover any amount paid under the contract for the supply of the goods – this is called rescinding the contract. The effect of a rescission is that the parties are restored to the position in which they were before the contract was entered into. The other option is to retain the goods but to seek damages from the supplier in respect of the defect.

The Australian Consumer Law

The remedies available to consumers under the Australian Consumer Law (Schedule 2 of the Competition and Consumer Act 2010 (Cth)) vary depending on whether the breach of guarantee is a major or non-major failure to comply.

Under the Australian Consumer Law a consumer may reject goods by notice in writing (or alternatively by returning the goods to the company together with notice) as to the breach of the guarantee. This remedy is available only in those cases where the failure to comply to a guarantee is a major failure.

Where the failure to comply with a guarantee is a non-major failure the consumer is limited to requiring the supplier to remedy the failure within a reasonable time [s 259(2)(a)].

If the supplier refuses or fails to comply with this requirement, or fails to comply within a reasonable time, the consumer may then have the failure otherwise repaired and seek all reasonable costs incurred from the supplier[s 259(2)(b)]. Alternatively they may notify the supply that they reject the goods [s 259(2)(b)].

Whilst the legislation defines a major failure it does not define a non-major failure. Determining whether a failure is major or non-major will require reference to the definition of major failure at s 260 (see below).

A major failureto comply with a guarantee occurs where:

  • the goods would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure; or
  • the goods depart in one or more significant respects from description or sample if supplied by description or sample; or
  • the goods are substantially unfit for a purpose for which goods of the same kind are commonly supplied and they cannot, easily and within a reasonable time, be remedied to make them fit for such a purpose; or
  • the goods are unfit for a disclosed purpose that was made known to the supplier or a person who made any prior negotiations before the purchase was made and the cannot, easily and within a reasonable time, be remedied to make them fit for such a purpose; or
  • the goods are not of acceptable quality because they are unsafe.

[s 260]

In the case of a major failure or where the breach of guarantee cannot be remedied, the consumer can either notify the supplier that they reject the goods or recover compensation for any reduction in the value of the goods below the price paid or payable by the consumer for the goods [s 259{3)].

The consumer may also take action against the supplier to recover damages for any loss or damage suffered because of failure to comply with the guarantee if it was reasonably foreseeable that the consumer would suffer such loss or damage as a result of the failure [s 259(4)].

The right of a consumer to reject goods does not arise in the following instances:

  • the rejection period for the goods has ended; or
  • the goods have been lost, destroyed or disposed of by the consumer; or
  • the goods were damaged after being delivered to the consumer for reasons not related to their state or condition at the time of supply; or
  • the goods have been attached to, or incorporated in, any real or personal property and they cannot be detached or isolated without damaging them.

[s 262]

There is no specified amount of time for a rejection period. The legislation describes it as being the period from the time of the supply of goods to the consumer within which it would be reasonable to expect the relevant failure to become apparent [s 262(2)].

Sale of Goods Act 1985 (SA)

Under the Sale of Goods Act 1895 (SA) the consumer will be entitled to rescind the contract up to the time that she or he is deemed to have accepted the goods [s.34(1)]. After acceptance of the goods the consumer's only remedy will be that of damages. The consumer will not be deemed to have accepted goods delivered, which she or he has not previously examined until she or he has had a reasonable opportunity of examining them for the purpose of working out whether they conform with the contract. There is no fixed maximum period allowed for the examination of the goods. What is a reasonable time will vary according to the facts of each case. A seller is obliged to allow the consumer a reasonable opportunity to examine the goods for the purpose of working out whether they are in fact what she or he meant to buy.

Under the Sale of Goods 1895 (SA) the consumer will be deemed to have accepted the goods when she or he lets the seller know that the goods have been accepted or, if after goods are delivered to the consumer she or he does anything to them which is inconsistent with the fact that the seller is the legal owner, (for example, selling the goods or sending them off for repair, or altering the goods), or if after the lapse of a reasonable time she or he retains the goods without telling the seller that she or he has rejected them. It will not be necessary for the consumer to return the goods to the seller, it is sufficient if she or he lets the seller know that she or he does not wish to accept the goods. It is then up to the seller to collect the goods.

Buying Goods or Services under a Related Sale Contract

Consumers who buy goods or services by way of a related sale contract have additional protections under Part 7 of the National Credit Code Sch 1 to the National Consumer Credit Protection Act 2009 (Cth).

A "related sale contract" is limited to situations where the credit to be provided is wholly or partially for the purpose of buying the goods or services. For example, a store may suggest a particular lender to finance the purchase of household items, or offer application forms to obtain credit to buy goods.

A normal credit card that can be used anywhere is usually not defined as a linked credit contract.

Consumers and Failed Businesses

The rights of a consumer relating to faulty goods and services under the Australian Consumer Law and under the law generally change when a business fails.

Businesses are owned either by a sole trader or partnership, or by a company. For more information about different business structures, see Business Information, Owning a business.

A claim by a consumer for faulty goods or services, or other breaches of the ACL is made against the owner of the business – it is not possible to sue just a business name. To check the owner of the business, a consumer can search ASIC's Business Names register.

If the business is run by a sole trader or partnership, and the business owner or owners are made bankrupt, a consumer with a claim cannot take legal action or keep the legal action going against the business owner or owners. However, if the sole trader or partnership merely shuts up shop and no formal steps are taken by the owners to finalise the business, a consumer still has the right to take legal action against the business owners.

If the business is run by a company, and a voluntary administrator or liquidator is appointed to the company, any legal action against the company by a consumer is automatically stayed and cannot proceed without the permission of the Court [Corporations Act 2001 (Cth) s 440D when an administrator is appointed or s 471B when a liquidator is appointed].

A consumer is considered to be an unsecured creditor and instead will need to contact the administrator or liquidator to lodge a proof of debt form.

Unsecured creditors may take some time to get paid, and if there are insufficient assets available to pay higher ranked creditors such as employees and the costs of the liquidation, there may be nothing left to pay a claim by an unsecured creditor. Liquidators may also need to take legal proceedings against third parties such as other businesses or directors, which may take some time to resolve and delay finalisation of the liquidation.

Sometimes it appears as though the company is continuing to trade yet consumers are informed that their unsecured claims (including gift cards) will not be paid.

This may be because either there is a receiver appointed (a receiver works for a secured lender) or the company is in administration and looking at other options to continue the business.

If the business is run by a company that merely shuts up shop and no formal steps are taken to finalise the company, a consumer still has the right to take action against the company for any claims. The difficulty for a consumer in this case is that it is usually costly and complex to compel the company to pay an unsatisfied judgment, and there may be no money available. For further information about enforcing a judgment debt see Debt, For Creditors, Judgment.

Other options for Consumers

Pursuing the Manufacturer

If the problem relates to faulty goods supplied by a business that is no longer operating, a consumer can take action against the manufacturer instead [Competition and Consumer Act 2010 (Cth) Schedule 2 Australian Consumer Law s 272].

Be aware that if the business supplying the goods branded under its own name and is also the importer, the business can be deemed to be the manufacturer [Competition and Consumer Act 2010 (Cth) Schedule 2 Australian Consumer Law s 272]. In that case, the consumer must deal with the liquidator.

Goods Paid for on Credit Card but Not Received

If a credit card was used to pay for goods, but the goods were not received, consumers can ask their credit provider to ‘chargeback’ the amount paid. This applies whether or not the business is still operating.

Consumers should lodge a request as soon as they are aware that there is a problem with the business – there may be a limited time in which to make a request for a chargeback. Further information about how to request a chargeback can be obtained from the credit card provider or bank.

Unfair Contract Terms

The unfair contract terms regime of the Australian Consumer Law (Competition and Consumer Act 2010 (Cth) sch 2 sections 23 - 28) apply to contracts entered into by consumers, or by small businesses who employ less than 20 people and the value of the contract is $300,000 in a single year, or $1million if the contract runs for longer.

The regime means that a court can declare that a term of a standard form contract is void if it considers the term is "unfair".

What is a standard form contract?

A standard form contract is one that has been prepared by one party to the contract (the supplier). These contracts are not subject to negotiation between the parties and the party who has not prepared the contract has no real bargaining power. They can only accept the contract as it is or not enter into it at all.

Examples of consumer transactions covered by the provisions include contracts for :

  • Telecommunications
  • Domestic building
  • Gyms
  • Motor vehicles
  • Travel
  • Utilities
  • Private education

Insurance contracts regulated under the Insurance Contracts Act 1984 (Cth) are not covered by these provisions. However, private health insurance contracts and state and Commonwealth government insurance contracts are not regulated by the Insurance Contracts Act 1984 (Cth) so they are subject to the unfair contract terms provisions.

Credit contracts (loans, credit cards) are generally covered by the National Credit Code. For more information see Problems with Credit Contracts.

Small businesses may also be presented with a standard form contract on a 'take it or leave it' basis. Some examples include:

  • Telecommunications
  • Advertising
  • Courier services
  • Supply of raw materials or parts
  • Waste management or cleaning services

When can a term be declared unfair?

A term will be declared unfair by a court if it can be established that a term in such a contract:

  • will result in a significant imbalance in the parties’ rights and obligations; AND
  • is not reasonably necessary to protect the legitimate interests of the party who would be advantaged by the term; AND
  • would cause detriment (either financial or otherwise) to a party if it were to be relied on.

All three conditions (i.e. ‘signficant imbalance’, ‘not reasonably necessary’ and ‘cause detriment’) must be met before a court will decide a term is unfair.

Examples of an unfair term include:

  • a term that permits one party (but not the other) to avoid or limit performance of the contract;
  • a term that permits one party (but not the other) to terminate the contract;
  • a term that penalises one party (but not the other) for a breach or termination of the contract.

[see Competition and Consumer Act 2010 (Cth), Schedule 2 s 25]

Only a court has the power to determine whether a contract term is unfair. That does not mean that all disputes about unfair terms must be decided by a Court, and you should always try to negotiatewith the other person or business first.

Unfair terms may exist in any type of consumer or small business contract. Be careful of on-line contracts and take the opportunity to read them carefully. If there is anything you do not understand, you should ask the supplier. Also take careful note if you are asked to sign a very long agreement. You may find that the agreement is not in transparent language, and may contain hidden terms that could be unfair. In fact, a long contract that is confusing and contains inconsistent or vague terms may be found to be unfair.

Small businesses may find some useful examples of the types of terms that are considered unfair on the ACCC website under Unfair Contract Terms FAQ.

What happens if a term is found unfair?

Although a court may find a particular term to be unfair this results only in the term itself being void (i.e. it will be treated as if it never existed). However, the contract itself will continue to be binding if it is capable of operating without the unfair term.

Terms excluded from the unfair terms provisions

The following contract terms are excluded from the unfair terms provisions [s 26]:

  • Terms that define the main subject matter of a contract – that is, the goods or services (including financial services or products) that the consumer is purchasing under the contract. It can also include a term that is necessary for the supply of goods or services to occur e.g. where a consumer agrees to buy a product online and to have it delivered by post, they cannot later challenge the delivery term as unfair, because it was necessary for the supply of the item they agreed to purchase.
  • Terms that set the upfront price payable under the contract – that is, the amount the consumer agrees to pay under the contract for the supply of the goods or services.

What to do if you think a consumer contract term is unfair

  • Get some legal help regarding whether or not the term is unfair and ask for help to write to the supplier or company, setting out why the term is unfair. If the supplier or company insists on performance of the unfair term, legal action may be an option. Remember that legal action can be expensive and time-consuming, and there is no guarantee of the outcome.
  • You can make a complaint to the ACCC or ASIC (in the case of financial services and products). However, whilst the ACCC or ASIC can seek the cooperation of businesses in removing unfair contract terms they do not have the power to state whether a contract term is unfair – this is a matter for the courts.
  • Small businesses may also get assistance from the Small Business Commissioner.

Lodging legal action

Determining the appropriate court and jurisdiction in which to lodge an unfair contract term action can be a complex matter. Legal advice should be sought if you wish to pursue an applicaton to have a contract term declared unfair.

More information for consumers and small business

More information about unfair contract terms for consumers can be found on the ACCC website under Unfair Contract Terms. For small business, visit the ACCC website Business Rights and Protections page.

    Consumer Protection  :  Last Revised: Fri Jan 7th 2011
    The content of the Law Handbook is made available as a public service for information purposes only and should not be relied upon as a substitute for legal advice. See Disclaimer for details. For free and confidential legal advice in South Australia call 1300 366 424.