Section 3 of the ACL currently provides that an acquirer of goods or services will be deemed a “consumer” for the purposes of the ACL if they acquire:

• goods or services for an amount equal to or less than $40,000;
• goods or services of a kind ordinarily acquired for personal, domestic or household use or consumption; or
• a commercial road vehicle or trailer used mainly to transport goods on public roads.

The definition does not apply in circumstances where goods are acquired for the purpose of resupply or use in manufacture.

The Regulations will increase the monetary threshold from $40,000 to $100,000 for goods or services acquired on or after 1 July 2021.  This significant reform has been introduced to combat the diminishment of consumer protections under the ACL resulting from inflation, in line with recommendations from the Consumer Affairs Australia and New Zealand (CAANZ).  The remaining limbs of the definition will not change.

This change will also apply to the Australian Securities and Investments Commission Regulations 2001 which contains similar provisions for financial products and services.

The ACL requires businesses to provide various guarantees in respect of goods and services supplied to “consumers” (Consumer Goods or Services), regardless of any other warranties or provisions set out in their supply contract and/or terms and conditions.  The consumer guarantees are set out in Part 3-2 of the ACL and relevantly include:

• in respect of goods, a guarantee that:
  • the goods are of acceptable quality;
  • the goods are fit for purpose;
  • the goods match their description;
  • the buyer will have undisturbed possession of the goods; and
  • there are no undisclosed securities on the goods; and

• in respect of services, a guarantee that the services will be:
  • provided with acceptable care and skill;
  • fit for purpose; and
  • provided within a reasonable time,

(together, the Consumer Guarantees).

A contract for the supply of Consumer Goods or Services must not exclude, restrict or modify the Consumer Guarantees.  Any term that attempts to exclude, restrict or modify the Consumer Guarantees will be void under the ACL.  In other words, the contract will remain ‘on foot’, however, the relevant term will be unenforceable.

Importantly, a term of a contract for supply of Consumer Goods or Services (other than goods acquired ordinarily acquired for personal, domestic or household use or consumption) will not be void if it limits the seller’s liability for a failure to comply with the Consumer Guarantees to a refund, repair, replacement or compensation for the cost of repairing the goods or resupplying the services.

The Competition and Consumer Regulations 2010 (Cth) also requires suppliers of certain Consumer Goods or Services to include mandatory text with any “warranty against defects”.  A warranty against defects is a representation that the business will repair or replace goods, resupply services or provide compensation if such goods or services are defective.  For example, a statement that the goods or services have a “2 year warranty” or “12 month replacement guarantee”.

A warranty against defects must be accompanied by certain information, including the supplier’s contact details, the period within which a defect must appear if the consumer is to be entitled to claim under the warranty and the procedure for the consumer to make the claim. As a consequence of the broadening of the definition of “consumer”, the warranty against defects provisions will apply to a wider class of transactions.

The Australian Competition and Consumer Commission (ACCC) may impose significant civil penalties on businesses that fail to comply with the above requirements.  The maximum penalties for non-compliance are $50,000 for a corporation or $10,000 for an individual.  Alternatively, the ACCC may issue an infringement notice with a penalty of $10,800 for a corporation or $2,160 for an individual.

It is important for businesses to understand the extent to which the ACL affects their supply transactions and to ensure that they use terms and conditions of supply which are consistent with the ACL, provide appropriate legal protection in the commercial context and are otherwise clear and up to date.

The upcoming changes to the law provide a timely opportunity for businesses to review and refresh the terms on which they currently supply goods or services.  For some businesses this may mean updating existing terms and conditions or supply contracts, while for others it may involve introducing those terms and conditions or contracts for the first time.  If you have any concerns about your terms of supply or the application of the ACL, we recommend you seek legal advice.

This article was co-written by Lawyer, Laura Bain.