Consumer law: Goods purchased that are suffering from a major failure

by The FindLaw Team

We’re at that time of the year where people will be giving, as well as receiving gifts and while some people may be secretly dissatisfied with their gifts and will have to grin and bear it, for others, their grievances will stem from the fact that the item in question is suffering from a ‘major failure’. When an item does not deliver on a guarantee, it will be especially disappointing if the gift was intended for someone special and further exacerbated if it was also expensive. However, all is not lost, because under the Australian Consumer Law (the ACL), protections, as well as remedies are available to a consumer if the goods bought have suffered from a major failure.

A broad overview of the remedies available under the ACL

Before we explore the provisions relating to goods which have suffered from a major failure, we should quickly give a brief overview of how the ACL operates on a broad sense in relation to guarantees, along with the available remedies.

Overall, the remedies which exist under the ACL can be split into four parts, all of which relates to either suppliers or manufacturers.

The remedies available are as follows:

• remedies which relate to guarantees of suppliers of goods;
• remedies which relate to guarantees against manufacturers of goods;
• remedies which relate to guarantees against suppliers of services;
• remedies which relate to guarantees against suppliers and credit providers.

So when discussion revolves around failure that is ‘major’ for the purposes of this piece, the remedies will relate to guarantees against suppliers of goods, and the provisions can be found in Part 5-4, Sub-division A in the ACL.

What is considered as a ‘major failure’ in the ACL?

In the ACL, the right to rescind and reject any good relies on whether or not the failure is considered ‘major’. It should be noted, that there is no sliding scale of failure in regards to goods, so if the failure is not considered ‘major’, than there are no available remedies.
When determining what constitutes a major failure, we can look to s 260 of the ACL, which states that a major failure is if:

“(a) the goods would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure; or
(b) the goods depart in one or significant respects:
   (i) if they were supplied by description – from that description; or
   (ii)  if they were supplied by reference to a sample or demonstration model – from that sample or demonstration model; or
(c)  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;
(d)  the goods are unfit for a disclosed purpose that was made known to:
    (i) the supplier of the goods;
    (ii) or a person by whom any prior negotiations or arrangements in relation to the  acquisition of the goods were conducted or made;
    and they cannot, easily and within a reasonable time, be remedied to make them fit for such a purpose; or
(e) the goods are not of acceptable quality because they are unsafe."

The alternative tests that need to be satisfied under s 260 are largely unclear, and additionally, the tests will also be considered in turn.

Would a consumer purchase the good if they were aware of the problem?

One of the elements of the s 260 alternative tests relates to s 260(a), regarding matters that a reasonable consumer would take into account. Assistance can be found from the ACL Guide on Consumer Guarantees which states:

“… a reasonable consumer would not have bought the goods if they had known about the problem. For example, no reasonable consumer would buy a washing machine if they knew the motor was going to burn out after three months.”

What happens if the goods are significantly different from description, sample or demonstration model?

It’s always disappointing when goods differ significantly from the description, sample or demonstration model. In the Second Explanatory Memorandum, the example given if a good fails to comply with the s 260(b) provisions is “… if a consumer orders a red bicycle from a catalogue and the bicycle actually delivered is green.”

In assessing whether the failure is ‘major’, the nature and extent of the failure will be one of the considerations, whilst also having a regard to the description, sample or demonstration model. Additionally, further regard will be made in relation to whether a remedy can be provided within a reasonable period of time, and the seriousness of the failure when assessed with the whole of the contract.

Goods which are substantially unfit for normal purposes

Under s 260(c), states that if a remedy cannot be provided within a reasonable time period, and the failure of the guarantee is major, the goods may be seen to be substantially unfit for their normal purpose.

When deciding whether the failure is major, again, regard is to be made as to the nature and extent of the failure, as well as the compliance with the fitness for purpose, whether a remedy can be provided within a reasonable time, and the seriousness of the failure when assessed with the whole of the contract.

Goods which are substantially unfit for a special purpose

Similar to the s 260(b) and (c), s 260 (d)  provides that goods which are substantially unfit for a special purpose, will have the same elements in whether a remedy can be provided within a reasonable time, as well as the nature and extent of the failure and the whole of the contract.

The Second Explanatory Memorandum provides an example of goods which are substantially unfit for a special purpose and relates to a consumer who “tells a retailer that he or she wants a computer to connect to the internet and it does not have that function and cannot be modified to provide that function.”

Needless to say, a computer not having the ability to connect to the internet would be a major failure nowadays, and any other examples of a similar ilk, will also be considered as a major failure.

Goods which are unsafe

Goods which are unsafe will obviously be considered as a major failure under the ACL, and when assessing the definition of ‘acceptable quality’ – which forms part of s 260(e), can be found in s 54(2) with the section defining ‘acceptable quality’ as:

• fit for all the purposes for which goods of that kind are commonly supplied;
• acceptable in appearance and in finish;
• free from defects;
• safe;
• durable.

Probing deeper into s 260(e), for a good to be considered ‘safe’ is measured against what a reasonable consumer would regard as acceptable and will be assessed in an objective, rather than subjective manner. Also, there is no absolute requirement that a good is free from risk.

What are the remedies available if goods are suffering from a major failure?

Actions which are available to a consumer against a supplier of a good in which the failure is major, a person under s 259(3) of the ACL can: reject the goods or they can keep the goods, but request compensation to cover any differences in value caused by the failure.



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