Australian Commercial Law: Negligence Tort and Consumer Guarantees

AUSTRALIAN COMMERCIAL LAW
STUDENT ID:
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Question 1
PART A
Issue
The key issue in the scenario presented is to offer advice to client Ann with regards to
negligence tort against the defective salami manufacturer considering the two useful sections
of the Australian Consumer Law. (ACL) i.e. s. 54 and s. 138.
Law
For safeguarding the consumer interests, ACL has been implemented. The provisions of ACL
are applicable to all those purchases where the buyer is the consumer as highlighted in s. 3 of
ACL. For qualification as a consumer, it is essential that either the cost of purchased good or
service should not cross $ 40,000 or if it does, the purchase should have been made for
private use of the consumer and must not be used for commercial activity. If the transaction
terms the buyer as consumer as per s. 3, then a plethora of implied consumer guarantees are
available to the consumer which are provided by law (Austlii, 2017).
Section 54 highlights one of the consumer guarantees that is implied and hence does not need
to be explicitly provided by the seller. In accordance with this section, the underlying good or
service must be of acceptable quality standard. In order to prove that the product met the
acceptable standards, the proof burden lies on the supplier and manufacturer of good. There
are certain key attributes which form the acceptable quality and are highlighted in s.54(2)
ACL. It is essential that the good provided should have the below listed qualities as per the
assessment of the buyer who is reasonably familiar with ascertaining the product quality and
recognising the key defects (Latimer, 2016).
 The good must be suitable for the purpose for which it is normally applied for.
 The appearance and finish of the product must be acceptable.
 The product must be free from defects i.e. without any defect.
 There should be no safety concerns involve in sale or usage of product.
 The product has to be durable.
The acceptable quality attributes listed above have indicated in various consumer law cases
such as Medtel Pty Ltd v. Courtney [2003] FCAFC151.

However, as per s. 54-4 ACL, categorisation of defective goods can also be done under
acceptable quality goods if the defect was present at the time of purchase and the same was
notified to the client at the time of sale. Also, in situations where it is possible to identify the
defective goods merely by observation and consumer has examined the good before
purchasing the same, then application of s. 54-4 is permissible. Also, it is imperative to note
that any s. 24 consumer guarantee will not be applicable if consumer behaves in a manner
which leads to product being labelled with unacceptable quality (Davenport and Parker,
2014).
In relation to goods that are defective, consumer can take action in accordance with s. 138
ACL. As per the given section, manufacturer has the liability of providing consumer the
compensation provided the satisfaction of the following conditions takes place (Gibson and
Fraser, 2014).
Condition 1: The goods supplied by manufacturer should be with regards to trade or
commerce and hence represents commercial operations.
Condition 2: The good that the manufacturer provides has safety defect.
Condition 3: On account of safety defect, injuries would be incurred by the buyer or
consumer.
The establishment of causal relationship between the safety defect being present and the
sustaining of the injury by the consumer is a vital element. The plaintiff would have the
responsibility to prove the fulfilment of the various conditions (Pendleton and Vickery,
2015).
Application
Considering the given scenario and related facts, there is a manufacturer of salami named
Smallgoods Pty Ltd. At the time of salami manufacture, it is essential for bacteria related
treatment to be provided. The manufacturer has conducted in a negligent manner with regards
to manufacturing of a salami batch owing to which no bacteria treatment has been provided.
Thus faulty salami has been made to Supermarkets Pty Ltd and the consumer Ann has bought
the salami for her own consumption.
There is no doubt with regards to classification of Ann as consumer in the scenario provided
considering the purchase of salami is for her own consumption and does not involve sale to