Consumer Classification and Implied Guarantees under Australian Consumer Law

This document discusses the classification of consumers under Australian Consumer Law (ACL) and analyzes three transactions to determine if they fall under ACL. It also examines the implied consumer guarantees for these transactions and identifies any breaches. Furthermore, it explores the potential remedies available to consumers in case of ACL violations and evaluates the validity of an exclusion clause. Overall, it provides a comprehensive understanding of consumer rights and protections under ACL.

BUSINESS ETHICS AND LAW
AUSTRALIA CONSUMER LAW
STUDENT ID:
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Question 1
For any transaction to fall within the ambit of Australian Consumer Law (ACL), it is essential
that the buyer must be a consumer which has been outlined in s. 3(1) ACL. As per this, for a
buyer to termed a consumer, one of the following conditions must be adhered to by the
underlying transaction (Austlii, 2017).
 The product buying price which is borne by the buyer must not exceed $ 40,000
 The usage of the purchased product should be for personal purpose and must not be
used for commercial purpose.
In line with the information provided, it is evident that Sangita has entered into three
transactions which ought to be critically evaluated in the wake of the above section to
highlight whether Sangita is classified as consumer in these transactions. This step is quite
pivotal as this only would determine whether the transactions entered by Sangita would fall
within ACL or not.
Transaction A: As per the details provided in the context of this transaction, a rice cooker has
been purchased by Sangita which she would gift to her aunt named Shindu. This rice cooker
which Sangita has purchased would be used by her aunt for personal purpose such as
preparation of rice and other dishes for the family and no commercial use of the cooker is
expected. The purchase price of the rice cooker is $ 59.95 which is lower than the threshold
limit of $ 40,000. Thereby, in line with s. 3(1) ACL, it is fair to conclude that the underlying
transaction would fall under ACL since Sangita is a consumer.
Transaction B: As per the details provided in the context of this transaction, an electric drill
has been purchased by Sangita which she would gift to her uncle named Ramdas. This
electric drill which Sangita has purchased would be used by her uncle for personal purpose
such as household work and no commercial use of the drill is expected. The purchase price of
the electric drill is $ 69.95 which is lower than the threshold limit of $ 40,000. Thereby, in
line with s. 3(1) ACL, it is fair to conclude that the underlying transaction would fall under
ACL since Sangita is a consumer.
Transaction C: As per the details provided in the context of this transaction, an electric
toothbrush has been purchased by Sangita which she would gift to her cousin named Pooja.
This electric toothbrush which Sangita has purchased would be used by her cousin for

personal purpose and no commercial use of the brush is expected. The purchase price of the
electric drill is $ 49.95 which is lower than the threshold limit of $ 40,000. Thereby, in line
with s. 3(1) ACL, it is fair to conclude that the underlying transaction would fall under ACL
since Sangita is a consumer.
From the above discussion, conclusion can be drawn that in the context of the transactions
discussed, Sangita would be labelled as the consumer and hence the ACL provisions would
apply to all the purchases made by her.
Question 2
In order to protect the interest of the consumers, a host of implied consumer guarantees are
provided under ACL which are available under section 51 to 59. The relevant implied
consumer guarantees for the transactions enacted by Sangita are outlined below.
 Section 54 highlights that goods that are sold to customers should have merchantable
quality (Austlii, 2017). The various attributes which are covered under merchantable
quality have been highlighted in the Medtel Pty Ltd v. Courtney [2003] FCAFC151
case where these have been clearly outlined. Some of these include comprise defect
free nature of goods, safe usage, finish is acceptable and it should be fit for use for
the normal purpose that the underlying good is usually deployed (Gibson and Fraser,
2014).
 Section 56 places a implied guarantee on part of the manufacturers and suppliers with
regards to the description of the goods sold matching that of the related catalogues
and advertisements (Austlii, 2017). As a result, in case of deviation with regards to
product attributes such as colour or size, the consumer can either demand refund or
get the product exchanged with the desirable product. Further, in order to limit the
liability, the suppliers and manufacturers cannot take refuge citing the fact that the
consumer should have verified at the time of buying if there is perfect match between
description and the actual product (Davenport and Parker, 2014).
 Section 55 highlights that the underlying product which the seller provides should be
fit for the purpose that the client has stated that it intends to use the same for when
making the purchase (Austlii, 2017). A case which ought to be discussed is Ryan v
Great Lakes Council [1999] FCA 177 where for the above implied guarantee to be

applicable, there are certain conditions which must be satisfied and are outlined as
follows.
1) There is an express statement on the part of the consumer to the supplier, seller or
their agent in relation to the underlying use intended for the specified product.
2) In order to decide on whether to make the product purchase or not, the seller tends
to rely on the expert knowledge of the supplier to determine if the product chosen
is for the use that the consumer is intending to use the product for.
3) The underlying circumstances tend to make the consumer rely/depend on the
supplier’s knowledge for making the purchase.
In wake of the implied consumer guarantees that are outlined above as per ACl, the
transactions made by Sangita would be critically analysed to illustrate any breaches.
Transaction A: The given transaction pertains to the purchase of a rice cooker. Even thoigh
the packaging of the delivery indicated that it contains a rice cooker but when Sangita open
the box, it contained an electric fry pan. This clearly highlights that the descriptive on the
outside of the box does not match with the product contained therein. This would result in
mismatch of description and breach of implied consumer guarantee which has been provided
as per s. 56 of the ACL. Hence, the given conduct by Myer is in breach of ACL provisions.
Transaction B: The given transaction pertains to the purchase of an electric drill. Based on the
available information, it is apparent that the drill became hot and started giving a burning
smell immediately after usage. This clearly represents that the electric drill sold by Myers is
not of merchantable quality or else it would not develop a technical snag on the first use only.
As a result, this points to presence of potential manufacturing defect along with product
quality owing to which s. 54 has been breached by Myers.
Transaction C: The given transaction pertains to the purchase of an electric toothbrush meant
to be used by her cousin Pooja. One of the concerns that Sangita raised while interacting
with the assistant (online) related to the brush being supported by both main power along
with battery for usage. This was a vital concern for Sangita since Pooja is a frequent traveller
and working on battery mode was a key consideration for her as the main power may not be
readily available on the move. The sales assistant gave her assurance in regards to the electric
toothbrush being supported by battery besides main power. However, in reality, the electric
toothbrush sold could only operate on main power and did not support any batteries. Clearly,

considering Sangita’s specific requirement which has been expressly communicated to the
agent of the seller, it becomes pivotal that the product endorsed should be one which satisfies
the purpose for which the buyer intends to buy the same. Also, owing to online mode of
purchase, the situation is such that Sangita has to rely on the expert knowledge of the online
sales assistant in order to make a purchase. It is therefore evident that the conduct of the agent
of Myers leads to breach of consumer guarantee extended under s.55 of ACL.
Question 3
If there is violation of the ACL provisions, then potential remedies do arise for consumers
under the aegis of ACL. The exact remedy which is available to the aggrieved consumer
would be driven by the fact whether breach that has occurred would be classified as a major
failure or not considering the definition of the same given in s. 260 ACL (LegalVision, 2016).
In case of the breach being categorised as a major failure, then statutory right is available to
the consumer whereby demand can be made for product exchange and even refund. On the
other hand, if the breach is relatively minor, then the focus is on getting the defect repair or
faulty product replaced with a different fit product (Austlii, 2017).
The major failure would arise in the following conditions (LegalVision, 2016)
 The good would not have been bought by the consumer if he/she was aware of the
issue which they came to know after the purchase.
 There is significant deviation between the actual product and the description provided
through packaging, catalogues and advertisement.
 The usage of the product leads to a safety hazard which is attributed to a defective
product which is sold by the seller.
A potential defence that is available to the sellers , suppliers and manufacturers is that the
defect should not have been incurred when the given product is in consumer’s possession or
the damage should not be result of the consumer mishandling of the product. In such
instances, the remedies available under ACL would not apply.
Transaction A: For the given transaction, it is noticeable that the deviation between the
product description and actual product is significant since the product itself was different
from the description the package. As per s. 260, this would trigger a major failure. Therefore,

in accordance with the requisite remedies available, Sangita can either demand a replacement
whereby the company would provide a rice cooker or she could also demand a 100% refund
on the purchase and the same cannot be denied by the company.
Transaction B: In the given transaction, the electric drill sold to Sangita fails to meet the
quality requirements owing to which it lacks merchantable quality. The issues with the
electric drill are not the result of any improper use by Ramdas and are most likely to be
manufacturing defects. Since the usage of electric drill poses potential safety hazard, hence
this would fall under the category of major failure. As a remedy, Sangita can demand 100%
refund from Myers or demand a replacement in the form of a new electric drill.
Transaction C: In the given transaction, the electric toothbrush which has been sold to
Sangita functions only on main power but not on batteries. If Sangita would have been told
about the same at the time of making the purchase, it is highly likely that this purchase would
not have been made by her. By referring to s. 260, it can be concluded that the given defect
would comprise as a major failure. As a result, Sangita can either replace this with an electric
toothbrush which is supported by batteries or can demand full refund on the product.
Question 4
For analysing the validity of the exclusion clause that Myers is relying on , reference to s. 64
ought to be made. As per this, any contractual term which the seller inserts so as to reduce,
modify or waiver any liability which would be payable by the seller in relation to violation of
implied consumer guarantees provided in the ACL would not be considered as valid and
hence not legally enforceable irrespective of the circumstances (LSCSA, nd).
The exclusion clause which has been printed on the receipt provided at the Myer store is
indicated below.
The above clause clearly has been inserted by the company so that it does not have any
liability even if the consumer guarantees provided under ACL are breached. Hence, as per s.
64, the exclusion clause cannot be used as a valid defense by Myers in order to escape
liabilities. This would imply that the remedies outlined for Sangita in the previous question
would exist.

References
Austlii (2017) COMPETITION AND CONSUMER ACT 2010 - SCHEDULE 2 The Australian
Consumer Law [online] Available at
http://www7.austlii.edu.au/cgi-bin/viewdoc/au/legis/cth/consol_act/caca2010265/sch2.html
[Accessed May 13, 2019]
Davenport, S. & Parker, D. (2014) Business and Law in Australia 2nd ed. Sydney:LexisNexis
Publications pp. 231-232
Gibson, A. & Fraser, D. (2014)Business Law 8thed. Sydney: Pearson Publications, pp. 198-
199
LegalVision (2016) What Happens if I Don’t Meet the Consumer Guarantees? [online]
Available at https://legalvision.com.au/breaching-consumer-guarantees/ [Accessed May 13,
2019]
LSCSA (nd) Exclusion Clauses and the Australian Consumer Law [online] Available at
https://www.lawhandbook.sa.gov.au/ch10s02s06s01.php [Accessed May 13, 2019]