Law 11 Report: Consumer Guarantees, Liability and Compensation

This report provides an overview of consumer guarantees and manufacturer liability under Australian Consumer Law (ACL). It defines various consumer guarantees, including those related to acceptable quality, fitness for purpose, and express warranties. The report examines manufacturer's liability under negligence, contract law, and statutory guarantees, highlighting the importance of duty of care and adherence to ACL provisions. It discusses compensation for breaches of statutory guarantees, considering factors like the nature of the goods, services, and the losses incurred by consumers. The report analyzes key case laws such as Donoghue v Stevenson and Norman Enterprises Pty Ltd t/as Leimo Australia v Deng, to illustrate the application of ACL principles. Ultimately, the report emphasizes the rights of consumers and the responsibilities of manufacturers in ensuring fair dealings and product quality.

Running Head: Law 1
Law

Law 2
Executive Summary:
This report state provision of ACL related to the consumer guarantee and after reading this report
various consumer guarantees and liability in this context becomes clear. This report defines
various consumer guarantees.

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Contents
Executive Summary:....................................................................................................................................2
Introduction:...............................................................................................................................................4
Manufacturer’s liability:..............................................................................................................................5
Negligence:..............................................................................................................................................5
Contract:..................................................................................................................................................5
Statutory Guarantee:...................................................................................................................................6
Consumer guarantee in Australia:...............................................................................................................7
Compensation for breach of statutory guarantees under ACL:...................................................................9
Manufacturer’s liability:..........................................................................................................................9
Amount of compensation:.......................................................................................................................9
Compensation in case of express warranty:..........................................................................................10
Conclusion:................................................................................................................................................10
References:................................................................................................................................................11

Law 4
Introduction:

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In Australian, liability related to the product is recognized by both common law and legislation.
Any person who suffer damage, injury or loss then such person has right to initiate legal
proceedings on following grounds:
 Under tort of negligence if duty of care breached.
 Under Australian consumer law, if any provision of ACL breached.
In this report, terms related to product liability is discussed in the form of 3 questions which are
answered below. Subsequently report is concluded with brief conclusion.
Manufacturer’s liability:
Negligence:
Usually, manufacturer of the product owns duty of care towards the ultimate consumer of the
product for the purpose of protecting the consumer against any risk or injury which is
foreseeable in nature. It is not allowed to retailers and importers to test the reliability of the
product if it is supplied by the manufacturer in the container which is sealed pack. These sealed
pack containers are directly opened by the ultimate consumers. However, it must be noted that if
product cause damage or injury to the person then retailer also under obligation to safeguard the
person from such risk and injury which is foreseeable in nature. If any party make in the supply
chain make any modification in the product then such party is also liable towards the consumer
in lieu of those changes.
Contract:
It must be noted there is no restriction on parties to enter into contract on the terms which are
agreed between the parties, but there are some implied terms also which are imposed by

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Common law and statute. It must be noted only parties to the contract has right to seek remedies
under the contract. In number of cases contracting parties are retailer and consumer, therefore
retailer is liable towards the consumer if any implied condition or warranty is breached.
However, retailer also enter into contract with manufacturer which means retailer has right to
seek remedy from manufacturer. ACL introduced various statutory guarantees which can be
considered as implied conditions and warranties under the contract. These guarantees exist in
every contract which is entered between the consumer and retailer (Clayton UTZ, 2015).
Statutory Guarantee:
Following are some statutory guarantees introduced by the ACL under chapter 2 and 3, and
under these guarantees manufacturer are directly liable towards the consumer:
 If goods are of unacceptable quality.
 Goods are not fit for the stated purpose.
 Goods do not match with their description.
 Manufacturer does not compile with existing warranties (ACCC, n.d.).
This can be understood through case law Donoghue v Stevenson [1932] A.C. 562, [1932] UKHL
100. In this case, Mrs. Donoghue claims against the manufacturer off ginger beer under tort of
negligence for breaching their duty of care. In this Court stated that manufacturer is liable
towards the ultimate consumer because it is the consumer who ultimately consumes the product.
In the present case, manufacturer of the product is liable towards Mr. George for failing to meet
the statutory guarantees stated under ACL. Manufacturer fails to provide the product which

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meets the description and also product supplied by manufacturer fails to fit for stated purpose.
Therefore, in this case manufacturer is liable towards the George.
Consumer guarantee in Australia:
Chapter 2 and 3 of ACL sates the guarantee provided to consumer by common law and statute. If
any person buy product under ACL then such person automatically get the protection under
consumer statutory guarantee. Following are some statutory guarantees provided by ACL:
 Section 59 of Competition and Consumer Act 2010 states that manufacturer and supplier
of product and services are under obligation to meet any express warranty stated by
manufacturer at the time of formation of contract. In other words, if manufacturer at the
time of formation of contract made any promise related to the quality, standard,
condition, and performance of contract then it is necessary that manufacturer fulfill such
promises. These promises are considered as express warranty of the contract. This can be
understood through case law Norman Enterprises Pty Ltd t/as Leimo Australia v Deng
[2013] QCATA 047. In this case, Tribunal stated that money back guarantee provided by
seller is considered as express warranty (Competition and Consumer Act 2010).
 Section 60 of the ACL states that it is the duty of manufacturer and supplier to perform
their functions and render their services with due care skill. In other words,
manufacturers are obliged to ensure reasonable care and skill while manufacturing any
product and perform the services (Competition and Consumer Act 2010).
 Section 61 of competition and Consumer Act 2010 states that it is the duty of
manufacturer and supplier to ensure that goods delivered by them and services rendered
by them fit for the purpose stated. In other words, if consumer stated any particular

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purpose at the time of formation of contract then manufacturer and supplier is under
obligation to ensure that goods must meet that particular purpose or desired result of the
consumer (Competition and Consumer Act 2010).
This can be understood through case law Campbell v Lane (No 2), [2013] QCATA 307.
In this case Court stated that horse was so lame that it was not fit for disclosed purpose.
If any manufacturer and supplier breach above stated liability, then following rights are available
to consumer:
 Consumer can terminate the contract on the ground of breach of statutory guarantee.
 Consumer can ask for refund for any services not consumed by consumer.
 Consumer can claim for compensation for the difference occurred in desired result and
actual result.
In the present case, Newman and manufacturer breach number of statutory guarantee available to
George under ACL.
Newman breach guarantee under section 59, 60, and 61 as he fails to meet the express warranties
at the time of formation of contract. He further fails to perform his duties with due care and skill.
Therefore, Newman is liable towards George under ACL.
George has right to seek compensation under ACL or terminate the contract.
However, Newman also failed to provide goods which fit for disclosed purpose. Therefore, both
manufacturer and Newman are liable under section 61 of ACL. George can also seek for
compensation under this section also.

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Compensation for breach of statutory guarantees under ACL:
Manufacturer’s liability:
As stated above, consumer has right to recover damages from manufacturer for breaching the
consumer guarantees stated under Australian Consumer law. However, manufacturer is liable in
following circumstances towards the consumer:
 If goods does not fit for stated purpose.
 Breach of express warranty.
 Goods or services fail to match description.
 Repair and spare parts.
Therefore, it is necessary for manufacturer to honor the rights of the consumer under consumer
guarantee.
If any manufacturer and supplier breach above stated liability, then following rights are available
to consumer:
 Consumer can terminate the contract on the ground of breach of statutory guarantee.
 Consumer can ask for refund for any services not consumed by consumer.
 Consumer can claim for compensation for the difference occurred in desired result and
actual result.
Amount of compensation:
Manufacturer is liable to pay compensation, and amount of compensation is determined through
analyzing the amount of goods and services and loss or injury suffered by consumer. Amount of
compensation must be equal to the value of product or less than the difference between current
value of product and it can be the lowest of either:

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 Retail price of the goods at the time of purchase.
 Actual price paid by consumer.
Compensation in case of express warranty:
If manufacturer does not meet with the express warranty and fail to meet the express warranty
within reasonable time period then consumer has right to take legal action against the
manufacturer for the purpose of enforcing the warranty in Court or Tribunal. Consumer also has
right to enforce their rights under consumer guarantee and claim for compensation for
consequential loss because of manufacturer’s failure to meet the warranty.
In the present case, George can ask for money refund that is $550 under the express guarantee
because consumer has right to enforce their rights under consumer guarantee and George can
also claim for compensation because manufacturer fail to meet its liability (Consumer affairs
Victoria, n.d.).
Conclusion:
After considering above facts, it is clear that ACL protect the rights of consumer and ensures fair
dealings in Australia. In this report various statutory guarantees are stated such as guarantee
related to acceptable quality, express warranty, etc. Lastly, it is concluded that ACL provides
various rights to the consumer.

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References:
ACCC. Consumer guarantees. Retrieved on 23rd September 2017 from:
https://www.accc.gov.au/consumers/consumer-rights-guarantees/consumer-guarantees.
ACL. Consumer Guarantees. Retrieved on 23rd September 2017 from: http://consumerlaw-
staging.tspace.gov.au/files/2016/05/0553FT_ACL-guides_Guarantees_web.pdf.
Campbell v Lane (No 2), [2013] QCATA 307.
Clayton UTZ, (2015). Product Liability 2015. Retrieved on 23rd September 2017 from:
https://www.claytonutz.com/articledocuments/178/ICLG-Product-Liability-Australia-
2015.pdf.aspx?Embed=Y.
Competition and Consumer Act 2010- Schedule 2- Section 59.
Competition and Consumer Act 2010- Schedule 2- Section 60.
Competition and Consumer Act 2010- Schedule 2- Section 61.
Consumer Affairs Victoria. Damages and compensation. Retrieved on 23rd September 2017
from: https://www.consumer.vic.gov.au/products-and-services/refunds-repairs-and-
returns/damages-and-compensation.

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Donoghue v Stevenson [1932] A.C. 562, [1932] UKHL 100.
Norman Enterprises Pty Ltd t/as Leimo Australia v Deng [2013] QCATA 047.