The definition of a business consumer under the Australian Consumer Law just keeps expanding. In late 2016, small businesses became business consumers under the ACL so they could get ACL unfair contract terms relief when signing standard form contracts – see here.
Now, from 1 July 2021, the consumer guarantee provisions will be extended yet again to businesses acquiring goods and services valued up to $100,000.
$40,000 Threshold to 30 June 2021
Currently, and up to 30 June 2021, a business is considered a ‘consumer’ under the ACL if they purchase goods or services that:
- are ordinarily acquired for domestic, household or personal use or consumption; or
- cost up to $40,000 (regardless of the type or purpose of the goods or services), but not if the business resupplies the goods – that is if you on-sell goods or “use them up” in the course of production, manufacturing, or repairs of other goods.
Your business customers will be a “Consumer” under the ACL if the goods or services cost up to $40,000 and the customer does not resupply them.
$100,000 Threshold from 1 July 2021
The new threshold will be $100,000: (new regulation 100 in Competition and Consumer Regulation) so that from 1 July 2021, a business will be consumer for goods costing up to $100,000, no matter the purpose, unless the business acquires them for resupply or to make a profit.
For example, from 1 July 2021, a business that purchases business equipment for $99,000 for its manufacturing facility will be a ‘consumer’ and as a business ‘consumer’ will be able to call on the consumer guarantees and rights under the ACL (such as refunds, warranties and liability for damages) if the goods or services are faulty, defective or do not perform as promised or in accordance with the consumer guarantees (regardless of any other contractual warranty terms).
No Contracting Out
These statutory business consumer guarantees cannot be contractually excluded in your business contracts. Limitation of liability clauses will be void if they contradict the guarantee. If you do not comply with the guarantee you can receive infringement notices and court orders for compensation and penalties.
Goods – Business Consumer Guarantee
The implied statutory consumer guarantee for goods is that the goods will:
- be of acceptable quality (eg. safe, not defective or faulty);
- be fit for the disclosed purpose;
- match any description or samples provided;
- meet promises of performance or quality; or
- have spare parts and facilities for repairs available for a reasonable time.
Services – Business Consumer Guarantee
The implied statutory consumer guarantee for services is that the services will:
- be provided with acceptable care and skill or technical knowledge and taking all necessary steps to avoid loss and damage;
- be fit for the purpose that you and the business agreed;
- be delivered within a reasonable time (when there is no contractual time frame).
Consumer Guarantee Exclusions
Consumer guarantees do not apply if you:
- Resupply – if you on-sell goods or ‘use them up’ in the course of production, manufacturing, or repairs of other goods;
- Non-defect returns – if you changed your mind, found cheaper supplies elsewhere, or did not like the purchase;
- Misuse – if you misused a product and thus caused the problem;
- Knew – if you knew or were told about the faults before purchase;
- Ignored advice – if you asked for a service to be done against the supplier’s advice or were unclear about the desired goods or services.
Remedies for Breach
The remedies for defects:
- For major defects – is replacement, refund or compensation; or
- For minor defects – is repair or replacement.
You cannot falsely represent ACL rights or remedies and you can suffer penalties of up to $10 million, three times the gain from the conduct or 10% of annual turnover.
Action Items for Businesses
- Update your warranty statements to comply with the mandated ACL warranty statements;
- Train your staff on what they can and can’t say and do under the new regime, including dealing with customer complaints and claims; and
- Instruct Clark McNamara Lawyers to review your contracts, marketing material and websites before 1 July 2021.
Contact Peter McNamara today on (02) 9299 2223.