What Remedies are Available for Defective Goods?

The remedies available under the ACL legislation are much more generous than under the law of contract.

A person complaining of misleading conduct may:

• Seek compensation for damages under Section 236;
• Seek an injunction (this usually happens to stop misleading advertisements) under Sections 232-235; or
• Seek various other remedies such as rescission (striking out) of a contract in whole or in part, modification of a contract and ‘such order or orders as (the court thinks appropriate’) under Sections 237and 243;
• Other remedies include infringement notices, substantiation notices, public warning notices, disqualification notices and non-party consumer redress.

It is not possible to claim damages in respect of misleading or deceptive conduct if the misled person suffered personal injuries or death (ss137C, 137D and 137E, CCA).

This measure was introduced in the wake of the so-called insurance crisis after the collapse of HIH.

There is no such limitation under the Australian Consumer Law 2010 (Tas).

You should get legal advice before taking legal action seeking a remedy under the ACL.

Remedies against the retailer

On 1 January 2011 the federal government brought in major changes to the remedies available when goods, or services do not meet consumer guarantees.

These are contained in Sections 259-277 of the ACL.

In respect of defective goods, the consumer may:

• Reject the goods for a major failure and obtain a refund;
• Ask for repair of the goods;
• Ask for replacement of the goods and;
• Sue for damages.

In respect of defective services the consumer may:

• Ask for defective services to be remedied;
• Terminate the services contract if response is unsatisfactory;
• Claim damages.

An important concept is that of ‘major failure’ in respect of goods and services (Section 260 (goods) and Section 268 (services)). A major failure is where:

• Goods or services would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure; or;
• Goods depart in one or more significant respects:
  (i) If they were supplied by description—from the description; or
  (ii) If they were supplied by reference to a sample or demonstration model—from that sample or demonstration model; or
• Goods or services 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; or
• Goods or services are unfit for a disclosed purpose that was made known to:
  (i) The supplier of the goods; or
  (ii) A person by whom any prior negotiations or arrangements in relation to the acquisition of the goods was conducted or made;
  and they cannot, easily and within a reasonable time, be remedied to make them fit for such a purpose; or
• In the case of services:
  (i) The services, and any product resulting from the services, are not of such a nature, or quality, state or condition, that they might reasonably be expected to achieve a result desired by the consumer that was made known to the supplier; and
  (ii) The services, and any of those products, cannot, easily and within a reasonable time, be remedied to achieve such a result; or
• The goods or services are not of acceptable quality because they are unsafe.

Goods – rights to repair, replace, or reject and refund and damages

In some cases the defect customers find with goods will not be a major failure (see above) and will not require replacement, but repair.

If this is the case the purchaser can require the retailer to repair the issue in accordance with Section 259(2).

There is an important exception which can mean the retailer does not have to repair the goods.

That is where the issue arose as a result of an event which was not under their control.

Interestingly under Section 266 if a person receives a defective good as a gift they are able to seek all the same remedies as the person who bought the item.

Obviously, in a case like this there would still be a requirement to prove to a retailer that they sold the item in question.

Section 259(2)(a) states the repair must be undertaken within a reasonable time.

Exactly what that means will depend on the facts of each individual case, however, if goods can not be repaired in a reasonable time a purchaser can simply claim a refund instead.

Another option is claiming damages for the difference between the price paid and the value of the goods – once the defect is taken into account, in accordance with Section 259(3).

This is done through the courts.

You should always get legal advice before commencing any legal action.

It is also possible for a consumer to sue a retailer for damages for any losses which happened as a result a malfunction in defective goods.

For example, if a defective toaster caused a fire a consumer could take action under Section 259(4).

However, Section 64A lets businesses limit their liability to the cost of replacement or repair in respect of goods purchased for business and not domestic purposes.

The consumer may take action under against the retailer whether or not the goods are in their original packaging under Section 259(7).

Whenever goods are replaced, the same consumer guarantees apply to the replacement goods under Section 264.

Rejection of goods

The consumer may reject the goods if they have a major failure, they cannot be repaired or the retailer has not responded by offering repair or replacement.

To do so, the consumer must return the goods explaining why they are being rejected in accordance with Section 259(3)(a) and Section 263(2).

If the goods are not able to be transported the consumer must notify the retailer to come and collect them – this is set out in Section 263(2)(b).

The retailer must then refund the price of the goods or replace them.

The retailer cannot require the consumer to buy other goods in lieu of a refund.

Defective goods cannot be rejected, in accordance with Section 262 if:
(a) the rejection period (see below) for the goods has ended; or
(b) the goods have been lost, destroyed or disposed of by the consumer; or
(c) the goods were damaged after being delivered to the consumer for reasons not related to their state or condition at the time of supply; or
(d) the goods have been attached to, or incorporated in, any real or personal property and they cannot be detached or isolated without damaging them.

The rejection period is the period within which it would be reasonable to discover the defect having regard to:
(a) the type of goods; and
(b) the use to which a consumer is likely to put them; and
(c) the length of time for which it is reasonable for them to be used; and
(d) the amount of use to which it is reasonable for them to be put before such a defect becomes apparent.

If goods are rejected and a refund is paid, then any service contract that goes with the goods can be terminated under Section 265.

The customer should notify the service provider if that party is a separate entity from the retailer.

The customer is then entitled to a refund representing the remainder of the unused services.