Legislation Affecting Enforceability of Contracts

Last updated 9 January 2019

There is a variety of specific and general legislation that aims to protect consumers entering contracts. Legislation that applies to the whole of the marketplace include:

Competition and Consumer Act 2010 (Cth) (Competition and Consumer Act)
Fair Trading Act 1989 (Qld) (Fair Trading Act).

The Competition and Consumer Act imposes basic minimum legislative standards that apply to consumers purchasing goods and services. The minimum standards seek to redress the imbalance between consumers (who are at a disadvantage when bargaining) and more powerful traders. The provisions protecting consumers, the Australian Consumer Law (ACL), are contained in sch 2 of the Competition and Consumer Act.

The Fair Trading Act adopts the provisions of the ACL so that transactions between businesses (not regulated by the Competition and Consumer Act) and consumers are covered.

In addition, there are some special legislative requirements for more expensive or complex products and services, for instance the requirement that contracts to buy land, cars and insurance are to be in writing.

Who does the Australian Consumer Law apply to?

The ACL applies to contracts for goods and services between a seller and a consumer in the course of trade or commerce purchased after 1 January 2011. It does not apply to private sales.

Any person is a consumer as long as the price of the goods and services does not exceed $40 000 or, where the price exceeds that amount, the goods are for personal, domestic or household use or consumption, or the goods are a road vehicle or trailer.

Additionally, the consumer must not buy the goods for the purpose of selling them to someone else, using them to manufacture other goods or using the goods to repair other goods or fixtures on land.

Guarantees

Statutory guarantees (warranties) are provided for in the ACL.

The ACL requires suppliers to guarantee when selling goods and services that:

they own the goods so that the buyer can recover their money from the seller if the goods sold did not belong to the seller
the goods are not mortgaged to someone else unless the goods are sold subject to that mortgage
the goods match the description they are sold by (e.g. if a car is advertised as a 2008 Nissan Pulsar, but the vehicle bought is in fact a 2004 Nissan Pulsar, the goods do not match the description)
the goods sold are of acceptable quality, for example:
- do all the things someone would normally expect them to do and for any disclosed purpose
- look acceptable
- are free from defects
- deemed to be safe and durable
the goods for purchase are comparable in quality to the sample
the manufacturer of the goods will have spare parts and repair facilities available for a reasonable period of time
meet any extra promises such as lifetime guarantees and money-back offers
the services will be rendered with due care and skill
any materials supplied in connection with those services and the services themselves will be reasonably fit for the purpose for which they are supplied
the services are supplied within a reasonable time unless the contract fixes the time.

When a supplier breaches a guarantee

Sellers are responsible for fixing goods under statutory guarantees including transportation costs, but consumers need to return goods to the place of purchase. Most sellers state that they will repair any faults within one year of purchase. The ACL has not placed a specific time limit on making warranty claims, as some products would be expected to last more than one year. Accordingly, purchasing extended warranties (guarantees) may provide no greater protection than what the ACL provides.

A person cannot make a guarantee claim after six years have elapsed from the date of purchase.

If goods are faulty and require repair, consumers should:

locate proof of purchase
telephone the seller and return goods as directed
write a letter stating the fault and requesting prompt repair and keep a copy of the letter
obtain confirmation of when the repair work will be finished and confirm this promised time in writing
keep notes of any conversations (date, time, place, who and what was promised)
test goods when collecting after repair.

A guarantee applies to all repair work that must be carried out with due skill and diligence. If repair work is unsatisfactory, the seller must be given first right to fix the problem before the buyer goes elsewhere. It is possible to make a claim for repairs by a third party (not the seller) if the seller has been given a reasonable time to repair goods and has failed to do so. It is prudent to let the seller know in writing that you intend to take the goods elsewhere for repair, detailing how the seller has failed to make repairs in a satisfactory manner.

If a serious fault develops, consumers should ask to cancel the contract and obtain a refund on the basis of a total failure of consideration and obtain damages. Any linked contract to supply services is also cancelled (e.g. if you purchased an alarm system and also signed a contract for the supply of monitoring services, the contract for the supply of monitoring services would also be cancelled).

If a guarantee for the supply of services is seriously breached, the consumer can terminate the contract and any linked goods contract.

Consumers should seek legal advice if they believe that a supplier has seriously breached a guarantee prior to terminating a contract.

A term of the contract is unfair

The ACL also protects consumers where a term of the contract is unfair. For more information on unfair terms see Unfair Contract Terms: A guide for businesses and legal practitioners.

A term is void if the term is unfair and is contained in a standard form contract (most contracts to buy a car from a motor dealer are standard form contracts, but a contract to buy a car from your neighbour would not be). A term is unfair if it causes a substantial imbalance in the parties’ rights and obligations arising under the contract, if it is not reasonably necessary to protect the legitimate interests of the party relying on it and if it would cause harm to a party if it were applied or relied on.

Terms that define the subject matter of the contract, set the price and are expressly permitted by law are excluded from the provisions and will not be void.