- Do you understand consumer law and provide training to your staff about it?
- Do you know the difference between guarantees and warranties?
- Has a customer asked you for a refund because they changed their mind?
What you can and can’t do checklist
These are some of the key rights and responsibilities you should understand as a small business.
Business rights under the law
- You are protected from unfair contract terms in a small business standard form contract.
- You can collectively bargain with other small businesses against a larger business, if you notify the ÌÇÐÄÔ´´ first.
- You are free to set your prices and discount your products and services as you see fit. Suppliers can’t force you to charge their recommended retail price.
- You can choose not to accept cash for payments. You should be clear and upfront about the type of payments you accept.
- You don’t have to provide a refund if a consumer has simply changed their mind or found a better price elsewhere. Your business can display a sign that says, ‘No refunds for change of mind’.
- There are circumstances where it may be illegal for another business to refuse to supply you.
- You can choose to offer a warranty for your products.
- If you provide a remedy to a consumer for a problem caused by a manufacturer, you are entitled to a reimbursement from the manufacturer of your costs.
Responsibilities to consumers under the law
- You must honour the automatic guarantees that apply to consumers when they buy products or services. You may also be protected by these guarantees when buying goods or services as a consumer.
- You must identify and and product-related services from the market.
- The advertising, pricing and claims made by your business must be clear, accurate and truthful. You can’t mislead people, and other businesses can’t mislead you.
- You must provide a receipt for transactions over $75 and for any transaction when requested by a consumer.
Against the law
- You can’t take away consumers' rights by displaying a sign or saying ‘no refunds’, ‘no refunds on sale items’ or ‘exchange or credit note only for the return of sale items’.
- You can’t say your business isn’t responsible for problems with a product or service. You are responsible.
- You can’t suggest a consumer must sign an extended warranty to avoid losing their basic rights after a certain date.
- You must not engage in unconscionable conduct and other businesses must not engage in unconscionable conduct in their dealings with you.
- You must not collude with your competitors. This means that you must not enter or attempt to enter contracts, arrangements or understandings with competitors about things such as prices, products or services that will be supplied, where they will be sold or who they’ll be sold to.
Reduce your risk of breaking the law
- Make sure you understand the law and provide training to your staff about the laws.
- Have steps in place to deal with customer issues effectively.
- Make sure any claims you make about your products or services are true and that you can substantiate them.
- Make sure any products or services you offer comply with all relevant Australian safety standards.
- Make sure your price displays are clear, accurate and follow the law.
- Do not enter any contracts, arrangements or understandings with your competitors unless you have obtained independent legal advice about it first.
You must meet a set of basic rights and guarantees
Your small business must meet a set of basic rights called consumer guarantees when selling products or services. These rights are protected under consumer law.
Consumers have the right to expect certain standards
When consumers buy a product or service, they have the right to expect they will get what they paid for, and it does what it’s meant to do. Your small business also has these rights when buying products as a consumer.
Products and consumer guarantees
Products must be of acceptable quality, safe, fit for purpose, and match their description, sample or demonstration model. They should come with full title, ownership and undisturbed possession, and without any hidden debts or extra charges.
Any extra promises your business makes about the quality, condition, performance or characteristics of a product must be met. These are legally known as express warranties.
Manufacturers or importers are responsible for providing spare parts and repair facilities for a reasonable time after purchase, unless told differently at the time of purchase.
Example of acceptable quality guarantee
An expensive new car is unlikely to be acceptable if it has defects on the bodywork, even though it otherwise runs well. However, a car described as a 'second hand car with a defective clutch' may still be acceptable because of this description and the price paid.
Example of fit for purpose guarantee
A domestic-size lawn mower won't be regarded as unfit for the purpose of mowing acres of long grass on a farm unless the consumer asked for a mower suitable for that purpose, and the supplier recommended that mower.
Example of matches description guarantee
A seller's website describes a product as having certain features and the consumer relies on the website when buying the product. The seller will fail to comply with this guarantee if the product doesn't have those features.
Example of undisturbed possession guarantee
A car dealer will be liable to a consumer if it sells a car that is owned by a third party, even if the dealer didn't know this.
Example of extra promises guarantee
A consumer buys a kitchen knife. The seller promises that it will stay sharp for 10 years. After 5 years, the knife is no longer sharp. The consumer can claim that the knife doesn’t meet this guarantee.
Services and consumer guarantees
Services must be provided with due care and skill, be fit for purpose and provided within a reasonable time, if there’s no agreed time frame.
Example of due care and skill guarantee
A home security company installing an intruder security alarm system must carry out the work in such a manner that the alarm is activated during a burglary.
Example of fit for purpose guarantee
A consumer wants to have a website built. They explain to a website building business that they need a website that can have images easily uploaded. The website will not be fit for purpose if the provided website does not have this function.
Consumer guarantees are different to warranties
All warranties are voluntary and in addition to consumer guarantees. Warranties are extra promises that your business can choose to make in addition to consumer guarantees.
Examples
A retailer states that they will only replace or repair a faulty product if the consumer buys an extended warranty. This is misleading as a consumer’s basic consumer guarantee rights already entitle them to the same remedy at no cost.
A warranty requires the consumer to have a product serviced once a year. If the consumer doesn't do this, they can no longer make a claim under the warranty when there’s a problem with a product. But in this situation, the consumer still has their basic consumer guarantee rights and can still ask the business to provide remedy for a problem with their product under consumer law.
Learn more about warranties.
Consumer rights are not limitless
There are exceptions to guarantees. The law doesn’t require you to provide a remedy if the customer:
- simply changes their mind (unless your store has a policy for change of mind)
- discovers they can buy the goods or services cheaper elsewhere
- knew or was made aware of the problem with the product before they bought it
- has damaged the products by misusing them in an unreasonable way
- asked for a service to be done in a certain way against the advice of the business
- if the problem with a service was caused by the actions of someone other than the business.
Examples
A customer buys a red dress and then decides they prefer blue. They return the next day having not worn the dress and demand a refund. You are not required to provide one.
A customer buys a laptop for $1200 then later sees the same model advertised by a competitor for $999. You have no obligation to match the price or refund the difference.
A customer buys a water resistant watch rated to 20 m and wears it deep-sea diving at 200 m. It floods and stops working. Because the damage resulted from an unreasonable use, you’re not required to provide a remedy.
A business can be a consumer too
A product or service bought for your business to use is covered by consumer guarantees, when it meets at least one of the following:
- it costs less than $100,000 including GST
- it’s a product or service commonly bought for personal, domestic or household use
- the product is a vehicle or trailer used mainly to transport goods on public roads.
Other businesses are also covered by the consumer guarantees when you supply products or services to them, provided one of the above requirements are met.
However, there are some exceptions. Even when meeting one of these conditions, a product is not covered by consumer guarantees when it's purchased:
- for resupply
- for use or transformation in production or manufacturing, or
- to repair or treat other goods.
Example of when consumer guarantees apply
An accountant purchases a multifunction business printer and scanner for $20,000. Six months later, the printer breaks down. It had not been misused during this time. The business would be protected by the consumer guarantees as the printer cost less than $100,000.
Examples of when consumer guarantees don’t apply
A farmer buys grain from a supplier to feed the cattle on his small farm. The shipment of grain costs $20,000. He will then sell the cattle once it reaches a certain age.
While the grain costs less than $100,000, it is being used in the production of the farmer’s cattle and so is not covered by the consumer guarantees.
Failure to meet a guarantee
If you sell a product or service that fails to meet a consumer guarantee, the purchaser is entitled to a remedy. A remedy can be a repair, replacement or refund. The supplier (your business) is legally obliged to provide that remedy.
The type of remedy available to the consumer will depend on whether the problem is major or minor.
Learn more about major and minor problems with products or services.
Problems with a product
Example of major problem with a product
A consumer buys an electric blanket, which stops working after the first use due to faulty wiring. This would likely be a major problem, and the business must give the choice of a replacement or a refund.
Example of minor problem with a product
A small business buys a fridge and finds that the door has a scratch on it. This defect doesn’t impact the safety or functioning of the product. This would likely be a minor problem, and the supplier must fix the problem or repair the item for free. The supplier does not have to offer a replacement or refund for a minor problem, although it can choose to.
Problems with a service
Example of major problem with a service
A small business asks a technician to increase their store computer’s memory capacity within one week. When installing a new drive, the technician damages the computer. Repairs will take 4 weeks, but the small business needs the device within the week. The small business can choose whether to continue or cancel the contract.
Example of minor problem with a service
A consumer hires a carpenter to build a carport to cover their vehicle. The carpenter builds a structure that isn’t long enough to cover the car. Although they haven’t met the consumer’s request, the carpenter is able to fix the problem within a reasonable time. The additional work would need to be done free of charge.
Exceptions and special rules
There are some exceptions and special rules where consumer guarantees don’t apply to certain types of products and services, or apply in a different way, or different laws apply.
Learn more about consumer rights and guarantees.
Watch our video about how consumer guarantees apply to your business
Watch more that help explain consumer rights.
Did you know consumers have rights when purchasing products or services from your business?
Under Australian Consumer Law, these are called consumer guarantees and apply to most purchases, including online purchases. The consumer guarantees are intended to ensure that consumers get the products they paid for and that they do what they're meant to do.
Consumer guarantees include that products must be safe, lasting, and free of defects, match the description provided and be fit for purpose. Consumer guarantees apply to services too and include they must be fit for purpose, provided with due care and skill and supplied within a reasonable time.
If your products or services do not meet a consumer guarantee, it is your responsibility to resolve the problem. You may need to provide a repair, replacement or refund, and in some cases, compensation. If your business has its own refund or return policy, this must operate in addition to, and not in place of, consumer guarantees.