Responsibility for fixing a problem with a good
When goods fail to meet a guarantee, a consumer has a right to a ‘remedy’ – an attempt to put the situation right. Common remedies include repair, replacement or refund, and can involve action for compensation or damages.
The supplier has to provide the remedy when goods do not meet the following consumer guarantees:
- fit for any disclosed purpose;
- clear title;
- undisturbed possession;
- undisclosed securities; and
- match the sample or demonstration model.
The supplier is the person or business who sold the goods to the consumer – for example, a retailer or a trader.
Note some of the guarantees apply in a limited way when the goods are hired or leased.
The manufacturer guarantees the availability of repairs and spare parts for a reasonable time after purchase. The importer is responsible for this when the manufacturer does not have an office in Australia.
The manufacturer is the person or business that:
- makes or puts goods together; and
- has their name or brand on the goods.
Both manufacturer and supplier
Both the manufacturer and the supplier guarantee goods:
- are of acceptable quality – they will be safe, durable and free from defects. They will be acceptable in appearance and finish, and do the job such things are usually used for;
- match any description given to the consumer; and
- will meet any extra promises made about them (express warranties).
There is further information about express warranties and warranties against defects.
Whether you offer a repair, replacement, refund or other ‘remedy’ depends on whether the problem is:
- a major failure; or
- a minor failure.
When goods fail to meet a consumer guarantee, the consumer can also claim for consequential losses – compensation for their costs in time and money because something went wrong. For more information, see the damages and compensation page.
Manufacturer's failure to honour an express warranty
If you refuse to honour an express warranty or fail to do so within a reasonable time, the consumer can take legal action to enforce the warranty in a tribunal or court.
They can also:
- assert their rights under the consumer guarantees; and
- ask for compensation for consequential loss due to the manufacturer’s failure to meet the warranty – see our damages and compensation page.
What if there is no express warranty?
If there is no express warranty and you have not met a consumer guarantee, the consumer can assert their rights under the consumer guarantees.
When you sell goods directly to the consumer
As a manufacturer or importer, you may sell goods directly to consumers – for example, in a seconds shop at your premises.
If so, you are acting as supplier and have the same responsibilities under consumer guarantees law. For more information, see our consumer guarantees page.
Consumer claims against the manufacturer
How much compensation does the manufacturer have to pay?
A consumer is entitled to ask for an amount covering any drop in the value of the goods.
This amount must be equal to or less than the difference between the current value of the goods and the lowest of either:
- the average retail price of the goods at the time of purchase; or
- the actual price paid.
A consumer bought goods for $30. The average retail price at the time was $28. The goods are worth only $10 due to failure to meet a consumer guarantee. The manufacturer must pay the consumer $18 - the difference between the average retail price of $28 (because it is lower than the price paid) and the value of the goods as a result of the problem.
The consumer can also ask for compensation for any ‘reasonably foreseeable’ loss suffered due to the manufacturer’s failure to meet the consumer guarantees. ‘Reasonably foreseeable’ costs include the cost of inspecting and returning the goods to the manufacturer. For more information, see our damages and compensation page
What if the manufacturer did not cause the problem?
As a manufacturer, you are not responsible for problems with goods beyond your control. You do not have to pay damages if goods do not meet the consumer guarantees due to:
- an act, default, omission or representation made by some other person, unless they are your employee or agent.
A mechanic, not employed by the manufacturer, uses the wrong engine oil in a car. This damages the engine. In that case, the mechanic, and not the manufacturer, would be responsible for compensating the consumer.
- a cause independent of human control that occurs after the goods left your control.
The day after the supplier finishes building a gazebo for the consumer, gale force winds lift two sheets of iron off the gazebo roof.
- the supplier charging a higher price than the recommended or average retail price for the goods.
This covers situations where there is a higher standard of acceptable quality expected of those goods due to their price, for more information see acceptable quality. Manufacturers will be held to the standard required if the goods were sold at the recommended retail price or the average retail price.
Limits on compensation for non-household goods or services
Suppliers and manufacturers can limit their liability under the consumer guarantees for problems with goods or services not used for personal, domestic or household purposes.
You can limit remedies to:
- replacing or repairing goods;
- reimbursing the consumer for repairing or replacing the goods;
- re-supplying services; and
- reimbursing the consumer for paying someone else to supply the services.
You can only do this if it is fair or reasonable. What is ‘fair or reasonable’ will depend on the circumstances, including whether:
- the consumer had no choice but to agree to limit compensation;
- the consumer was given something in return for buying the goods or services from you, at the expense of buying from someone else;
- the consumer knew or should have known about the limit on compensation; and
- the goods were a special order for the consumer.
When a supplier deals with a problem that is the manufacturer’s responsibility
Some goods may not be of acceptable quality due to a manufacturing defect, may not match a description given by the manufacturer or are unfit for a purpose specified to the manufacturer.
A consumer may ask a supplier, not the manufacturer, to deal with the problem.
If so, the manufacturer must reimburse the supplier. The amount can include any compensation paid to the consumer for reasonably foreseeable consequential losses.
How long does a supplier have to ask for reimbursement?
A supplier must make a request to the manufacturer within three years of the date:
- the supplier fixed any problems with the consumer’s goods; or
- the consumer took legal action against the supplier.
Are there any limits on reimbursement?
Manufacturers cannot ‘contract out’ of this obligation to reimburse the supplier.
However, when the goods are not used for personal, domestic or household purposes, and it is fair and reasonable to do so, the manufacturer can limit their liability to the lowest cost out of:
- replacing the goods;
- obtaining equivalent goods; or
- repairing the goods.
Suppliers and manufacturers can also make an agreement about what they will each be responsible for, as this does not affect the consumer’s rights.
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