CONSUMER LAW

In this section we will be looking at the liabilities faced by sellers and manufacturers on the local market. The legislation will also apply when Australia is deemed the appropriate forum in which to settle a consumer goods dispute. In many ways the legislation reflects the issues also dealt with in commercial sales by the Vienna Convention of the Sale of Goods and the Victorian Goods Act.

LEGISLATION: Part V, Division 2 and 2A of the TRADE PRACTICES ACT (C’th) 1974 provides consumer protection against CORPORATIONS which attempt to avoid responsibility for faulty goods and services, and also to prevent CORPORATIONS from using misleading and deceptive advertising. Section 4 of the TPA defines a corporation as being any corporation established outside of Australia, and any trading or financial corporation formed in Australia. Obviously this fails to catch any non-corporations in dubious business dealings, however Section 6 of the T.P.A. extends the provisions to also include these parties where their business takes place in relation to:

i. trade or commerce between Australia and other countries;

ii. trade or commerce between states of Australia; and

iii. trade or commerce within a territory, or between a state and a territory.

The definition of ‘trade and commerce’ in relation to the TPA is:

• activities normally considered trade and commerce by the normal use of the words.
• ‘trade’ usually denotes an ongoing activity.
• the defining is not restricted to goods, but also to services.
• the existence of profit doesn’t necessarily mean trade exists.

Operation of the TPA outside Australia

The main problem in applying the provisions of the TPA outside Australia is that of enforcement against Australian citizens and corporations. It can be extremely difficult to enforce legislation overseas, particularly when there may be a conflict between the TPA and other international treaties or legislation.

DEFINITIONS:

CONSUMER, as defined by Section 4B of the TPA is any person who acquires goods or services-

• for their own personal use
• not to be resold for profit
• generally costing less than $40,000
• that are not raw materials
• that are not buildings affixed to land

GOODS refers to movable property, including motor vehicles, ships, aircraft, animals, trees, gas and electricity.

SERVICES includes the performance of work, the provision of entertainment or recreation, banking but does not include work performed by an employee for their employer.

IMPLIED CONDITIONS AND WARRANTIES:

Consumer legislation implies two terms into a contract of sale. These two terms are CONDITION and WARRANTY.

A CONDITION is a fundamental term in a contract. If a condition is not met satisfactorily the consumer is able to cancel the contract and redeem any money paid, as well as sue for any consequential damages. The right to return the goods is not available if the goods have been lost or destroyed, allowed by the consumer to become damaged, or become damaged by abnormal use.

A WARRANTY is a subsidiary, or minor term in a contract. If warranty is breached the consumer does not have the right to cancel the contract, only to have the problem repaired, and be entitled to consequential damages.

EXAMPLE: If Pei-chen ordered a Kenwood stereo from Smashes and received a Kelvinator stereo instead, then Smashes would have breached a CONDITION, and Pei-chen can cancel the contract. However, if Smashes had supplied the Kenwood stereo as ordered but it didn't operate properly, they would have breached a WARRANTY, and they are obliged to repair the problem. In either case, Brashes could also be liable for consequential damages.

CONDITIONS AND WARRANTIES IMPLIED INTO CONSUMER CONTRACTS

GOODS:

1. Right to sell the goods

2. Supply by description

3. Merchantable quality

4. Fitness for Purpose

5. Supply by sample

SERVICES:

6. Due care and skill

7. Fitness for purpose

Except in the right to sell the goods, no conditions or warranties are implied in purchases made at auctions, garage sales and where the goods are sold as seconds.

1. RIGHT TO SELL GOODS (S69.1)

The supplier of the goods must have a clear title to them. He cannot sell goods which are owned by another party, or are encumbered in any way.

2. SUPPLY BY DESCRIPTION (S.70.1)

This usually applies to mail or telephone ordering, or when a consumer orders goods in a shop which are not specific, or when labelling is confusing.

3. MERCHANTABLE QUALITY (S.71.1)

Basically refers to a consumer getting "value for money". Goods must be of a reasonable quality for a reasonable time. This condition is not implied where:

a) the defect is drawn to the consumer's attention before the contract is made.

b) the consumer has examined the goods before the sale is made, and should have seen the fault.

The test in relation to this condition is to determine the degree of defect and ask whether the defect would cause a reasonable consumer to pay a lower price for that good.

4. FITNESS FOR PURPOSE (S.71.2)

The goods must be able to perform the task for which they were purchased. This condition is not implied where:

a) the consumer did not rely on the advice of the supplier.

b) it is unreasonable to rely on the advice of the supplier.

5. SUPPLY BY SAMPLE (S.72)

When a sample is supplied or shown before sale, the bulk of the goods must correspond with that sample. The consumer must be given opportunity to compare the bulk of the goods with the sample. There must be no defect in the bulk of the goods that wouldn’t have been revealed by examination.

The breach of one section can also automatically breach another, eg, if a good is unmerchantable it may also be unfit for purpose.

6. DUE CARE AND SKILL (S.74.1)

Services rendered must be supplied with reasonable skill. The warranty requires that the standard of care and skill is what would generally be exhibited by a supplier of that type of service.

7. FITNESS FOR PURPOSE (S.74.2)

Any services rendered and materials used for the service must be fit for the expressly desired purpose and be able to achieve the result desired. This warranty does not apply where the circumstances show that the consumer did not rely on the supplier’s skill, and also does not apply to contracts for the professional services of architects and engineers.

EXCLUSION OF IMPLIED CONDITIONS OR WARRANTIES

Section 68 of the TPA prevents the attempt to exclude any of the above conditions and warranties by causing any such exclusion to be void. The inclusion of any such term is an offence punishable by a fine (S53.g)

LIABILITY OF MANUFACTURERS

Under consumer legislation there are two situations in which the 'manufacturer' does not necessarily make the goods:

- Any person or organisation which imports goods from an overseas organisation which DOES NOT HAVE AN OFFICE IN AUSTRALIA is considered, by law, to be the manufacturer.

- When the supplier puts their organisation's name on the goods. For example, supermarket 'home brands', clothing suppliers like Country Road who have some of their goods made elsewhere by clothing factories.

Sections 74B - G impose liabilities on manufacturers in all of the above areas with the exception of ‘Right to Sell’, but also imply two further warranties into the sale:

1. SUPPLY REPAIR OR PARTS (S.74F)

Irrespective as to whether or not the express guarantee has expired, the manufacturer must continue to offer repair and parts for a reasonable period. The manufacturer will not be liable if it gave reasonable notice to the consumer at or before the time of purchase that repair facilities or spare parts would be restricted or unavailable.

2. MUST COMPLY WITH EXPRESS GUARANTEE (S74.g)

Where a written guarantee from the manufacturer is issued upon purchase, the consumer has a right to compensation if problems arise from the non-compliance.

UNFAIR PRACTICES

DEFINITION: Any misleading or deceptive statement or practice used by a supplier in order to do business. (Telling lies to make sales.) This is not to be confused with 'puffery' which is self evident exaggeration.

LEGISLATION: Trade Practices Act 1974. (Comm.)

HOW IT WORKS: Generally found in advertising, but also can be used by sales people.

MISLEADING STATEMENTS include the following:

1. Falsely represent that goods are of a particular standard, quality, value, grade, composition, style, or have had a particular history or previous use.

2. Falsely represent that services are of a particular standard, quality, value or grade.

3. Falsely represent that goods are new.

4. Falsely represent that a particular person has agreed to purchase goods or services.

5. Represent that goods or services have sponsorship, approval, performance characteristics, accessories, uses or benefits they do not have.

6. Represent that a corporation has a sponsorship, approval or affiliation it does not have.

7. Make a false or misleading representation with respect to the price of goods or services.

8. Make a false or misleading representation concerning the availability of facilities for the repair of goods or of spare parts for goods.

9. Make a false or misleading representation concerning the place of origin of goods.

10. Make a false or misleading representation concerning the need for any goods or services.

11. Make a false or misleading representation concerning the existence of any exclusion clauses.

MISLEADING PRACTICES include the following:

1. Misleading conduct in relation to employment.

2. Bait advertising.

3. Not stating the full cash price for goods or services.

4. Offering gifts and prizes with no intention to keep the offer.

5. Not having reasonable quantities of advertised goods.

6. Referral selling

7. Accepting payment without intending to supply.

8. Harassment or coercion

9. Pyramid selling

10. Unsolicited credit cards

11. Unsolicited goods or services.

CASE STUDIES

THINGS THAT WILL GIVE ME MARKS WHEN I AM ANSWERING THESE DAMNED CASE STUDIES

1. Discuss whether the plaintiff would be deemed a consumer?
2. Is defendant deemed to be a supplier and/or manufacturer (ie - DON'T forget about manufacturers' liabilities)?
3. Have there been any breaches in the supply of goods? (List, FULLY, COMPREHENSIVELY, THOROUGHLY, including instances when the condition or warranties are NOT implied)
4. Have there been any breaches in the supply of services? (List)
5. Were the breaches of condition or warranty? (Need to know this, or your remedies will not be accurate)
6. What remedies are available to the plaintiff?
7. Have there been any breaches of Unfair Practices? (List, and suggest remedies)

1. Dennis went to Bed & Co Ltd. to buy a pair of Queen size bed sheets. He found some sheets that he liked, checked the size on the packaging and bought them. All of the sheets were made under license in China for Bed & Co Ltd., and had the company's name on the label. When Dennis washed the sheets for the first time (after following the instructions on the packaging carefully) he discovered that the stitching had come undone. Dennis returned them to the store to have them repaired, but the sales person pointed to a sign that stated "No exchange, No returns", and further stated that they didn’t have the facility to repair the sheets. What are Dennis’ rights in relation to this matter, and what are Bed & Co Ltd’s. obligations?
2. Colin, a wheat farmer, bought an "Ace" tractor from Machine Sales Pty. Ltd. for $20,000. The salesman told Colin that the tractor would be excellent for wheat farming. Colin has found that the tractor cannot effectively pull the large machinery which is used to plant and harvest wheat. Advise Colin of his rights against Machine Sales Pty. Ltd.
3. Patricia recently had her kitchen renovated. She purchased cupboards from Cupboard Makers for $2,000 which included the fitting of the cupboards. The cupboard doors do not close properly and the handles have fallen off. In addition, the colour of the wood is much lighter than the sample shown to her. What rights does Patricia have under consumer law?
4. Gus bought a pair of ‘Northshore’ brand blue jeans that were on sale at Northshore Jeanery Pty. Ltd. While Gus was paying for the jeans, he noticed a sign above the cash register which said "No refund on sale items". The first time Gus washed the jeans, all the dye washed out, leaving the jeans a dirty white colour. Gus took the jeans back to Northshore Jeanery and asked for a refund, but the sales person just pointed at the sign and said "No refunds". Advise Gus as to his rights under consumer law.
5. Beryl has a health food take away shop in the city and attracts large lunch time crowds. She goes to Zap, the largest microwave oven dealers in Melbourne and tells the salesman that she requires a reliable microwave to be used for commercial purposes. The salesman recommends the Nuke Model 5000. Just to be sure, Beryl contacts the manufacturers, Micro Models Pty. Ltd. and is advised that the Nuke Model 5000 is suitable for her needs. She then purchases the microwave. Within days of purchasing the microwave, Beryl discovers that it either burns the foods black, or fails to heat the food at all. What rights does Beryl have against:

• Zap
• Micro Models Pty. Ltd.

6. Morgan was establishing a horse racing stud, and attended a sale of stud horses held by Murray's Pty. Ltd. A salesman handed Morgan a catalogue headed "Murray's Best Breeding Stock". Morgan's attention was drawn to a stud horse called 'Plentiful' with a price of $50,000. Morgan said to the salesman, "I want a good breeding stallion. I believe Plentiful is just what I want." The salesman simply replied, "Write out your cheque and I'll give you a receipt." After three months, Morgan discovered that Plentiful, although a healthy stallion, was useless as a stud horse. Advise Morgan whether he has any rights against Murrays, and if so, what they are.
7. Bronwyn went to her local nursery, Plants Galore, and asked the sales assistant to advise her upon the purchase of a tree which would grow quickly to provide shade and privacy without being so large that it would eventually be a problem in her small garden. Having taken a particular tree upon the recommendation of the sales assistant Bronwyn found that within only a few months this tree looked to be growing to such a size that it would interfere with power lines as well as paving and fencing on ground level. Does Bronwyn have any rights against Plants Galore, and if so, what are they? Would your answer be any different if she had simply asked for a particular tree by its given name?
8. Enzo went shopping one day at Brandon Park Shopping Centre and saw a stall where Rudy is demonstrating a carpet stain removal technique using a machine he has invented. Enzo asked Rudy if he can remove beer stains from pure wool carpet. Rudy proceeded to spill some beer on the carpet and showed Enzo how the stain was removed. Enzo was impressed and made a booking to have his carpet cleaned. Rudy arrived to do the job but used a differed technique and machine to do the job. When the carpet dried Enzo noticed that not only did the beer stain remain, but the carpet now had permanent bleach marks on it. Enzo subsequently found out that the chemical used for the job was not the right one for wool carpet. He now seeks compensation from Rudy but Rudy refuses. Discuss whether any breaches of consumer law have taken place.
9. Joanne decided to buy a motor scooter to cut her travelling time in getting to college every day. She asked her friend Joe, who recently bought one and he told her that Marco Brand scooters are very good, and then named about 12 other students who also own one because of his recommendation. She saw an advertisement for Marco Scooters for $1,700, an unbelievable bargain price at Con's Bike Store Pty. Ltd. She goes to Con's Bike Store but Con tells her the last Marco Scooter for $1,700 has just been sold. His new stock of Marco Scooters are $1,950 and he has plenty of these. Joanne asks if he is willing to discount the price. Con states he can't lower the price buy he offers her a free plastic seat cover for when it rains, but this will add $40 to the price as it would have to be ordered in. Joanne tells Con she saw a very similar Kawasaki scooter that cost much less, but Con tells her some lies about them to not jeopardise his potential sale. Joanne then asks if a warrantee is given. Con tells her the bike comes with a 3 month warranty on parts and labour except for the bike frame and than in the event of a claim she just sends the scooter back to the manufacturer in New Zealand for repairs. Joanne is put off by Con's pushy sales technique but still goes ahead and buys the scooter because he tells her that if she recommends the scooter to her friends, he will give her $50 for each one he sells to them. Discuss the breaches, if any, that occur in this case.