Consumer Guarantees for Business-to-Business Dealings

Consumer Guarantees for Business-to-Business Dealings

Understanding the relevant Australian Consumer Law (ACL) consumer guarantee provisions is crucial when engaging in business-to-business commercial transactions. If the purchase price of the goods or services are less than $100,000, the buyer is considered a consumer regardless of whether the purchaser is an individual or a business. The definition of a consumer typically has two principal areas that constitute differently when regarding a business. This concerns consumer guarantees and express warranties.

When do consumer guarantees apply to B2B transactions?

Currently, a business is considered a consumer under the ACL if it purchases goods or services that:

• The amount is over $100,000;
• The goods or services purchased cost over $100,000 but are ordinarily used for personal, domestic, or household use; or
• Commercial vehicle or trailer, used to transport goods, of the amount of $100,000.

If you sell goods or use them within the course of production, manufacturing, or repairing other goods, you will not be constituted as a consumer. The second condition is more intricate as the courts have given it multiple interpretations. Usually, it is inclusive of transactions between business-to-business exchanges of involved goods or services, typically acquired by households. The courts generally consider the ordinary use of the goods, rather than the intended purpose by the buyer.  

Court example of goods or services ordinarily used for their personal, domestic, or household purposes:

Goods and services will be judged according to the kind of product that is sold rather than the intended purpose of the goods subject to sale. This is prevalent in Carpet Call Pty Ltd v Chan, in which a carpet is purchased for use as a nightclub’s commercial carpet. The court held that despite the items intended use, the carpet is typically purchased for domestic consumption, and as a result, the transaction was classified as a consumer transaction.

Difference between guarantees and warranties for goods

Warranties for goods are voluntarily provided by the supplier or manufacturer, whereas the ACL expressly imposes this guarantee for goods. Once a provider offers a warranty, the purchaser will be able to take reliance on such as the ACL requires the supplier to comply with any express warranties made.

What is a Consumer Guarantee:

Under the ACL, a consumer guarantee can be defined as a set of rules that apply when consumers purchase goods or services and apply automatically, irrespective of whether the seller provides any voluntary or extended warranty. Concerning a business-to-business transaction, the statutory consumer guarantees are applicable when the business acquires the goods or services.

What are goods?

The following assurances are included in the ACL and are provided by your business to consumers who buy your goods:

• The seller has the right to sell the goods;
• The customer will have undistributed possession of the goods;
• Goods are free from any undisclosed security;
• The goods are of an acceptable quality and correspond with their given description;
• The goods are fit for purpose that was told to the customer that it would be fit for;
• The goods match a model or a sample that the purchaser requested;
• It is possible to secure spare parts and obtain repairs for a reasonable period after purchase unless the customer has been advised otherwise; and
• The supplier or manufacturer can meet any additional requirements made about the goods such as promises concerning the performance, quality, or condition.

What are services:

The ACL contains guarantees that your business is required to give to consumers of your services:

• The services will be provided with due care and skill;
• The services are fit for a particular purpose or desired result; and
• You provide the services within a reasonable time if not otherwise specified.

Warranty against defects

Under the consumer guarantee rights, the warranty is legally applicable after the goods or services are purchased. If your business does not uphold any of the guarantees, then the business consumer has the right to a repair, replacement, refund, cancellation of the service, or reimbursement for damages and loss. A supplier, however, can also provide an additional warranty for goods that the consumer may rely on. If a supplier offers a warranty, they must meet the following criteria:

• Clear and easy-to-understand wording;
• Business’s name, address, email address and phone number;
• How long the warranty period goes for;
• Whether the consumer is responsible for any expenses regarding the warranty claim;
• What a customer must do if a defect arises; and
• How to make a warranty claim.

Calculating the payable amounts:
When determining an unclear amount that is payable, the ACL has put in place a system which is as follows:

1. How might the supplier, in an alternative situation, price the service? Is it ascertainable?
2. If not, what are the competitors charging? If the most affordable of all the competitors would not charge more than $100,000 for a similar service, then the consumer guarantees apply; and
3. If the first two steps fail, try to work out the cost of the service.

Remedies

If a supplier or manufacturer fails to recognise the application of consumer guarantees under the terms of a contract it can amount to deceptive or misleading conduct. This will enable the consumers to have access to remedies depending on the severity of the failure. A major failure allows a consumer to have a statutory right to a replacement, refund, or compensation. Whereas a minor failure enables the consumer to request replacement or repair.