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Focus: Government seeks comment on consumer rights

30 July 2009

In brief: The Federal Government has released an issues paper, Consumer rights: Statutory implied conditions and warranties, to seek comment on the adequacy of the current laws on implied conditions and warranties. Partner Jacqueline Downes (view CV), Special Counsel Nicola Nygh (view CV) and Law Graduate James Kerr report.

How does it affect you?

  • The Government is undertaking a wide-ranging review of the rights of consumers when they acquire goods and services.
  • One of the many matters the issues paper raises is the possible enhancement of statutory rights and remedies available to consumers for defective goods or services.
  • It also highlights some of the key factors that individuals and organisations should consider when preparing a submission.
  • The closing date for submissions is 24 August 2009.

Clarity of existing legislation

The main concern identified by the issues paper is the lack of clarity in the existing federal, state and territory legislation dealing with consumer transactions and statutory implied conditions and warranties. The existing legislation implies certain conditions and warranties in relation to the sale of goods and the supply of services to consumers.

The lack of clarity is said to result from a variety of factors, including:

  • the differences between the various Australian jurisdictions in defining the implied terms, the remedies available and the extent to which the implied terms can be excluded or limited;
  • the reliance on common law principles to understand the implied terms and the rights and remedies available to consumers; and
  • an absence of explanation in the existing legislation of the scope of the implied terms.

The issues paper seeks comment on whether the existing regime, with overlapping federal, state and territory legislation, is appropriate and on what can be done to improve it.

Warranties

The issues paper discusses the three types of warranty that consumers can rely on to protect themselves if they have a problem with goods or services they have purchased, including:

  • voluntary warranties;
  • extended warranties; and
  • statutory warranties under the Trade Practices 1974 (Cth) (the TPA), fair trading and sale of goods legislation.

The latter includes the conditions and warranties implied into consumer contracts, such as the requirement that goods be of merchantable quality, that they be fit for their intended purpose and that they match the description given to the consumer.

The issues paper suggests that consumers, retailers and manufacturers lack awareness of the statutory regimes that impact on consumer contracts, and of the remedies available to consumers and the obligations imposed on retailers and manufacturers. It asks what can be done to enhance consumer awareness regarding these rights and obligations, and to prevent the distribution of misleading or deceptive information by retailers and manufacturers.

The ability of corporations under the TPA to limit their liability for breach of an implied term in certain circumstances is considered, and submissions are sought on whether such a right is necessary and appropriate.

Extended warranties

The increasing prevalence and cost of extended warranties is noted as significant for consumer rights. Consumers are often not aware of the nature and scope of their rights under extended warranties, or that their rights under the statutory implied conditions and warranties, in many cases, exceed extended warranties. The issues paper also asks whether consumers have sufficient information about extended warranties, whether the information they have is sufficiently clear, and what regulatory and non-regulatory measures could be taken to improve consumers' understanding.

'Lemon' laws

'Lemon' laws are designed to provide a remedy where consumer goods repeatedly fail to meet expectations about performance or quality. The issues paper identifies two alternative types of lemon laws:

  • laws that increase the information available to consumers in advance of the decision to purchase a good; and
  • laws that create an enhanced rights regime, providing rights to repair, replacement and/or refunds in certain circumstances.

The issues paper asks whether lemon laws are needed, particularly in relation to motor vehicles, the proposed scope of such laws, and whether there are any alternative non-regulatory approaches that may be adopted to deal with these concerns.

Enforcement

The issues paper asks whether the existing remedies are adequate, whether they are sufficiently understood by consumers, and whether additional remedies and non-regulatory forms of alternative dispute resolution are desirable. It also seeks comment on whether common law remedies should be contained in a single statutory regime where the regulator can also bring action on behalf of consumers to enforce statutory guarantees, as is the case in New Zealand.

What next?

Any changes to laws affecting implied conditions and warranties have the potential to be costly for business, and may require a major review of consumer contracts. If you require further information, or assistance in making a submission, please do not hesitate to contact any of the people below.

For further information, please contact:

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