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Changes to definition of “consumer” under the Australian Consumer Law (ACL)

The change in the definition of a “consumer” under the ACL has implications for business to business transactions for high value commercial or industrial goods.

Under the current ACL definition, a person or business is a “consumer” if they purchase goods or services for their own use that:

  1. are of a kind ordinarily acquired for domestic, household or personal use or consumption; OR
  2. cost up to $40,000, irrespective of their kind or purpose.

However, from July 2021 the definition of “consumer” will be amended so that the monetary threshold in the second limb of the definition will increase from $40,000 to $100,000.

Consumer guarantees under the ACL

Businesses that make or supply goods or services to consumers are bound by the consumer guarantees that are automatically imposed under the ACL, irrespective of any extended or voluntary warranty offered.  The guarantees require the goods or services are fit for the disclosed purpose, are of acceptable quality, match relevant descriptions or samples provided, meet promises as to quality or performance and have availability of spare parts. It is not possible for parties to limit or contract out of liability under the ACL.

What are the implications of the change in the definition of “consumer”?

Manufacturers or suppliers of goods that cost up to $100,000 from July 2021 will be subject the ACL provisions regarding warranties, refunds and liability for damages.

  • Sellers will be required to place, repair or refund the cost of a good or service if it fails to comply with a consumer guarantee, depending on whether the defect is major or minor.
  • Manufacturers can be liable directly to the consumer regarding a major or minor defect in the goods, or in circumstances where the seller is required to provide a remedy to the consumer the manufacturer is required to indemnify the seller.

NOTE: Sellers and manufacturers are already subject to the above obligations, but they only apply to goods or services up to the value of $40,000 prior to July 2021. 

Buyers of industrial or commercial equipment up to the value of $100,000, as of July 2021 will benefit from the protection of the ACL consumer guarantees which were limited to the $40,000 threshold prior to that date.  The extended application of the ACL in terms of the monetary threshold means that buyers will find it easier to make claims against manufacturers or suppliers. 

What next?Businesses should ensure that their business contracts, such as terms and conditions of trade, comply with their consumer protection requirements otherwise such business contracts will be invalided by the ACL.  

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