Do consumer guarantees extend to businesses?
Updated: May 19
Businesses that engage in supply or distribution agreements may be unclear of their rights under the Competition and Consumer Act (CTH) 2010 (‘CCA’) and whether they are deemed a consumer per schedule 2 of the CCA, the Australian Consumer Law (‘ACL’).
This article will discuss the typical agreements business usually enter into when engaged in trade and commerce and clarify whether a business is deemed a consumer under the ACL.
Businesses enter into supplier agreements with suppliers when a quantity of goods is required for a period of time for resale purposes.
Businesses also enter into distributor agreements when the business requires goods from the manufacturer to produce a certain quantity of goods for a set period of time to sell those goods.
Parties that enter into a supplier or distributor agreement are generally considered to have a commercial relationship. Due to the commercial relationship between the parties, the parties may experience compliance issues regarding the quality and standards of goods or services provided and whether the wronged party are entitled to envoke their consumer guarantees under the ACL.
When is a business defined as a consumer?
The wronged party is only entitled to consumer guarantees if they are deemed a consumer under the ACL.
Section 3 of the ACL defines a consumer as a person that acquires particular goods or services in the following circumstances:
The person has paid, or is required to pay an amount for the goods or services for sum that does not exceed $100,000;
The person acquired goods or services for personal, domestic or household use or consumption; or
The goods the person acquired consisted of a vehicle or trailer, which would be primarily used to transport goods on public roads.
The ACL does not provide an express definition of a person. It is accepted that businesses (or other forms of body corporates) are deemed a person under the CCA and ACL.
To meet the $100,000 threshold, the person must have acquired the goods or services for an amount that is less than or equal to the threshold. In circumstances where there is a continuous supply of services under a single agreement that exceeds the threshold, the business may experience difficulties in being classified as a consumer.
Unfortunately, there is not a great deal of case law on this issue. However, Justice Barrett considered section 51AC of the former Trade Practice Act 1974 (Cth) in Overlook Management BV V Foxtel Management Pty Ltd  NSWSC 17 and held:
“…it seems to be open to me to take the practical (and, I think, conservative) view that where, as here, there is a continuum of supply and acquisition under a single contract over a period, the relevant “price” is, at any time, at least the aggregate of the amounts paid in respect of the supply and acquisition before that time – I say “at least” because the element of futurity present in these provisions makes it clear that past events and past payments are by no means the end of the matter.”
Sections 3(4) of the ACL states that “the amount paid or payable for goods or services purchased by a person is to be the price paid or payable for the goods or services.” Section 3(5) of the ACL provides the following exceptions:
“if, at the time of the acquisition, the person could have purchased from the supplier the goods or services other than by a mixed supply—the price at which they could have been purchased from the supplier” ;
“if at the time of the acquisition, goods or services of the kind acquired could have been purchased from another supplier other than by a mixed supply” then “the lowest price at which the person could, at that time, reasonably have purchased goods or services of that kind from another supplier”; or
“if, at the time of the acquisition, goods or services of the kind acquired could not have been purchased from any supplier except by a mixed supply—the value of the goods or services at that time.”
Exception to consumer goods
Section 3(2) of the ACL states the following goods will not be considered consumer goods:
The “goods, other than gift cards, were purchased for the purpose of re-supply”. Alternatively, the gift cards were purchased for resupply in trade or commerce.
Goods “for the purpose of using them up or transforming them in trade or commerce” in the course of “process of production or manufacture” or “repairing or treating other goods or fixtures on land.”.
The ACL recognises goods that are affixed to land or premises can be deemed consumer goods. This provides consumer guarantees to consumers with built-in kitchen or bathroom fittings as part of a building contract. Those goods will be considered consumer goods even though those goods would ultimately become fixtures at the property once installed by the builder.
Sections 2 and 8 of the ACL list some of the following goods that are deemed consumer goods:
Ships, aircraft and other vehicles;
Animals, including fish;
Minerals, trees and crops;
Gas and electricity;
Second-hand goods; and
Any component part of, or accessory to goods.
In relation to consumer services, the case of Obeid v Australia Competition and Consumer Commission (ACCC) (2014) FCA 839 held that the ordinary meaning of “services” is not to be given a restrictive meaning.
Section 2 of the ACL defines consumer services as:
The performance of work under a contract, (including work of a professional nature);
The “provision of, or the use or enjoyment of facilities for, amusement, entertainment, recreation or instruction” under a contract; or
“Conferring of rights, benefits or privileges for which remuneration is payable in the form of a royalty, tribute, levy or similar exaction” under a contract; or
“A contract of insurance”; or
“A contract between a banker and a customer of the banker entered into in the course of the carrying on by the banker of the business of banking”; or
“Any contract for or in relation to the lending of money".
How can we help?
The Arida Lawyers team can assist you by:
Advising whether you are considered a consumer under the ACL;
Assist you in enforcing your consumer guarantees; and
Represent you in the NSW Civil and Administrative Tribunal or various courts.
The Arida Lawyers team can also assist with Contract Law, Debt Recovery, Consumer Law and Building and Construction. Contact us today on 1300 146 390 or email firstname.lastname@example.org to arrange a free consultation.
This article provides general information relevant to our expert services. It is not legal advice and should not be relied upon as such. If you are seeking legal advice, you should contact us for a free initial consultation.