Consumer Rights

The pitfalls of not having terms & conditions

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What are some of the pitfalls of not having terms and conditions? We hear many risky stories of companies going without terms and conditions altogether or using terms and conditions that do not belong to them and were not tailored to them.

Here we explore just some of the risks of not having terms and conditions.

1)     Payment terms: clarity on when fees and payments are due, how they are to be paid and interest charges and other feesIf it’s not clear what is included and what is excluded, you run the risk of missing out on being able to charge for (and recover cost) for goods and services provided.

2)     Risk allocation: first and foremost, terms and conditions serve to be a risk allocation document that set out the risks relevant to your goods and services and which party will bear each risk and in what circumstances.  Chances are if you don’t have terms and conditions or don’t have properly drafted terms and conditions, you’ve allocated yourself more risk than you bargained for.  For example, what time frames do you accept? Who runs the risk of timing of decision making and instructions of your client or customer? If they don’t respond in the right time frame, does your timeline or deadline push out or do you wear the risk of delayed instructions or delayed client/customer decisions?

3)     Dates: when the agreement starts and finishes.  The date that the services of goods will be provided… All key milestone dates.  These are just some of the things that are covered by well drafted, terms and conditions.  Having certainty around dates minimises the scope for a frustrated customer or client and makes it clear, upfront, what everyone has agreed to.

4)     Exposure to warranty claims: without terms and conditions, you are missing out on clearly prescribed warranty terms that make it clear to any clients, hirer or purchaser, just when you are on the hook for a warranty claim and, more importantly, when you are not on the hook for a warranty claim.  These need to fit within the legal requirements.

5)     Scoping inclusions and exclusions: good terms and conditions make it clear precisely what is included in your scope, your quote or fee and, importantly, what is not included in your scope, quote or fee.  By having certainty around inclusions and exclusions, you may avoid a claim that further goods or services were included in the original scope, quote or fee, for example.

6)     When you are on the hook, and when you are not: good terms and conditions make it clear what you will be responsible for, and the things and actions that you are not responsible for.  Typically, you will not be responsible for any use of your products or services outside of their intended purpose or scope.

7)     Title and risk: for the sale of goods, this refers to when title and risk passes to the end consumer.  For the hire of goods, this refers to when risk in the good hired passes to the other party.  These both make it clear when the other party is on the hook (and, more importantly, when you’re off the hook).

8)     Fees: good terms and conditions would make clear all components of your price or fee.  This includes additional fees such as bond or delivery, fees that apply if things go outside the scope or outside of time.  Having clearly expressed fees can make it easier for you to recover those fees.  This is particularly important for scope increase and to ensure that you are protected for your fees for any such “scope creep”.  Failure to have clear terms and conditions surrounding your fees may mean that you are required to pay for disbursements or extra fees that haven’t been properly disclosed to the customer, or, the customer not having to pay for certain additional services that weren’t disclosed upfront in your terms and conditions. 

 For tailored terms and conditions that properly address risk and allocate risk between the parties, Coutts is here to help.  For further information please don’t hesitate to contact:

Alexandra Johnstone
Partner
alexandra@couttslegal.com.au
02 4607 2110  

This blog is merely general and non specific information on the subject matter and is not and should not be considered or relied on as legal advice. Coutts is not responsible for any cost, expense, loss or liability whatsoever in relation to this blog, including all or any reliance on this blog or use or application of this blog by you.

“Lemon” motor vehicles – consumer rights clarified

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On 8 September 2018 the Australian Consumer and Competition Authority (ACCC) published an updated guide in relation to the application of the Australian Consumer Law (ACL) to motor vehicle sales and repairs. Although this publication does not constitute legal advice or a definitive guide as to when the ACL applies, it does provide some useful legal guidance for consumers in respect of defects and failures in new and used motor vehicles.

A link to the guide can be found here.

Overview

On 1 January 2011 the ACL was introduced as a uniform consumer protection law across Australia. As the law is relatively new, there is a measure of uncertainty in relation to parts of its practical operation - hence the publication by the ACCC of the above guide.

The ACL prescribed a set of “supplier” and “manufacturer” guarantees which apply to all consumer transactions across Australia.

Major and non-major failures

Under the ACL, where there has been a breach of one of the prescribed guarantees, the remedy to which a consumer is entitled, depends on there has been a “major” or “minor” failure to comply with the consumer guarantee. These are concepts new to the law in Australia.

If a vehicle suffers from a “major” failure, then the consumer is generally entitled to elect to:

  • reject the vehicle and obtain either a full refund or replacement vehicle of the same type; or

  • retain the vehicle and ask for compensation from the dealer or manufacturer.

If a vehicle suffers from a “non-major” failure, then the supplier has the option of repairing the vehicle or providing a replacement or refund to the consumer. A “non-major” failure can become a “major” failure if the vehicle cannot be repaired within a reasonable time

In addition, the consumer may be entitled to compensation for any foreseeable loss suffered by the consumer as a result of any breach of the ACL guarantees.

What are “major” and “non-major” failures

The ACL prescribes a “major” failure as occurring where:

  • a person would not have purchased the product had they been aware of the failure;

  • the failure results in the product being significantly different from a sample or description;

  • the product is substantially unfit for its purpose and cannot be effectively repaired within a reasonable time; or

  • the product is unsafe.

A “non-major” failure is a failure which does not amount to a “major failure” as defined above.

Clarification as to “major” and “non-major” failures

Since the introduction of the ACL there has been a lot of uncertainty in the motor vehicle industry as to when a defect will amount to a “major” defect - particularly when the vehicle is no longer new. Given the infancy of the ACL, there have only been a handful of cases which have considered the application of the ACL in the context of defective vehicles. Hence, the publication of the guide by the ACL provides some measure of clarification to the industry and consumers alike.

Examples of “major” vehicle failures

The ACCC guide sets out the following examples which it considers to amount to “major” failure of a motor vehicle:

  • a manufacturing defect in a new vehicle causing excessive noisiness in the vehicle resulting in multiple repairs (exceeding 5 weeks) which did not see the issue resolved;

  • a 2 year old vehicle suffering from a manufacturing defect causing the engine and vehicle to seize with the vehicle not be able to be repaired within 5 weeks.

Examples of “non-major” vehicle failures

The ACCC guide sets out the following examples which it considers do not amount to a “major” failure of a motor vehicle:

  • a new vehicle which had developed a rattling noise and which did not interfere with its normal operation and which was repaired within 2 days.

  • an 18 month old vehicle with an intermittent electrical fault causing a warning light to activate from time to time. The cause of the problem could not initially be diagnosed and resolved until the third attempted repair;

  • a 3 year old vehicle which had suffered from the following issues and which were repaired on separate occasions - an interior trim coming loose, the satellite navigation system developing a glitch and the boot latch breaking.

Key Take-Aways

The ACCC guide provides some clarification as to what will constitute a “major” and “non-major” failures in the context of motor vehicles. However, the examples provided by the ACCC are reasonably clear-cut and we must await for further cases to be decided in the State and Territory consumer tribunals before more valuable guidance can be given in relation to more borderline cases.

 

We have experience in motor vehicle claims and can help if you are dissatisfied with the performance of your vehicle.   For further information please don’t hesitate to contact:

Alexandra Johnstone
Partner
alexandra@couttslegal.com.au
02 4607 2110  

This blog is merely general and non specific information on the subject matter and is not and should not be considered or relied on as legal advice. Coutts is not responsible for any cost, expense, loss or liability whatsoever in relation to this blog, including all or any reliance on this blog or use or application of this blog by you.

Consumer Rights

There are legal guarantees you must give your customers when they purchase your goods. If you try to restrict these you could find yourself in a lot of trouble, as Hewlett Packard found out in July 2013.

Hewlett Packard v ACCC

In July this year the Federal Court ordered Hewlett Packard Australia (HP) to pay a huge fine arising from false and misleading representations made to consumers about consumer guarantee rights. HP had told its customers they had to have multiple repairs before replacement, that only a limited, express warranty was available, beyond which payment for repairs were required. To their online customers they said it was up to HP whether they would accept any returns to repair or replace.  The case is significant for two reasons: it was the first high profile consumer guarantees case brought by the ACCC and it involved a fine of $3millon dollars, the second highest pecuniary penalty imposed by the Federal Court for a breach of the ACL.

The Court found that HP made a number of false or misleading representations to consumers about their consumer guarantee rights, including:

  1.  the remedies available to consumers were limited to the remedies available at HP’s discretion.
  2. consumers were required to have their product repaired multiple times before they were entitled to a replacement.
  3. the warranty period for HP products was limited to a specified express warranty period.
  4. consumers were required to pay for remedies outside the express warranty period.
  5. products purchased online could only be returned to HP at HP’s sole discretion.

Additionally, the Court found that HP represented to retailers that it was not liable to indemnify the retailer if the retailer failed to obtain authorisation from HP before giving a consumer a refund or replacement.

The above representations were made by HP staff working at call centres located around the world, who were following HP’s internal guidelines and scripts.

In his judgment, Justice Buchannan stated that the penalty was appropriate and “reflects an acknowledgment of the seriousness of the respondent’s conduct”.  Justice Buchannan noted the Court’s disapproval of HP’s conduct and the need for general and specific deterrence for such behaviour.  In addition to the $3 million penalty, the Court also made ordered HP to pay $200,000 towards the ACCC’s legal fees as well as make a number of apologies, re-train their staff and advertise a correction.

What was wrong with HP’s warranty?

Under the Australian Consumer Law Act, consumers are given a set of rights called consumer guarantees for all goods purchased after 1 January 2011. These guarantees include a guarantee that:

  1. goods will be of acceptable quality.
  2. goods will be fit for any disclosed purpose.
  3. goods will match any description under which it is sold.
  4. goods will have spare parts available for a reasonable time.
  5. all express warranties offered will be honoured.

For goods purchased on or after 1 January 2011, where a good develops a major fault, consumers have a right to a replacement or refund from the supplier of the good. For goods that develop a minor fault, a consumer has a right to have the good remedied (at the suppliers discretion) within a reasonable time. If the supplier doesn’t do so, the consumer can either reject the goods and receive a refund or have the problem fixed and recover reasonable costs of doing so from the supplier.

If you offer guarantees, implied or expressed, you need to ensure that any guarantee provided complies with the Australian Consumer Law (ACL).

Call Coutts to assist you review your terms and practices of trade. If they do not comply with the ACL you could be prosecuted and fined.