As mentioned above, consumer guarantees cannot be avoided, modified or limited by contract (s. 64 ACL). Furthermore, any attempt to circumvent the consumer guarantees may amount to a violation of ACL s. 29(1)(m) that focuses on the making of “a false or misleading representation concerning the existence, exclusion or effect of any condition, warranty, guarantee, right or remedy (including a guarantee under Division 1 of Part 3-2)”. This was illustrated in ACCC v Valve Corporation (No 3).^[1] In this case, Valve operated an online distribution network for video games, known as Steam, which required consumers to create a subscriber account. The subscriber agreement stated that ‘All Steam fees are payable in advance and are not refundable in whole or in part’. The Court held that this contractual term ‘did not convey the message to a reasonable consumer that “as a matter of contract you cannot claim a refund, although you might be able to obtain a refund as a result of legislation or some other regime”’.^[2] Therefore, Valve contravened ACL s. 29(1)(m) in making the ‘no entitlement to refund’ representation because pursuant to the ACL, consumers (subscribers) were entitled to a refund in certain circumstances.

If a provision of the contract specifies a law other than a law of Australia, that provision will not affect the operation of the guarantees. However, the Vienna Sales Convention prevails in the event of an inconsistency between the provisions of the convention and the division (ss 67 and 68 ACL).

2.6.3.1 Remedies in relation to the Consumer Guarantees

Where a supplier or manufacturer has acted in breach of a consumer guarantee, several remedies may be available to the consumer. In addition to the remedies available under common law and equity, the ACL contains sections dealing specifically with remedies.

When a consumer guarantee is breached, the consumer has a right of action to seek a remedy. The consumer may seek a remedy from only the supplier if goods do not meet guarantees as to; fitness for any disclosed purpose; matching sample or demonstration model; title; undisturbed possession or undisclosed securities.

The consumer may seek a remedy from only the manufacturer if goods do not meet the guarantees as to repairs and spare parts.

The consumer may seek a remedy from both the supplier and manufacturer if goods do not meet the guarantees as to; acceptable quality; express warranties; and matching description.

2.6.3.2 Specific remedies for breach of Consumer Guarantees

Under s. 259(2)(a) of the ACL, if the failure to comply with the guarantee is not a major failure and can be remedied, the consumer can require the supplier to remedy the failure within a reasonable time. Sections 259(2)(b) and 265 make it clear that if the supplier does not do so the consumer may either reject the goods and recover the money paid, or have the failure remedied and recover the reasonable costs of doing so from the supplier. Damages for loss or damage may also be recovered (s. 259(4) ACL).

Under s. 261 of the ACL, if the consumer requires the supplier to remedy the failure, the supplier may either replace the goods with identical goods, or refund the amount paid by the consumer.

If the failure cannot be remedied, or is a major failure, the consumer can either recover compensation for any reduction in value or reject the goods (s. 259(4) ACL). Under s. 259(4) (ACL), damages for loss or damage may also be recovered.

A consumer is not entitled to reject goods unless the consumer does so within a reasonable period:

(1) after the failure became apparent – if the goods were damaged after the consumer took possession for reasons related to the failure; or

(2) if they have been lost, destroyed or disposed of by the consumer (s. 262 ACL).

If a consumer is entitled to reject the goods and does so, the consumer must return the goods to the supplier. Unless there is significant cost in doing so, in which case the supplier must collect the goods at its expense (s. 263(2) and (3) ACL). The consumer is entitled to either have replacement goods or a refund and the supplier must comply (s. 263(4) ACL).

2.6.3.3 Major Failure

A “major failure” is one where a reasonable consumer would not have acquired the goods had the consumer been fully aware of the failure as the goods are:

• unsafe; or
• substantially unfit for purpose; or
• departed significantly from the demonstration model or sample.