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Small Businesses and Consumer Laws

As a small business owner, you should be aware of the consumer laws that protect your customers and your business. Competition and Consumer Act 2010 (Cth) deals with how all businesses in Australia must deal with their customers, competitors and suppliers and The Australian Consumer Law (ACL) is schedule 2 to the Act. These laws include rules about consumer guarantees, refunds, and advertising. Knowing and following these laws can help you avoid legal problems and maintain a positive reputation with your customers. This article provides an overview of some of the most frequently triggered consumer laws.

 

    1. Protections of Australian Consumer Law (ACL)
     

The Australian Consumer Law (ACL) was expanded in July 2021 and small businesses are the main beneficiaries. ACL protects both you as a business owner, but also your clients who receive goods or services from you!  Here is quick run-down of some of your rights under the ACL:

Consumer Guarantee:

You are considered a consumer and entitled to consumer guarantee when you buy goods and services for:

  1. Under $100k
  2. Over $100k and normally bought for personal. Domestic or household use or consumption
  3. Vehicles and trailers used mainly to transport goods on public roads.

Your business will be considered a consumer and entitled to consumer guarantees.

Note:  Consumer guarantees do not apply if goods are purchased to be resold.

You might wonder what these consumer guarantees are. Consumer guarantees are promises under the ACL that businesses cannot contract out of. Examples of consumer guarantee in relation to goods and services are as follows:

  • Goods must
  • Be of acceptable quality
  • Be fit for purpose
  • Come with full title/not carry any hidden debts/charges
  • Match their description or demo model
  • Meet any promises
  • Services must
    • be provided with due care and skill
    • Be fit for purpose
    • Be provided within a reasonable time (if no time set)
     

What happens if a guarantee is breached, for example if goods are faulty?

Remedies for breach of consumer guarantees depend on the extent of the problem.

In case of a major problem, the consumer has the choice between

  1. Reject the good or service and obtain a full refund or replacement. or
  2. Keep the goods/contract for services and seek damages.
 

If the problem is minor, the supplier of goods can choose to provide a replacement, refund or repair free of charge. If the problem with services is minor, the consumer must give the supplier an opportunity to fix the issue free of charge.  The consumer cannot cancel the contract.

  1. Your obligations (only some of them)
 

Obviously as a small business owners you have obligations. Keeping abreast of your obligations ensures you are in compliance avoiding any legal headaches down the path. Some of your obligations are:

    • You must provide a receipt if a consumer requests one, or if the transaction is over $75.
    • Your advertising material, and any statements made by your business must be accurate and truthful. Examples of misleading statements/activities are fake reviews and endorsements. Please note that business puffery is fine.
    • Displaying prices – you must present the total cost to your client. For example $60 + GST, or $40 per hour plus $3 equipment fee. You cannot advertise your services for $40 per hour and then charge the client for $43 adding the non-disclosed $3 equipment fee.This is not applicable to business-to-business transactions.
    • You can add a surcharge on certain payments but the surcharge cannot exceed your cost of accepting that payment. Usual costs for accepting payments are: Bank feeds, Gateway fees, Terminal fees, Fraud protection insurance.
    • You cannot hang a sign that says: “No refunds” or “No refunds on sale items” or “Exchange or credit note only for the return of sale items”.
     
  1. What you are allowed to do (again only some):
 
    • Your prices are for you to setup, including any discounts. Your suppliers cannot force you to accept their recommended retail price.
    • Business puffery is allowed. Puffery is a statement that is a clear exaggeration for example ‘Come here for the best coffee in Sydney’ and that is legal.
    • You do not have to provide a refund if a consumer has simply changed their mind.
    • You can hang a sign that says: “no refund for change of mind.”
     
  1. Unfair Contract Terms
 

As a small business owner, you are covered against unfair contract terms. But what is an unfair contract term? An unfair contract term is a term only to be found in standard form contracts. Standard form contracts are agreements prepared by one party where the other party has had little or no opportunity to negotiate the terms.

A term may be unfair if it enables one party (and not the other) to:

    • Vary the terms of the contract
    • Automatically renew the contract without the other party’s express consent
    • Avoid or limit their obligations under the contract
    • Terminate the contract
    • Penalise the other party for breaching the contract
     

If a term is considered unfair by a court, it will be voided.

If you’re a small business owner, it’s important to be aware of your rights and obligations under Competition and Consumer Laws. Contact our team of experts for legal advice if you have any questions or need help complying with the law.

Disclaimer:

This is NOT legal advice and should NOT be relied as such.

For legal queries, please contact us on 02 8014 5818 or email info@checkslaw.com.au.

Tags :

commerciallaw,company law,consumer protection

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