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ACL Major Failure

So why does the ACL use the term “Major Failure”?

 260  When a failure to comply with a guarantee is a major failure

A failure to comply with a guarantee referred to in section 259(1)(b) that applies to a supply of goods is a major failure if:

(a) the goods would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure ; or

(b) the goods depart in one or more significant respects:

(i) if they were supplied by description—from that description; or

(ii) if they were supplied by reference to a sample or demonstration model—from that sample or demonstration model; or

(c) the goods are substantially unfit for a purpose for which goods of the same kind are commonly supplied and they cannot, easily and within a reasonable time, be remedied to make them fit for such a purpose; or

(d) the goods are unfit for a disclosed purpose that was made known to:

(i) the supplier of the goods; or

(ii) a person by whom any prior negotiations or arrangements in relation to the acquisition of the goods were conducted or made; and they cannot, easily and within a reasonable time, be remedied to make them fit for such a purpose; or

(e) the goods are not of acceptable quality because they are unsafe.

 Telstra Corporation Ltd., Submission to Economics Legislation Committee, Inquiry into the Trade Practices Amendment (Australian Consumer Law) Bill (No. 2) 2010 [Provisions], 16 April 2010.

 The submission from Telstra considered there should be ‘greater clarity of new and unfamiliar terms (such as major failure)’ on the grounds that:

... it is defined by use of terms that are new and in respect of which there is no jurisprudence. For example, when would a consumer be ‘fully acquainted’ with the nature and extent of the failure? When does a good ‘depart significantly’ from its description? The [Explanatory Memorandum] gives the example of a red bicycle, stating that a red bicycle might depart significantly from a green bicycle. Is the fact the bicycle actually works properly not relevant to whether there is a ‘significant departure’ or not? If a handset includes all major functions (for example you can make calls and SMS) but is missing an ancillary function that is referred to in the technical specification for the handset, such as a news or weather shortcut or application, would that be a ‘significant departure’? In whose view does there need to be a ‘significant departure’? Is the assessment quantitative or qualitative? Questions such as these need to be clarified and are of critical importance so that consumers and businesses are able to readily assess whether a failure is major or not major, as it will dictate the appropriate remedies and redress.


Senate Committee recommendation

In response to these valid concerns, the Senate Committee recommended that the ACCC and consumer regulators should issue national guidance in relation to the new consumer guarantees to ensure regulators, consumers and businesses have a consistent understanding of their new rights and responsibilities.

 Proposed provisions when the Bill was discussed in parliament.

 The remedies which are available to a consumer, when consumer guarantees are not complied with, are set out in proposed sections 259–266 of the Bill. The Bill refers to failures to comply with consumer guarantees in respect of goods as either major or minor failures. The applicable remedy depends on which guarantee has not been complied with, and whether the failure to comply is of a major or minor nature.

 As in above paragraph, FAILURE is always referring to the Failure to comply with a Guarantee not a FAULT that develops in the appliance.

Minor Failure was dropped from the legislation and there is now either a Failure to comply, or a Major Failure to comply, with a Guarantee. That is what is defined in Section 260.

263 Consequences of rejecting goods

(1) This section applies if, under section 259, a consumer notifies a supplier of goods that the consumer rejects the goods.

(2) The consumer must return the goods to the supplier unless:

(a) the goods have already been returned to, or retrieved by, the supplier; or

(b) the goods cannot be returned, removed or transported without significant cost to the consumer because of:

(i) the nature of the failure to comply with the guarantee to which the rejection relates; or

(ii) the size or height, or method of attachment, of the goods.

(3) If subsection (2)(b) applies, the supplier must, within a reasonable time, collect the goods at the supplier’s expense.

(4) The supplier must, in accordance with an election made by the consumer:

(a) refund:

          (i) any money paid by the consumer for the goods; and

(ii) an amount that is equal to the value of any other consideration provided by the consumer for the goods; or

(b) replace the rejected goods with goods of the same type, and of similar value, if such goods are reasonably available to the supplier.

(5) The supplier cannot satisfy subsection (4)(a) by permitting the consumer to acquire goods from the supplier.

(6) If the property in the rejected goods had passed to the consumer before the rejection was notified, the property in those goods revests in the supplier on the notification of the rejection.


the nature of the failure to comply with a Guarantee – for example, has the product developed a fault from a cause independent of human control that occurred after the goods left the control of the manufacturer or supplier?

the extent of the failure to comply with a Guarantee - How wide spread is the problem? Is this problem known to the supplier or the manufacturer?