Breach of the implied conditions

Contributed by Ian Macdonald and Su Mahalingham and current to 1 September 2005

If the implied conditions are breached, the consumer can bring a legal claim against the seller/supplier. The Trade Practices and Fair Trading Acts set out practical steps that the consumer can take in order to obtain some kind of recompense from the seller.

WHAT CAN THE CONSUMER GET?

Sale of Goods Act

If the buyer relies on the Sale of Goods Act and sues for a breach of one of the implied obligations under that Act, the buyer must act very quickly in order to exercise rights under the Act. The buyer can rescind (cancel) the contract for a breach of the implied condition of the contract if he or she acts before accepting the goods. However if the buyer waits until after accepting the goods then the only remedy available to the consumer will be monetary compensation. This means that the buyer must proceed with the contract, that is, keep the goods. However, the consumer is not said to have accepted the goods until after having had a reasonable opportunity to examine them in order to decide whether or not they are free of defects. How much time amounts to “reasonable time” depends on the facts of each case.

Once the buyer indicates to the seller that he or she has accepted the goods, (and acceptance includes doing any act consistent with ownership), then the buyer is deemed to have accepted the goods and if the goods turn out to be defective, the only claim that the buyer can bring against the seller under the implied obligations sections of the Sale of Goods Act is one of compensation.

Trade Practices Act and Fair Trading Act

These Acts allow a contract to be ended if one of the implied obligations is breached. Section 75A of the TPA and section 41 of the Fair Trading Act set out the things a consumer must do if the consumer intends to end the contract. These sections require the consumer to:

• send to the supplier a notice in writing giving particulars of the breach of condition; or
• return the goods to the supplier and give details of the breach, either in writing or orally.

If the consumer chooses to give notice, the right to end the contract will cease where:

• the notice is not given within a reasonable time after there has been a reasonable opportunity of inspecting the goods or before the notice is served;
• the goods have been disposed of, become unmerchantable (that is unsaleable), or damaged in some way by abnormal use on the part of the consumer.

In the case of contracts ended by the return of the goods, the right to cancel the contract is lost if:

• the consumer caused the goods to become unmerchantable; or
• they were damaged by abnormal use.

The TPA and the Fair Trading Act also allow for the consumer to claim for what are called “ancillary orders”. The Acts enable the court to grant, at the request of a consumer, a wide range of orders. These orders might include such things as the payment of compensation, an order directing work to be done, as well as refunding of money or the return of property.

THE STATUTORY OBLIGATIONS VERSUS VOLUNTARY OBLIGATIONS

Frequently, where goods are seen to be defective in some way, the consumer will deal with the seller on what can be called sellers’ terms. The sellers’ terms are usually specified in a document provided with the goods or provided as part of the contract of sale, called a warranty or a guarantee (often referred to as a voluntary obligation). The seller usually specifies what it will do in the event of the goods being defective. It usually limits responsibility to a certain time frame, for example 12 months, and to certain solutions that the seller will provide, such as repair. These solutions provided by the seller, however, probably fall short of what the consumer is actually entitled to.

The implied obligations do not spell out a use-by-date after which time the consumer has no claim. So, for instance, the voluntary rights provided by the seller may state that the seller will accept responsibility for defects for a period of 12 months after the contract of sale. Under the Acts, however, there is no such use-by-date on responsibility.

The issue of whether or not the consumer has rights is very much dependent upon the nature of the defect, and whether or not the implied term has been breached, rather than whether or not a particular time frame has passed. Also, and most relevantly, the voluntary rights provided by the seller are usually limited to the seller agreeing to fix the product. This may well be a suitable solution to the problem with which the consumer may well be quite satisfied.

However, sometimes the consumer may want more than the problem fixed, he or she may want to get rid of the product as it is clearly a “lemon”. In such circumstances, if the implied obligations under the Act have been breached, the Acts provide the consumer with an opportunity to rescind the contract. Rescinding a contract means simply that the contract can be cancelled.

Of course if the contract is cancelled the seller must provide the consumer with the purchase price or a proportional amount of the purchase price back.