While businesses are grappling with the myriad of issues arising from the coronavirus, businesses must also be mindful that consumers are also scrambling to know their rights when it comes to goods and services. As we have said in our blogs in recent days, these are indeed unprecedented and challenging times. However, it is important that all businesses are reminded that they still must abide by the Australian Consumer Law and its related regulations.

This article looks at some of the provisions of the Australian Consumer Law that businesses must keep in mind in the context of COVID-19.

“What are the statutory consumer guarantees?”

Businesses must ensure, as they come to grips with the reality of COVID-19, that consumer guarantees may still apply to goods and services. That is, the Australian Consumer Law is still in force, regardless of the particular circumstances that are arising during these extraordinary times.

The ability to comply with the Australian Consumer Law (‘the ACL‘) will be challenging for businesses, especially with the mandatory cancellations of events, the forced closure of shops, and the ever increasing measures that the Australian Government is taking to curb the virus in this country. However, we must advise businesses that they are to familiarise themselves with the various consumer guarantees, found in Division 1 of Part 3-2 of the ACL. These consumer guarantees apply regardless of any written terms and conditions entered into between a business and its customers and still apply during this pandemic.

The statutory consumer guarantees require service providers to guarantee that they will:

  • provide the services with due care and skill;
  • ensure that the services fit for any specified purpose (express or implied); and
  • ensure that those services are provided within a reasonable time (when no time is set).

The ACL applies to services that are for an amount of $40,000 or less, or the services are the kind normally acquired for personal, domestic or household use or consumption.

A contract or agreement for the supply of services usually states when the services will be provided and the date they will be completed. If not, the supplier guarantees to supply the service within a reasonable time. What is ‘reasonable’ will depend on the nature of the service and other relevant factors such as the weather, for example, if services are being performed in outdoor areas.

Except in limited circumstances, the guarantees cannot be excluded, modified or limited by contract, and any contractual term purporting to do so is void. In other words – you have to comply with these guarantees. Its the law.

“What happens when these consumer guarantees are not met?”

If, as a service provider, you sell a customer a service that fails to meet one or more of the consumer guarantees, that consumer may be entitled to a remedy – for example, a refund, a further service to rectify the problem and in some circumstances compensation for consequential loss. The service provider must then provide the appropriate remedy.

If the problem is minor and can be fixed, you can choose how to fix the problem. The consumer cannot cancel and demand a refund immediately. You must have an opportunity to fix the problem.

If the problem is major or cannot be fixed, the consumer can choose to:

  • terminate the contract for services and obtain a full refund, or
  • seek compensation for the difference between the value of the services provided compared to the price paid.

A purchased service has a major problem when it:

  • has a problem that would have stopped someone from purchasing the service if they had known about it;
  • is substantially unfit for its common purpose, and can’t easily be fixed within a reasonable time
  • does not meet the specific purpose the consumer asked for and can’t easily be fixed within a reasonable time;
  • creates an unsafe situation.

As you can well imagine, many of the implications of COVID-19 on the provision of services would be considered as “major”. As such, it is absolutely critical that businesses take the complaints of their customers or clients with the seriousness that they deserve, as liability under ACL may exist.

“What happens if a service or an event that my business runs or is involved in is cancelled due to this pandemic?”

If a service or event is cancelled due to COVID-19, or if it goes ahead, but in a manner different than that which was reasonably expected by the consumer, then your business may need to remedy or rectify the situation. However, it is important to note that businesses may not necessarily need to remedy or rectify in circumstances where the supply of the service or goods are impacted by an issue independent of human control after the services were supplied. 

There is a lot to unpack there, however businesses may be reassured that when referring to the word “supply”, this can also mean the planned future supply of those services.

It is best to get specific legal advice regarding your situation, but what we can say is that COVID-19 may be considered an issue that is independent of human control. Accordingly, if you have arranged for the supply of services in the future, and it appears that you cannot provide services which are fit for the purpose or within a reasonable time to supply, you may escape having action taken against you by a consumer for being able to supply that service, whether it be now or in the future.

When providing advice to you in relation to the above, we are likely to ask you the following:

  • Was the service being provided impacted by a mandatory legal barrier to perform that service, such a Government imposed restriction on trade? If this is the case, it is unlikely that consumer guarantees will be accessible to consumers who are impacted by you not being able to provide those services.
  • Is your business still able to perform services, but the business is choosing to cancel a service or event due to COVID-19? In this instance, it may be that the consumer has the ability to cancel the provision of those services and have access to various remedies under the ACL, such as a refund;
  • Has your business offered the service but the customer has indicated that they do not wish to proceed with the service? In this instance, the business is well within their rights to treat this in a similar manner as they would where a client has “changed their mind”. If your terms and conditions deal with a “change of mind”, then those terms and conditions are to be applied. Where your terms are silent, or if you do not have terms at all, you are likely to not need to offer a refund under statutory consumer guarantees.

We want to emphasise however that you should seek specific legal advice to be sure that you are not in breach of the statutory guarantees within the ACL. A wrong decision may be costly, and may be an unwanted distraction in these difficult times.

“What happens if I need to give a refund but don’t want to (or cant) hand over the money right now?”

While we all wish we’d kept money aside “for a rainy day”, the reality is that no one could have predicted this kind of event would happen at the time they contracted with the consumers to provide the services.

One of the key pieces of advice we are offering to our clients right now is that while it is important to be aware of the legal issues, you must always take into account the relationship that you have with your customer base. Where you have the money to give a refund, and you are legally obliged to do so, then you should do so. People will remember those businesses who treated their customers right, even in the most difficult of times. In instances where you fear you cannot pay those refunds, we recommend that you open up the communication lines with your customers to find a solution, or work out a plan to have the money returned to them in increments. When in doubt, speak with your accountant or your bank to see whether you are able to access the various financial assistance that the Federal Government has announced with respect to business support.

If you have any questions in relation to the above, please do not hesitate to contact Kathryn Adams on 0452 614 454 or at kathryn@hallettlaw.com.au.