The Myth of Buyer Beware

Hello to the folks at whirlpool reading this… hope you find it helpful… – diomedes

I have always had a problem with the statement, it implies every one you do a transaction with is or could be shonky and well I just hate feeling like that’s the case.  It’s akin to the glass is half empty and most people that know me know how much I despise that view.

So to you the consumer I say buy with confidence and if something comes up then take solace in knowing you have the tools and protections to deal with them.

In Australia we are blessed to have the Trade Practices Act 1974 for transactions prior to January 2011 and for those new transactions we now have the Australian Consumer Law 2010 which provides greater protections while clearing up some ambiguities of the TPA.

What do these rights really mean to you?  At the heart of any transaction is the “contract”, we often don’t think of them like that as a consumer but that’s exactly what they are and all contracts have terms.  All contracts should have terms that align themselves with each party to the contact.

When you buy a house or enter into other financial arrangements you would generally sit down with the other party and hash those out, however when buying consumer goods this really doesn’t happen and you are left with terms as set down by the vendor leaving you without much of a say about anything other then to accept their terms.

It is the job of the TPA and now the ACL to be your voice in these contracts and set down binding terms on the vendor.  I should also point out that for the sake of the Act consumer rights generally apply to goods and or services not exceeding $40,000, but there are acceptions to this and it’s best to check your circumstances.

I live by two hard and fast rules when buying anything, never pay list price and never buy an extended warranty.  Extended warranties aren’t worth the paper they are written on as they are redundant, you already have ample protections that extend past the manufacturers expressed voluntary warranty period.

So lets talk about this for a moment, when you buy some kind of goods lets say white goods for example and the manufacturer says they provide a 12 month warranty this is the voluntary expressed manufacturers warranty.  However under the act your rights as a consumer  are compensatory with what you paid for it and what any reasonable person would expect.

This is outlined on page 10 of the Warranties and Refunds document from the Australian Competition & Consumer Commission which states;

How long do consumers’ statutory rights apply?

Statutory rights are not limited to a set time period. Instead, they apply for the amount of time that is reasonable to expect, given the cost and quality of the item.

This means a consumer may be entitled to a remedy under their statutory rights after any manufacturers’s voluntary or extended warranty has expired.

So when you as a consumer purchases an appliance or other goods that cost say $1000 and it comes with a 12 months manufacturers warranty and then those goods fail after say 18/24 months the manufacturer will by default tell you sorry it’s out of warranty and this is where your Statutory rights kick in as in the contract of sale you have an implied Statutory warranty.

The basis comes down to would a reasonable person expect this $1000 item to last longer then 18/24 months, and if so how long would a reasonable person expect the item to last and if they had known it wouldn’t last that long would they have made the purchase in the first place.

So when you write to the manufacturer to ask for your claim to be assessed it is important you tell them you are not claiming under their manufacturers warranty but your implied statutory warranty;

The item must be of merchantable quality when you purchased it, meaning it must meet basic levels of quality and performance that would be reasonable to expect considering it’s price, the manner in which it was promoted and the amount of usage it has provided over the period of time it has been in service.

The amount of benefit the item has provided being taken into consideration you believe the manufacturer is in breach of the sales contract and statutory terms provided under the law as outlined in No.51 – Section 71 and No.51 – Section 66 of the Trade Practices Act 1974.

Lets look at these two sections of the act as they both support our main contention that all goods must be of merchantable quality and fit for the purpose or purpose for which goods of that kind are commonly bought as it is reasonable to expect.

Section 71;

(1) Where a corporation supplies (otherwise than by way of sale by auction or sale by
competitive tender) goods to a consumer in the course of a business, there is an implied condition
that the goods supplied under the contract for the supply of the goods are of merchantable quality, except that there is no such condition by virtue only of this section –

(a) as regards defects specifically drawn to the consumer’s attention
before the contract is made; or

(b) if the consumer examines the goods before the contract is made, as
regards defects which that examination ought to reveal.

(2) Where a corporation supplies (otherwise than by way of sale by auction or sale by competitive
tender) goods to a consumer in the course of a business and the consumer, expressly or by
implication, makes known to the corporation or to the person by whom any antecedent
negotiations are conducted any particular purpose for which the goods are being acquired, there is
an implied condition that the goods supplied under the contract for the supply of the goods are
reasonably fit for that purpose, whether or not that is a purpose for which such goods are
commonly supplied, except where the circumstances show that the consumer does not rely, or that
it is unreasonable for him to rely, on the skill or judgment of the corporation or of that person.

In part one of  section 71 it clearly states good must be of merchantable quality this forms the back bone of the statutory warranty and is expanded upon later.  Then part two of section 71 is that any expressed or implied use you may have for the item that you convey to the manufacturer or their agents with whom you are negotiating form part of the terms of the contract.

What this means is if you buy an item and intend to use it in a non standard fashion outside the manufacturers normal operating methods and they still sell it to you without declaring it can not be used that way they are indirectly saying it’s fit for that purpose and it becomes a binding term of the sales contract.

Section 66;

(1) In this Division-

(a) a reference to the quality of goods includes a reference to the state or condition of the goods;

(b) a reference to a contract does not include a reference to a contract made before the
commencing date;

(c) a reference to antecedent negotiations in relation to a contract for the supply by a
corporation of goods to a consumer is a reference to any negotiations or arrangements
conducted or made with the consumer by another person in the course of a business carried on by
the other person whereby the consumer was induced to make the contract or which otherwise
promoted the transaction to which the contract relates; and

(d) a reference to the person by whom any antecedent negotiations were conducted is a
reference to the person by whom the negotiations or arrangements concerned were conducted or

(2) Goods of any kind are of merchantable quality within the meaning of this Division if they are as
fit for the purpose or purposes for which goods of that kind are commonly bought as it is
reasonable to expect having regard to any description applied to them, the price (if relevant) and
all the other relevant circumstances.

This is actually my favorite section of the act as it deals with the marketing smoke and mirrors manufacturers and retailers use to induce sales while trying to leave them external to the sales contact.  All of part one of section 66 deals with presale negations and representations.  From literature a manufacturer produces making claims of quality and life cycle to conversations you have with sales stuff who tell you this product is the best on the market fully engineered in Germany.  These references and dealings also form a term of the sales contract in the form of an expressed warranty under the act as they have made direct representations to you that help you form your purchase choice.

Saving the best for last is part two of section 66 which expands on part one of section 71, not only does it again make plan that goods have to be of merchantable quality and fit for purpose but it also adds the reasonable expectation.

Reasonable expectation cuts both ways, in that there is no time limit applied as we saw earlier from the ACCC but what does have to be taken into consideration is the amount of benefit provided.  The act takes the stance that if two people buy the same item they both can reasonable expect to receive the same benefit outcome for the item regardless of time.

What that means is if person A buys an electric mixer and uses it every day while person B buys the same electric mixer and only uses it once a week but person B’s mixer fails after 13 months while person A’s still works they have not both enjoyed the same benefit and under the act person B can reasonable expect the mixer to have lasted longer and is entitled to remedy under the act regardless of the manufacturers expressed voluntary warranty.

Time to recap as that is a lot to take in.  Lets look at this scenario and I hope it drives home your rights as a consumer in Australia.

Sue goes into her local white goods retailer to purchase a new washing machine, the sales person John tells Sue that Brand X is of the highest quality and would serve her family well for years to come.  This sales pitch which induces Sue to enter in the contact to buy the washing machine is protection number one by way of an expressed warranty under the act.

Sue happily purchases Brand X washing machine from John for the princely sum of $1249 which comes with a manufacturers voluntary expressed 12 months warranty, this is protection number two.

John attempts to sell Sue a 36 month extended manufacturers warranty for $139 however Sue declines this as she can’t afford it and anyway what type of washing machine doesn’t last 36 months?  After all John said it was of the highest quality which forms protection number three by way of an implied statutory warranty under the act.  Given the value of the item,  the quality and the amount of benefit a reasonable person would expect to receive from such an item.

Sue comes out to her washing machine one Saturday 18 months from the day she purchased it to find it no longer works, she rings John who tells her sorry Sue you should have purchased that extended warranty as the washing machine is now out of it’s manufacturers warranty and she’d have to get it repaired at her cost or buy a new one.

Sue knowing her rights and Johns obligations under the act thanks John for his time and then sits down and pens a letter to John stating that she is not asking for her claim for remedy to be assessed under the manufacturers expressed warranty as it has expired but under her statutory warranty as provided by TPA discussed above, Sue kindly asks for the matter to be resolved within 10 business days.

John after the initial denial wheres off learns a lesson about consumer rights and then offers to Sue to have the washing machine repaired, replaced or refunded which ever is the most applicable, but should John still refuse after Sue’s letter Sue then contacts her states office of fair trading who will then make things happen rather quickly.  A complaint with all documentation to the ACCC also works wonders.

I have spoken a lot about the Trade Practices Act 1974 here and not a lot about the Australian Consumer Law this is really due to most people won’t be affected by the ACL yet and the same rights and protections are covered in both with the ACL referring to these as the consumer guarantee’s.

Never ever pay for an extended warranty and never put up with the spin from a retailer or manufacturer, you have rights, learn them and use them.

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