Consumer rights Reforming statutory implied conditions and warranties

7 Difficulty in enforcement

Key points The contractual remedies available for breach of an implied term may be elusive to consumers without knowledge of the law of contract, and should be replaced by statutory remedies for breaches of statutory consumer guarantees. Consumer agencies play an important role in educating consumers and businesses, and in taking action where consumers are misled about their rights. Mechanisms for enforcing the statutory guarantees must be accessible if they are to be effective. Australian governments should work to make small claims court and tribunal processes efficient, timely, low cost and — as much as possible — uniform across jurisdictions.

A right without a remedy is no right at all. Rights only acquire substance insofar as they are backed by effective remedies. If consumers have no means of securing timely and cost effective remedies, their consumer rights are, ultimately, of little value.

Certainly, there are remedies available for breach of an implied term. These remedies are discussed in the Issues Paper and, briefly, below. However, where these remedies are so remote and inaccessible for consumers that formal action to obtain the remedies is rarely taken, the existence of those remedies may not provide a strong incentive for retailers to honour consumer rights.

Existing remedies for implied terms

Contractual rights

Part V, Division 2 of the TPA implies terms — both conditions and warranties — into contracts for the supply of goods or services to consumers. Consequently, remedies for the breach of these terms lie in the general law of contract and not, for example, in the provisions of Part VI of the TPA.⁹⁷ The same is the case for the various state and territory FTAs and SGAs that imply terms into contracts. There are generally no clear and explicit statutory remedies for breaches of implied terms.

Depending on the nature of the breach and of any losses suffered as a result of the breach, remedies available for breach of an implied term may include termination, damages, and various equitable remedies. Damages are the usual remedy for breach of contract, on the basis that the payment of money is often adequate compensation for any loss flowing from the breach.

Section 75A of the TPA creates a statutory right to rescind a contract where there has been a breach of a condition implied by Part V, Division 2. As Professor Carter noted, this right to ‘rescission’ is potentially confusing, since it does not conform with the traditional understanding of rescission as the winding back of contracts as if they had never occurred.⁹⁸ Rather, section 75A adopts the looser usage of ‘rescission’ as indicating the exercising of a right to terminate for breach or repudiation.⁹⁹

Statutory rights

Part V, Division 2A of the TPA creates express statutory rights of action against manufacturers and importers of goods where the goods are unmerchantable, are unfit for specified purposes or do not correspond with description or sample, and where the manufacturer or importer does not comply with an express warranty.

Unlike the implied terms, the statutory rights of action themselves specify the remedy available: compensation. Where a corporation supplies to a retailer goods which contravene a provision of Division 2A, and a consumer of those goods suffers loss or damage as a result, the corporation is liable to compensate the consumer for that loss or damage.

However, like the implied terms, the remedies provided for in Part VI of the TPA are not available when a provision of Division 2A gives a consumer a right to action. Conduct which gives a consumer the right to compensation is not conduct which contravenes Part V of the TPA, which is the trigger for the availability of remedies such as injunctions under section 80 or damages under section 82.¹⁰⁰

Alternative remedies

It should be noted that the remedies often associated with breaches of implied terms — repair, replacement and refund —are not necessarily provided for under the statutory regime. Section 75A provides for refunds for goods where a contract has been rescinded for breach of a condition. However, refunds are not available more generally (including in relation to services), and there is no statutory right to replacement or repair in the TPA. These ‘remedies’ may be offered by retailers or manufacturers to settle consumer complaints about breaches of implied terms or statutory rights.

Some submissions to CCAAC suggested that the range of remedies available for breaches of implied terms should be expanded. For example, Dr Nottage considered that rights to repair and replacement should be introduced into Australian law, in much the same way as it is available under section 23 of the CGA.¹⁰¹ Dr Nottage points to the 1994 recommendation of the Australian Law Reform Commission (ALRC) to amend section 75A to allow consumers the right to seek replacement goods.¹⁰² Alternatively, Mr Spier suggested that rescission should be made available at any stage in the contractual relationship, and that the guiding principle for remedies should be to return the purchaser to the pre purchase position.¹⁰³

Conversely, some submissions suggested very strongly that the current regime, which makes contractual remedies available, continued to be the most appropriate mechanism for providing consumers with redress. The ARA, for example, ‘believes the current defined remedies for breaches of statutory implied warranties are sufficient and any expansion … would allow for an abuse of process and claims of compensation’.¹⁰⁴ While the LCA provides some cautious support for extending the scope of section 75A (perhaps to include a right to replacement at the supplier’s option), its belief is that the existing remedies for breaches of implied terms are adequate.¹⁰⁵

On balance, CCAAC agrees with the ALRC’s 1994 recommendation that replacement be introduced into the implied terms regime as an available remedy. Where appropriate, and subject to availability, a replacement may be the best means of providing consumers with the goods they intended to buy. The choice of whether to pursue a refund or replacement should be the consumer’s, provided a replacement is reasonably available. Further, retailers should be free to continue to offer to repair goods in satisfaction of a consumer guarantee, although this need not be recognised in the legislation.

No matter what remedies are available to consumers, CCAAC considers that they should be spelled out clearly, on the face of the legislation, for each consumer right, rather than leaving consumers to consult the law of contract to determine the remedies to which they are entitled.