Consumer rights Reforming statutory implied conditions and warranties

3 State and territory legislation

All States and Territories have enacted legislation to impose obligations on suppliers or sellers of goods by implying certain terms into contracts.³³ NSW, Victoria, WA, SA and the NT have also enacted legislation to imply certain non excludable terms into consumer contracts.³⁴

The 15 different statutes that govern implied terms law across Australia are either based on the TPA or are to similar effect. A summary of the provisions in each jurisdiction is in Appendix F.

While there is substantial consistency between the various Australian regimes in relation to the nature and scope of the implied terms, there are material differences in coverage, application and remedies with some significant impacts for consumers.

The most basic difference between jurisdictions is that state and territory laws apply to goods or services supplied by a person (whether an individual or a corporation), whilst the TPA provisions apply to individuals only to a limited extent. This difference is the result of the limited powers of the Commonwealth under the Constitution. There are also differences in the application of the statutory implied terms between each jurisdiction, which depend on the nature of the goods or services supplied or the monetary value of those goods or services. Further details about these differences are provided in the Application section of this chapter.

A summary of the key differences between the regimes across jurisdiction is in Appendix G.

Implied terms³⁵

Implied terms relating to title, quiet possession and encumbrances (TPA section 69)

Each jurisdiction has an implied term that the seller has the right to sell the goods, that the goods will be free from encumbrances not disclosed and that the consumer will enjoy quiet possession of the goods. Supply must be to a ‘consumer’, but there is no requirement for the seller to be acting in the course of a business. There are no significant impacts for consumers arising from the different formulations of the provisions.

The key differences between the jurisdictions’ provisions are:

• 
  In Queensland, Tasmania and the ACT the term is implied under the relevant Sale of Goods Act (SGA) and can be excluded.
  

The SGAs are also narrower in their operation because they apply only to the ‘sale’ and not the ‘supply’ of goods and therefore do not cover goods supplied through a lease, hire purchase or exchange.

Implied terms relating to supply by description (TPA section 70)

Each Australian jurisdiction has an implied term that goods will correspond with their description and, if the supply of goods is by reference to description and sample, also correspond with the sample. The terminology and formulation of the sections across the jurisdictions are uniform.

The key differences between the jurisdictions’ provisions are as follows:

• 
  In Queensland, Tasmania and the ACT the term is implied under the relevant SGA, and only applies to the ‘sale’ not the ‘supply’ of goods.
  
• 
  The NSW, WA and NT Fair Trading Acts (FTAs) require the supply to be in the course of a business — the SA and Victorian legislation does not.
  

Implied terms relating to supply by sample (TPA section 72)

Each jurisdiction has an implied term to the effect that where a contract has a provision that goods are supplied by reference to a sample:

• 
  the bulk of the goods will correspond with the sample in quality;
  
• 
  the consumer will have a reasonable opportunity of comparing the bulk with the sample; and
  
• 
  the goods will be free from any defect rendering them unmerchantable that would not be apparent on a reasonable examination of the sample.
  

The key differences between the jurisdictions’ provisions are:

• 
  In Queensland, Tasmania and the ACT the term is implied under the relevant SGA, and only applies to the ‘sale’ not the ‘supply’ of goods.
  
• 
  The NSW, WA and NT FTAs require the supply to be in the course of a business — the SA and Victorian legislation does not.
  
• 
  In NSW, WA and the NT, the provisions follow the TPA formulation.
  
• 
  There is no separate provision in the SA Consumer Transactions Act 1972 (CTA). However, the SGA has a similar provision applying to the sale of goods, but the provision can be excluded.
  
• 
  In Victoria, the implied term will only apply if the buyer is shown a sample of the goods and is induced to buy the goods or goods of a similar kind. In the case of the third implied term outlined above (that goods are free from a defect rendering them unmerchantable), the buyer must also establish that they were not aware of any defect at the time the contract was made.
  

Implied terms relating to quality and fitness (TPA section 71)

Quality

Under the TPA, there is an implied term that goods are of merchantable quality, except in relation to defects specifically drawn to the consumer’s attention before the contract is made or, if the consumer examines the goods before the contract is made, in relation to defects which that examination ought to reveal. ‘Merchantable quality’ is defined in subsection 66(2) to mean that goods are fit for the purpose(s) 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, and all other relevant circumstances.

The key differences between the jurisdictions’ provisions are as follows:

• 
  In Queensland, Tasmania and the ACT the term is implied under the relevant SGA, and only applies to the ‘sale’ not the ‘supply’ of goods.
  
  • 
    Under the SGAs, terms as to quality will only be implied if the consumer establishes certain circumstances. This may make proof of breach more difficult.
    
• 
  The TPA provision is mirrored in NSW, WA and the NT except that it applies to the supply of goods by a person as well as a corporation.
  
• 
  The NSW, Victorian, WA and NT FTAs require the supply to be in the course of a business — the SA legislation does not.
  
• 
  In SA and Victoria, there are additional criteria in the definition of merchantable quality to those outlined in subsection 66(2) of the TPA, such as the price of the goods, the terms and conditions of the contract of supply and the apparent condition of the goods on delivery. The Victorian consumer legislation also gives the relevant court or tribunal a wide discretion to consider ‘all other relevant circumstances’.
  

Fitness (TPA section 74B)

The TPA provides that, where goods are supplied in the course of a business by a corporation and the consumer makes known a particular purpose for which the goods are being acquired, there is an implied condition that the goods are reasonably fit for that purpose. It is immaterial whether or not that is a purpose for which such goods are commonly supplied, except where the consumer does not rely or it is unreasonable to rely on the skill or judgment of the supplier.

The key differences between the jurisdictions’ provisions are as follows:

• 
  In Queensland, Tasmania and the ACT the term is implied under the relevant SGA, and only applies to the ‘sale’ not the ‘supply’ of goods.
  
  • 
    Under the SGAs, terms as to fitness for purpose will only be implied if the consumer establishes certain circumstances. This may make proof of breach more difficult.
    
• 
  The TPA provision is mirrored in NSW, WA and the NT except that it applies to the supply of goods by a person as well as a corporation.
  
• 
  The NSW, Victorian, WA and NT FTAs require the supply to be in the course of a business — in SA, the provisions require that the goods be of a description which it is in the course of the supplier’s business to supply.
  
• 
  Under the NSW, Victorian, WA and NT FTAs, where a consumer makes known a particular purpose for which goods are acquired, the term will be implied except where the consumer does not rely on the supplier or it would be unreasonable to rely on the skill or judgment of the supplier. In contrast, a consumer in SA is required to show reliance on the skill and judgment of the supplier.
  

Implied terms relating to services (TPA section 74)

The TPA includes the following implied warranties (but not conditions) relating to supply of services by a corporation in the course of a business:

• 
  services will be rendered with due care and skill and any material supplied with the services will be fit for the purpose — subsection 74(1); and
  
• 
  where the consumer makes known a particular purpose for which the services are required, or the result that the services are desired to achieve, the services will be reasonably fit for that purpose — subsection 74(2).
  

The key differences between the jurisdictions’ provisions are as follows:

• 
  The NT and WA provisions mirror the TPA provisions.
  
• 
  In NSW the provisions are substantially the same but do not exclude contracts in relation to the transportation or the storage of goods for the consumer’s business or contracts of insurance.
  
• 
  In Victoria, the implied terms are conditions, not warranties as in the other jurisdictions.
  
• 
  In SA, the provisions are similar to NSW and Victoria but domestic building work is excluded.³⁶
  
• 
  There are no equivalent provisions in Tasmania or the ACT.
  
• 
  In Queensland, there are no provisions implying warranties for services generally, however, there are warranties implied into domestic building contracts.³⁷
  
• 
  Recreational services may be excluded, restricted or modified under the TPA and in Victoria and the NT — this is not the case for the other jurisdictions.