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Interaction between warrantiesand consumer guaranteesA warranty does not change yourresponsibilities under the ACL. Consumerguarantees cannot be replaced, limitedor removed by any agreement, contractor warranty. Consumer guarantees applyfor an unspecified but reasonable period,to be determined by a range of factors,including the nature and cost of thegoods. The consumer guarantees applyin the same way regardless of whethera vehicle is covered by a manufacturer’swarranty, an express warranty or anextended warranty, and consumerguarantees may continue to provideprotections after warranties have expired(warranties are discussed further atpage 20).When explaining customers’ rights underwarranty, you should be careful not torepresent that customers have no otherlegal right to address a defect. To ensureyou do not risk breaching the ACL whendealing with your customers, you shouldensure that consideration of customers’consumer guarantee rights and yourobligations as either a manufactureror dealer are embedded in all systems,policies and procedures that make upyour complaints handling system. Anupdated complaints handling system will,as a matter of best practice, help ensurethat a consumer’s statutory rights underthe ACL are given due consideration atthe outset of responding to a claim.Figure 1: Remedies from consumer guarantees and warrantiesConsumer guaranteesConsumer hasconsumer guaranteerights (which may bemore extensive thanwarranty rights)e.g. if a major failureoccurs outside ofwarranty period.WarrantyConsumer hasrights underconsumerguaranteesand warranty.Consumer haswarranty rights(which may bemore extensivethan consumerguarantee rights).No right available (e.g because the problem was casued by consumer misuse).A guide to Australian consumer law —Motor vehicle sales and repairs9

Example 1:A vehicle that was just over three yearsold suffered from a manufacturingdefect that resulted in excessive jerkingand shuddering when accelerating tosuch an extent that the vehicle was notdrivable. The vehicle was substantiallyunfit for its normal purpose becausedespite many attempts at a repair, thedealer could not permanently fix theissue (see also discussion about ‘majorfailure’, at page 12). The vehicle hasfailed to meet the consumer guaranteeof acceptable quality. As the vehicleis not drivable, the failure wouldconstitute a major failure to complywith a consumer guarantee.The dealer cannot avoid providing aremedy merely because the problemoccurred one month after the expiry ofthe manufacturer’s three year warrantyperiod applicable for that vehicle(or 1000 kms after the 100 000 kmwarranty distance, as the case maybe). If the defect is a manufacturingdefect, then the consumer mayreject the vehicle and ask whoeversupplied the vehicle (e.g. the dealer)to provide the consumer’s choice of arepair, replacement or refund underthe consumer guarantee provisions,regardless of whether the warrantyhas expired.There are several factors that make itreasonable for a consumer to reject avehicle in response to a major failure(and seek a refund/replacement), morethan three years after purchase. Thesefactors include that the consumer’s useof the vehicle was consistent with areasonable consumer’s likely use, andthat it would be reasonable for thevehicle to be used for longer than three10years before the manufacturing defectbecomes apparent (see discussion aboutthe ‘rejection period’, at page 15).Example 2:A manufacturing defect prevented atwo-year-old vehicle from shifting intoreverse gear. The vehicle has failedto meet the consumer guarantee ofacceptable quality. The dealer spenttwo months unsuccessfully attemptingto repair the vehicle, and the consumerthen requested a replacement or refundunder the consumer guarantees. Giventhe vehicle failed to meet a consumerguarantee and could not be repairedwithin a reasonable time (see discussionabout ‘major failure’, at page 12), thefailure is a major failure to comply witha consumer guarantee. The consumermay reject the vehicle and ask whoeversupplied the vehicle (e.g. the dealer) toprovide a replacement or refund underthe consumer guarantee provisions.This applies regardless of whetherthe vehicle may have been able tobe repeatedly repaired under themanufacturer’s warranty. The consumermay, however, wish to keep the vehicleand have it repaired, in which casethe dealer is entitled to repair thevehicle rather than replace it or providea refund.

As a matter of best practice, and alsoto minimise the risk of contravening theprovisions of the ACL, which prohibitmisrepresentations and misleadingor deceptive conduct (e.g. where theconsumer has requested a remedyunder the consumer guarantees), youshould also: when providing a remedy, make itclear to the consumer when youare providing remedies under theconsumer guarantee provisions—rather than simply describing suchremedies as ‘goodwill’ when not providing a remedy,consider providing consumers withwritten reasons for refusing toprovide a remedy under the consumerguarantee provisions.Acceptable qualityThe test for acceptable quality is whethera reasonable consumer, fully acquaintedwith a vehicle’s condition (including anydefects) would find it: fit for all the purposes forwhich vehicles of that kind arecommonly supplied acceptable in appearance and finish free from defects safe durable.This test takes into account: the nature of the vehicle, for example:– a new vehicle would be expected tolast longer than a used vehicle– a dedicated four-wheel-drive vehiclemay have a higher standard for offroad use than a ‘soft off-roader’ – a high-performance vehicle mayrequire more maintenance to keepup its performance levelthe price of the vehicle, for example,a consumer may reasonably expect atop-of-the-range model in a particularvehicle class to be more durable thana cheaper competing model in thesame classrepresentations made aboutthe vehicle; for example, in anyadvertising, on the manufacturer’sor dealer’s website or in thevehicle manualanything the dealer told the consumerabout the vehicle before purchaseany other relevant facts, such as theway the consumer has driven or usedthe vehicle.The guarantee of acceptable quality doesnot apply if: the dealer alerts the consumer tothe defect in the vehicle before theconsumer agrees to the purchase the consumer examines the vehiclebefore buying and the examinationshould have revealed it was not ofacceptable quality. The examinationdoes not require the consumer tofind hidden defects or ones thatare difficult to detect; for example,engine, brake or gearbox faults, whichmay not be easily detected the consumer causes the vehicle tobecome of unacceptable quality ordoes not take reasonable steps toprevent the vehicle from becomingof unacceptable quality, for example,the consumer puts petrol in adiesel vehicleA guide to Australian consumer law —Motor vehicle sales and repairs11

the consumer uses the vehicle in anabnormal way. ‘Abnormal’ use hasnot been defined under the ACL.However, certain uses for vehicles willbe inherently abnormal, for example,a small hatchback is not designedfor towing a horse float. Informationprovided in the manufacturer’shandbook and any other operatinginstructions may also be relevant.Major vs minor failuresWhen a vehicle fails to meet a consumerguarantee, your rights and yourobligations to the vehicle owner dependon whether the failure is major or minorand whether you sold or otherwisesupplied the vehicle to the consumer(e.g. see reference to ‘supplier’ in table 1and table 2).Major failuresA major failure to comply withthe consumer guarantees includesthe following: a reasonable consumer would nothave bought the vehicle if they hadknown about the full extent of theproblem. For example, no reasonableconsumer would buy a new vehiclewith so many recurring faults thatthe vehicle has spent more time offthe road than on it because severalqualified repairers have been unableto solve the problem the vehicle is significantly differentfrom the description, sample ordemonstration model shown to theconsumer. For example, a consumerorders a vehicle with a diesel engineafter test-driving the demonstrationmodel, but the vehicle delivered has apetrol engine12 the vehicle is substantially unfit for itsnormal purpose and cannot easily bemade fit within a reasonable time. Forexample, the engine of a vehicle witha stated towing capacity of 3500 kgsand normally used for towing, has adesign flaw that cannot be easily fixedwhich causes it to overheat when ittows a load of more than 2500 kgs the vehicle is substantially unfit fora purpose that the consumer toldthe dealer about, and cannot easilybe made fit within a reasonabletime. For example, a vehicle doesnot have enough towing capacityto tow a consumer’s boat, despitethe consumer telling the dealerthe specifications required to towthe boat the vehicle is unsafe. What is ‘unsafe’will depend on the circumstances ofeach case. For example, a vehicle hasfaulty brakes that cause the vehicle torequire a significantly greater brakingdistance than would be safe fornormal use.When there is a major failure to complywith a consumer guarantee, theconsumer can choose to: reject the vehicle and choose a repair,refund or an identical replacement(or one of similar type and value ifreasonably available) from whoeversupplied the vehicle (e.g. thedealer), or

keep the vehicle and ask forcompensation, from the dealer or themanufacturer, for any drop in its valuecaused by the failure of the vehicle tocomply with a consumer guarantee,and compensation for any reasonablyforeseeable loss suffered due to thefailure of the vehicle to meet theconsumer guarantees.Additional guidance on criteria fordetermining a major failureWhile examination of a vehicle willlikely be required to identify the natureof a fault, the ACL does not requirean involved process of diagnosis todetermine if a vehicle’s failure is ‘major’.You should approach consumer claims forremedies from the perspective of whethera reasonable consumer would havebought the vehicle if they had known ofthe full nature and extent of the failure atthe time of purchase. In particular: if a manufacturing defect causes avehicle to become immobile and notdrivable, and this defect cannot beeasily repaired with the result that thevehicle is not able to be used withina reasonable time, this is likely toconstitute a major failure to complywith the consumer guarantee ofacceptable quality where a vehicle experiences multipleminor failures which necessitatemultiple or repeated repairs with theresult that the vehicle cannot be usedby the owner for unreasonable periodsof time (e.g. because the vehicle isnot in the owner’s possession), this islikely to constitute a major failure tocomply with the consumer guaranteeof acceptable quality.Example 1:Within the first 60 days after purchase,a manufacturing defect caused a vehicleto become immobile and not drivable,and the dealer was unable to repairthe vehicle within a reasonable numberof days. The vehicle is unlikely to meetthe consumer guarantee of acceptablequality, and a reasonable consumer isunlikely to have bought a vehicle if theyhad known the vehicle would developsuch serious defects shortly afterpurchase. Therefore, the failure is likelyto be a major failure of the vehicle tocomply with the consumer guarantee ofacceptable quality.Example 2:Shortly after purchase, a manufacturingdefect caused a vehicle to developexcessive noisiness. During eachattempted repair, the vehicle wasnot able to be used by the consumerfor extended periods (e.g. becausethe vehicle was not in the owner’spossession), for a combined periodof five weeks. The vehicle is unlikelyto meet the consumer guarantee ofacceptable quality, and moreover, areasonable consumer is unlikely tohave bought a new vehicle if they hadknown the full extent of the vehicle’sproblems. Therefore, the failure is likelyto be a major failure of the vehicle tocomply with the consumer guarantee ofacceptable quality.A guide to Australian consumer law —Motor vehicle sales and repairs13

Example 3:A vehicle is approximately three yearsold. During the three years, a fewrelatively minor issues have occurred.Firstly, after about one year, a piece ofinterior trim came loose and the dealerwas able to repair it. After about twoyears the satellite navigation systemdeveloped a glitch, which the dealerwas easily able to fix with a softwareupdate. At three years of age, the bootlatch broke, which the dealer was ableto quickly and easily replace. Eachissue was able to be easily repaired,and the vehicle was able to be usednormally. Therefore, even though eachindividual failure is likely to be a minorfailure of the vehicle to comply withthe consumer guarantee of acceptablequality, these failures, which occurredover a three-year timeframe and do notreflect a recurrent or systemic issue, donot constitute a major failure.Minor failuresMinor failures to comply with theconsumer guarantees of acceptablequality or fitness for purpose includethose where a vehicle has a fault thatsignificantly affects its operation, but canbe fixed within a reasonable time. Forexample: a vehicle where the windscreen wipersstop working a vehicle fault that can be rectifiedwith a software update a vehicle with a small fault in itstransmission, which the manufacturercan quickly resolve by, for example,replacing the entire transmissionrather than repairing only thefaulty component.14A minor failure does not initially allowthe consumer to reject the vehicleand demand a refund, replacementor compensation for the difference invalue—even if the vehicle is immobileand not drivable for a short period oftime (e.g. several days).Example:A consumer buys a new vehicle, andit soon develops a slight rattling noisethat does not interfere with its normaloperation. The consumer returns thevehicle to the dealer, who inspectsit, determines the cause of the noiseand offers to repair it in two days.The consumer refuses this offer anddemands a refund, claiming a majorfailure to comply with the guarantee ofacceptable quality. However, in thesecircumstances, the fault would mostlikely be considered a minor failure,if capable of being fixed within areasonable time. The dealer would nothave to offer a refund in this case.When the failure to comply with aconsumer guarantee is minor, you arenot held to repairing it. You can choosebetween providing a repair or offeringthe consumer a refund or an identicalreplacement (or one of similar value ifreasonably available).If you have identified a minor failure,but have not been able to fix it withina reasonable time, the consumer canchoose to get the job done elsewhereand charge you the reasonable costsof this repair or can treat the failureas major. This applies even if the delayis due to unavailability of parts. See‘Inability to repair within a reasonabletime’ on page 16.

Major failure—when consumers arenot entitled to reject goodsA consumer cannot reject a vehicle if the: rejection period has passed consumer has lost, destroyed ordisposed of the vehicle vehicle was damaged after beingdelivered to the consumer vehicle, part or component has beenattached to, or incorporated in,some other property and cannot bedetached without damaging it consumer has caused the problemthrough their own action orinaction—see ‘Abnormal use’.The ‘rejection period’ is the periodcommencing from the time a consumerbought a vehicle, during which it wouldbe reasonable to expect a problemto appear.The length of a vehicle’s ‘rejection period’is yet to be the subject of significantjudicial consideration, however, thereis nothing in the ACL to suggest thatits application is related to the conceptof warranties. It is therefore entirelypossible that the warranty period canend before the rejection period ends. Itis also possible that a latent defect doesnot become ‘apparent’ until it has beenidentified and diagnosed. In determiningwhether the rejection period has passed,it is relevant to consider the: type of vehicle way in which the consumer is likely touse it length of time, and amount of use,that would reasonably be expectedto elapse before the problembecomes apparent.Abnormal useVehicles are not expected to beindestructible; a consumer’s use of avehicle can affect its durability.The guarantee of acceptable quality willnot apply if the consumer: uses a vehicle abnormally causes the quality of a vehicle tobecome unacceptable fails to take reasonable steps to avoidthe quality becoming unacceptable.The law does not define ‘abnormal use’.However, examples of abnormal usewould include: a soft-top vehicle is left out in therain with its roof open, resulting indamage to the interior a two-wheel drive vehicle beingconsistently driven in lower tractionover rough surfaces that are bettersuited for four-wheel-drive vehicles.There is a difference between damagecaused by abnormal use, and gradualdeterioration (also called ‘wear andtear’) caused by a consumer’s normaluse of a vehicle. Wear and tear involvesthe eventual wearing out of parts to thepoint where they no longer work, as wellas such things as scuffing, scratching ordiscolouration that would predictablyoccur over time when the vehicle is usednormally. Normal wear and tear is not aminor or major failure.If a consumer uses a vehicle normally,and its condition deteriorates faster orto a greater extent than would usuallybe expected, then the vehicle mayhave failed to meet the guarantee ofacceptable quality and the consumer maybe entitled to a remedy.A guide to Australian consumer law —Motor vehicle sales and repairs15

Example:A consumer buys a new vehicle,and takes due care to maintain thecondition of the vehicle’s exterior. Oneyear after purchase the dealer conductsa routine service and determines thevehicle needs to be repainted to preventthe onset of rust. The dealer cannotrefuse to repaint the vehicle by claimingthe consumer’s use of the vehiclewas abnormal.Inability to repair within a reasonabletimeA reasonable repair time, for the purposeof determining whether a fault is major,is assessed taking into account the natureof the problem and the difficulty inidentifying it. Otherwise, the assessmentis on the basis of all things beingnormal or equal; for example, that partsare available.A failure that is initially assessed asminor but which is not fixed within areasonable time, for example, becauseparts subsequently become unavailable,or because of any other reason beyondyour control) gives the consumer the rightto reject the vehicle. If multiple repairattempts are required to remedy a singleminor failure, which is indicative of asystemic problem, you should considerthe combined length of all the repairattempts (and not the individual length ofeach repair in isolation), when deciding ifthe repair time is ‘reasonable’.Similarly, if multiple repair attemptsare required to remedy different typesof minor failure, this may ultimatelyconstitute a major failure of theguarantee of acceptable quality, forexample if

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