Pursuant to section 54 of the Australian Consumer Law (ACL), which forms Schedule 2 to the Competition and Consumer Act 2010 (Cth), goods supplied to a consumer must meet the guarantee of acceptable quality.³ Goods are of acceptable quality if they are:
- Fit for all purposes for which goods of that kind are commonly supplied;
- Acceptable in appearance and finish;
- Free from defects;
- Safe; and
- Durable, having regard to their nature and price.
The standard of acceptable quality is objective, assessed from the perspective of a reasonable consumer fully acquainted with the state and condition of the goods, taking into account all relevant circumstances. The Federal Court in ACCC v LG Electronics Australia Pty Ltd [2017] FCA 1047 emphasized that the guarantee applies irrespective of any manufacturer’s warranty and cannot be contracted out of. Thus, suppliers and manufacturers bear a continuing obligation to ensure that goods perform as a reasonable consumer would expect, even after any express warranty period has expired.
Defects that impair the functionality, safety, or longevity of goods, or that cause the goods to deviate materially from their represented condition, may amount to a breach of this guarantee. In the context of motor vehicles, recurring mechanical faults, performance degradation, or modifications that compromise drivability or safety may constitute a failure to meet acceptable quality standards.
Under section 60 of the ACL, services supplied to consumers must be performed with due care and skill.⁴ This statutory guarantee imposes a non-excludable obligation on suppliers of services to exercise the care and competence expected of a reasonably skilled provider in that field.
Similarly, section 61 of the ACL provides that where services are supplied, and a consumer makes known a particular purpose for which the services are required, there is a guarantee that the services – and any resulting product – will be reasonably fit for that purpose.⁵
Failure to perform services competently (e.g., improperly tuning a vehicle or incorrectly installing performance parts) may constitute a breach of both sections 60 and 61. In Vizcarra v Delorian Motors Pty Ltd [2020] NSWCATAP 31, the tribunal reiterated that a service provider is liable where services are negligently performed, even if the consumer did not specify technical details of the work.
Accordingly, mechanics, tuners, and automotive service providers must perform services to a standard that does not introduce defects, reduce functionality, or otherwise compromise the vehicle’s fitness for its intended use.
Where goods or services fail to comply with these guarantees, the nature and seriousness of the failure determine the available remedies under the ACL:
(a) In the case of a minor failure – that is, where the failure can be remedied easily and within a reasonable time – the supplier has the right to attempt a repair or rectification.⁶ The consumer must provide the supplier with a reasonable opportunity to remedy the fault. If the supplier fails to rectify the failure within a reasonable time, the consumer is then entitled to reject the goods or services and seek a refund, replacement, or compensation for any loss.
(b) In the case of a major failure, the consumer may immediately reject the goods or services and elect either a refund or a replacement.⁷ There is no obligation on the consumer to accept further repair attempts where a major failure exists. The consumer’s choice must be respected, and the supplier must effect the refund or replacement within a reasonable time without imposing further conditions.
This statutory framework ensures that consumers are not trapped into cycles of repeated unsuccessful repairs and that their autonomy in choosing remedies for significant failures is protected.
A “major failure” in respect of services is defined by section 268 of the ACL.⁸ It occurs where:
- A reasonable consumer, fully acquainted with the nature and extent of the failure, would not have acquired the services; or
- The services fail to achieve their intended or disclosed purpose and cannot be remedied within a reasonable time; or
- The services create an unsafe situation.
Tribunal and court decisions (for instance, Safi v Heartland Motors Pty Ltd [2016] NSWCATAP 80) affirm that a series of cumulative minor defects in goods or services can collectively amount to a major failure, especially where repeated attempts at repair fail or significant inconvenience is caused.
In the automotive context, persistent mechanical problems post-service, failure to achieve the promised performance enhancement, or new safety risks arising from aftermarket modifications may individually or collectively constitute a major failure entitling the consumer to reject the services.
If goods are rejected due to a major failure, section 263(1) of the ACL requires the consumer to return the goods to the supplier unless it is impracticable.⁹
Return of goods is fundamental to the operation of the remedy framework: it enables the supplier to reclaim ownership and assess the nature of the alleged failure. This requirement of mutual restitution ensures that the consumer cannot retain both the goods and the money paid, maintaining fairness between the parties.
However, if the size, weight, or nature of the goods makes their return impracticable, section 263(2) obliges the supplier to collect the goods at their own expense.
The supplier is entitled to inspect and verify the alleged defect before providing a remedy. This principle was affirmed in ACCC v LG Electronics Australia Pty Ltd [2017] FCA 1047, where the Federal Court recognized that inspection rights are crucial to prevent fraudulent or unfounded claims.¹⁰
A supplier’s right to verify is particularly important in disputes over technical services, such as performance tuning or mechanical repairs. Without access to inspect the goods or services in question, the supplier is prejudiced in its ability to ascertain the nature, cause, and extent of the alleged defect, and therefore, in its ability to provide an appropriate remedy.
Refusing to allow inspection is inconsistent with the cooperative obligations imposed by the ACL on both consumers and suppliers.
Fundamentally, a consumer cannot both retain the goods and demand a full refund. This principle is codified in section 263(4) of the ACL, which provides that upon the refund being paid, the goods revest in the supplier.¹¹
The doctrine of mutual restitution ensures that upon rescission of a contract under the ACL guarantees regime, the parties are restored to their pre-transaction positions: the consumer receives their payment back, and the supplier recovers the goods. This preserves fairness and prevents unjust enrichment.
In Morphy v Beaufort Townsville Pty Ltd [2018] VCAT 1520, the tribunal reiterated that a consumer who rejects goods must cease using them and must return them, unless impracticable. Retention of goods after rejection would be inconsistent with exercising the right to a refund and could bar the consumer’s remedy.
Accordingly, in circumstances where a refund has been offered, the consumer must cooperate by returning the aftermarket parts (MV Ram Unit and MAF sensor) to the Respondent, thereby enabling the remedy process to be properly completed.
Footnotes:
¹ Competition and Consumer Act 2010 (Cth), Sch 2, Australian Consumer Law (ACL).
² ACT Civil and Administrative Tribunal Act 2008 (ACT), s 32(1).
³ ACL s 54.
⁴ ACL s 60.
⁵ ACL s 61.
⁶ ACL s 259(2).
⁷ ACL s 259(3), s 260.
⁸ ACL s 268.
⁹ ACL s 263(1).
¹⁰ ACCC v LG Electronics Australia Pty Ltd [2017] FCA 1047 at [160].
¹¹ ACL s 263(4).
