Gibson, Business Law 11^th Edition

Chapter 9: Statutory consumer guarantees and the Australian Consumer Law

LO9.1 Explain the relationship between the Australian Consumer Law (ACL) and the sale of goods legislation

Multiple choice: Choose the one alternative that best completes the statement or answers the question.

1. Which of the following is not a difference between the Sale of Goods Acts and the Australian Consumer Law?
   • • • 1. The remedy under the Sale of Goods Acts is for breach of contract, whereas the Australian Consumer Law provides statutory remedies.
         2. The Sale of Goods Acts apply to non-consumer transactions whereas the Australian Consumer Law does not.
         3. The implied conditions and warranties in the Sale of Goods Acts can be excluded, whereas the Australian Consumer Law guarantees can’t.
         4. The Sale of Goods Acts are administered by state and territory Departments of Fair Trading whereas the Australian Consumer Law is administered by the Australian Competition and Consumer Commission.

Difficulty: Complex

Topic: An introduction to consumer guarantees

Standard/Graduate Attribute AACSB: Application of knowledge

Learning Outcome: LO 9.1 Explain the relationship between the Australian Consumer Law (ACL) and the sale of goods legislation.

True/False: Identify whether the statement is True or False.

1. The Australian Consumer Law applies to all consumer transactions involving a sale of goods but not goods on exchange or lease.
2. True
3. False

Difficulty: Basic

Topic: An introduction to consumer guarantees

Standard/Graduate Attribute AACSB: Application of knowledge

Learning Outcome: LO 9.1 Explain the relationship between the Australian Consumer Law (ACL) and the sale of goods legislation.

1. A purchaser of goods is not considered a ‘consumer’ under the Australian Consumer Law if he or she purchases goods valued at less than $40,000 for use in the course of a small business.
   • • • 1. True
         2. False

Difficulty: Basic

Topic: An introduction to consumer guarantees

Standard/Graduate Attribute AACSB: Application of knowledge

Learning Outcome: LO 9.1 Explain the relationship between the Australian Consumer Law (ACL) and the sale of goods legislation.

LO9.2 Explain how the ACL differs from the sale of goods legislation

Multiple choice: Choose the one alternative that best completes the statement or answers the question.

1. Which of the following signs is unlawful under s 64 of the Australian Consumer Law?
2. We replace but do not refund.
3. No refunds.
4. No refund if you change your mind.
5. We repair or replace but do not refund.

Difficulty: Moderate

Topic: What are consumer guarantees

Standard/Graduate Attribute AACSB: Analytical thinking

Learning Outcome: LO 9.2 Explain how the ACL differs from the sale of goods legislation.

1. Which of the following is not a consumer guarantee applied to goods under the Australian Consumer Law?
   • • • 1. The consumer will obtain the same title that the supplier has.
         2. The goods are free of any charge or encumbrance.
         3. The supplier has the right to dispose of the goods.
         4. The consumer shall have undisturbed possession of the goods.

Difficulty: Basic

Topic: What are consumer guarantees

Standard/Graduate Attribute AACSB: Application of knowledge

Learning Outcome: LO 9.2 Explain how the ACL differs from the sale of goods legislation.

True/False: Identify whether the statement is True or False

1. An extended warranty is issued at the time of purchase and lasts for 12 months.
   • • • 1. True
         2. False

Difficulty: Basic

Topic: An introduction to consumer guarantees

Standard/Graduate Attribute AACSB: Application of knowledge

Learning Outcome: LO 9.2 Explain how the ACL differs from the sale of goods legislation.

1. For the Australian Consumer Law to apply, there must be a supply of goods or services to a consumer, by a supplier or manufacturer, in trade or commerce.
   • • • 1. True
         2. False

Difficulty: Basic

Topic: An introduction to consumer guarantees

Standard/Graduate Attribute AACSB: Application of knowledge

Learning Outcome: LO 9.2 Explain how the ACL differs from the sale of goods legislation.

Essay: Write your answer in the space provided or on a separate sheet of paper.

1. Do you think it’s fair that consumer guarantees only apply to goods and services as stipulated by the Australian Consumer Law?

Difficulty: Complex

Topic: An introduction to consumer guarantees

Standard/Graduate Attribute AACSB: Analytical thinking

Learning Outcome: LO 9.2 Explain how the ACL differs from the sale of goods legislation.

LO9.3 Explain who is a ‘consumer’ for the purposes of the ACL

Multiple choice: Choose the one alternative that best completes the statement or answers the question.

1. Which one of the following are not classed as goods under the Australian Consumer Law?
2. Laptops for home use.
3. A double bed bought at auction.
4. A mobile phone.
5. A cold press juicer.

Difficulty: Moderate

Topic: Meaning of consumer

Standard/Graduate Attribute AACSB: Application of knowledge

Learning Outcome: LO 9.3 Explain who is a ‘consumer’ for the purposes of the ACL.

1. Which of the following is the definition for “goods”?
2. An intangible economic activity that is consumed at the point of sale
3. Tangible or moveable property
4. The selling of an item to a consumer
5. An activity in relation to trade, business or commercial dealings.

Difficulty: Basic

Topic: Meaning of consumer

Standard/Graduate Attribute AACSB: Application of knowledge

Learning Outcome: LO 9.3 Explain who is a ‘consumer’ for the purposes of the ACL.

1. Consumer guarantees on products and services apply to:
2. Discounted items.
3. Bundled products.
4. Online Australian services.
5. All of the above.

Difficulty: Complex

Topic: Meaning of consumer

Standard/Graduate Attribute AACSB: Analytical thinking

Learning Outcome: LO 9.3 Explain who is a ‘consumer’ for the purposes of the ACL.

True/False: Identify whether the statement is True or False

1. A product consumer guarantee provides the consumer with an implied express warranty.
2. True
3. False

Difficulty: Complex

Topic: Meaning of consumer

Standard/Graduate Attribute AACSB: Analytical thinking

Learning Outcome: LO 9.3 Explain who is a ‘consumer’ for the purposes of the ACL.

Essay: Write your answer in the space provided or on a separate sheet of paper.

1. Distinguish between a supplier and a manufacturer?

Difficulty: Basic

Topic: Meaning of consumer

Standard/Graduate Attribute AACSB: Application of knowledge

Learning Outcome: LO 9.3 Explain who is a ‘consumer’ for the purposes of the ACL.

A manufacturer is a business entity that produces and creates products, goods and services from basic raw materials.

1. Under the Australian Consumer Law, who is a consumer?

Difficulty: Basic

Topic: Meaning of consumer

Standard/Graduate Attribute AACSB: Application of knowledge

Learning Outcome: LO 9.3 Explain who is a ‘consumer’ for the purposes of the ACL.

• They acquire goods or services of less than $40,000;
• They acquire goods or services of a kind ordinarily acquired for personal, domestic or household use (of any value);
• They acquire a commercial road vehicle (of any value); and
• The goods were not acquired for resupply, or for use of transformation in trade or commerce.

LO9.4 Summarise and discuss the various consumer guarantees applying to goods

Multiple choice: Choose the one alternative that best completes the statement or answers the question.

1. Which of the following services are not covered by the consumer guarantees according to Australian Consumer Law?
   • • • 1. Plumbing.
         2. Photography.
         3. Supply of electricity.
         4. Supply of petrol.

Difficulty: Basic

Topic: Consumer guarantees applying to goods

Standard/Graduate Attribute AACSB: Application of knowledge

Learning Outcome: LO 9.4 Summarise and discuss the various consumer guarantees applying to goods.

1. Why was the plaintiff successful in obtaining a full refund in the case of Rowland v Divall [1923] 2 KB 500?
   • • • 1. Because the goods were free of any undisclosed securities.
         2. Because the seller did not give clear title to the goods.
         3. Because the ownership rights were never passed to the owner.
         4. Because the true owner had failed to make a claim.

Difficulty: Complex

Topic: Consumer guarantees applying to goods

Standard/Graduate Attribute AACSB: Analytical thinking

Learning Outcome: LO 9.4 Summarise and discuss the various consumer guarantees applying to goods.

1. Under the Australian Consumer Law, goods supplied to a consumer in trade or commerce must:
   • • • 1. correspond with any description or sample.
         2. be of acceptable quality.
         3. be fit for any disclosed purpose.
         4. all of the above.

Difficulty: Basic

Topic: Consumer guarantees applying to goods

Standard/Graduate Attribute AACSB: Application of knowledge

Learning Outcome: LO 9.4 Summarise and discuss the various consumer guarantees applying to goods.

1. In relation to the consumer guarantee of acceptable quality, which of the following statements is not true?
   • • • 1. The guarantee imposes strict liability on the supplier.
         2. Goods must remain acceptable for a reasonable time after sale.
         3. ‘Acceptable’ means they must be reasonable for the purpose described.
         4. The test of acceptability is subjective based on the consumer’s description.

Difficulty: Basic

Topic: Consumer guarantees applying to goods

Standard/Graduate Attribute AACSB: Application of knowledge

Learning Outcome: LO 9.4 Summarise and discuss the various consumer guarantees applying to goods.

1. Which consumer guarantee principle was applied in the case of Healing (Sales) Pty Ltd v Inglis Electric Pty Ltd [1968] HCA 60?
2. Guarantee as to title of goods.
3. Guarantee as to undisclosed possession.
4. Guarantee as to undisturbed possession.
5. Guarantee as to disturbed possession.

Difficulty: Moderate

Topic: Consumer guarantees applying to goods

Standard/Graduate Attribute AACSB: Analytical thinking

Learning Outcome: LO 9.4 Summarise and discuss the various consumer guarantees applying to goods.

1. Why was the plaintiff unsuccessful in the case of: Southern Cross Homes (Broken Hill) Inc v Chapman (1999) SASC 491?
   • • • 1. The goods were not fit for the purpose but were made to the consumer’s specifications.
         2. The goods were made to the consumer’s specifications.
         3. The goods were fit for the purpose but not made to the consumer’s specifications.
         4. The goods were not fit for the purpose specified.

Difficulty: Moderate

Topic: Consumer guarantees applying to goods

Standard/Graduate Attribute AACSB: Analytical thinking

Learning Outcome: LO 9.4 Summarise and discuss the various consumer guarantees applying to goods.

1. Which of the following factors have to be taken into account in determining ‘acceptability’?
   • • • 1. Whether the purpose for the goods had been made known to the seller.
         2. Price.
         3. The description applied to the goods.
         4. All of the above.

Difficulty: Complex

Topic: Consumer guarantees applying to goods

Standard/Graduate Attribute AACSB: Application of knowledge

Learning Outcome: LO 9.4 Summarise and discuss the various consumer guarantees applying to goods.

1. Why was the manufacturer found liable in the case of: Drummond v Van Ingen (1887) as App Cas 284?
   • • • 1. The defect was only minor and the quality was the same as the sample.
         2. The cloth was equal to the sample but contained a defect that could not be discovered by reasonable inspection.
         3. The cloth was equal to the sample but contained a defect that was discovered on inspection.
         4. The cloth did not correspond with the sample.

Difficulty: Complex

Topic: Consumer guarantees applying to goods

Standard/Graduate Attribute AACSB: Analytical thinking

Learning Outcome: LO 9.4 Summarise and discuss the various consumer guarantees applying to goods.

1. In relation to the consumer guarantee of fitness for purpose, which of the following statements is not true?
   • • • 1. The goods must be supplied in trade of commerce.
         2. The consumer must, either expressly or by implication, make known the intended purpose of the goods.
         3. The consumer must rely on the skill and judgment of the supplier.
         4. The consumer must request the goods under their trade name or patent.

Difficulty: Basic

Topic: Consumer guarantees applying to goods

Standard/Graduate Attribute AACSB: Application of knowledge

Learning Outcome: LO 9.4 Summarise and discuss the various consumer guarantees applying to goods.

1. When will the consumer guarantee as to description (s 56) not apply?
   • • • 1. Whether or not the seller normally deals in goods of that description.
         2. Even if the goods, having been exposed for sale or hire, are selected by the consumer
         3. Only when the seller normally deals in goods of that description.
         4. Where the consumer has not seen the goods and relies on the seller’s description.

Difficulty: Basic

Topic: Consumer guarantees applying to goods

Standard/Graduate Attribute AACSB: Application of knowledge

Learning Outcome: LO 9.4 Summarise and discuss the various consumer guarantees applying to goods.

1. In relation to the consumer guarantee by sample (s 57), which of the following statements is not true?
   • • • 1. The goods must be free from any defect which would not be apparent on reasonable examination.
         2. The seller must supply the buyer with a sample of the goods.
         3. The buyer must be given a reasonable opportunity to compare the bulk with the sample.
         4. The bulk of the goods must correspond with the sample in quality, state or condition.

Difficulty: Basic

Topic: Consumer guarantees applying to goods

Standard/Graduate Attribute AACSB: Application of knowledge

Learning Outcome: LO 9.4 Summarise and discuss the various consumer guarantees applying to goods.

True/False: Identify whether the statement is True or False

1. The Australian Consumer Law replaces the Sale of Goods Acts in all states and territories.
   • • • 1. True
         2. False

Difficulty: Basic

Topic: Consumer guarantees applying to goods

Standard/Graduate Attribute AACSB: Application of knowledge

Learning Outcome: LO 9.4 Summarise and discuss the various consumer guarantees applying to goods.

1. Unless it can be otherwise inferred from surrounding circumstances, there is an implied guarantee that a supplier of goods has the right to sell the goods to a consumer.
   • • • 1. True
         2. False

Difficulty: Basic

Topic: Consumer guarantees applying to goods

Standard/Graduate Attribute AACSB: Application of knowledge

Learning Outcome: LO 9.4 Summarise and discuss the various consumer guarantees applying to goods.

1. If a seller does not have title to the goods at the time of transfer, then there is a total failure of consideration.
   • • • 1. True
         2. False

Difficulty: Basic

Topic: Consumer guarantees applying to goods

Standard/Graduate Attribute AACSB: Application of knowledge

Learning Outcome: LO 9.4 Summarise and discuss the various consumer guarantees applying to goods.

1. A buyer of defective goods will not be protected under Australian Consumer Law if the buyer fails to examine the goods and discover an obvious defect.
2. True
3. False

Difficulty: Basic

Topic: Consumer guarantees applying to goods

Standard/Graduate Attribute AACSB: Application of knowledge

Learning Outcome: LO 9.4 Summarise and discuss the various consumer guarantees applying to goods.

1. The test of acceptable quality of goods is an objective test of the reasonable consumer.
   • • • 1. True
         2. False

Difficulty: Basic

Topic: Consumer guarantees applying to goods

Standard/Graduate Attribute AACSB: Application of knowledge

Learning Outcome: LO 9.4 Summarise and discuss the various consumer guarantees applying to goods.

1. The guarantee of fitness for purpose applies regardless of anything that happens after the goods are sold.
   • • • 1. True
         2. False

Difficulty: Basic

Topic: Consumer guarantees applying to goods

Standard/Graduate Attribute AACSB: Application of knowledge

Learning Outcome: LO 9.4 Summarise and discuss the various consumer guarantees applying to goods.

1. Where goods are sold by description, description goes to both identity and quality of goods.
   • • • 1. True
         2. False

Difficulty: Basic

Topic: Consumer guarantees applying to goods

Standard/Graduate Attribute AACSB: Application of knowledge

Learning Outcome: LO 9.4 Summarise and discuss the various consumer guarantees applying to goods.

1. If a vendor sells goods by description to a consumer, the vendor impliedly guarantees that the goods will correspond with the description given.
   • • • 1. True
         2. False

Difficulty: Basic

Topic: Consumer guarantees applying to goods

Standard/Graduate Attribute AACSB: Application of knowledge

Learning Outcome: LO 9.4 Summarise and discuss the various consumer guarantees applying to goods.

1. In the context of a sale by sample, the buyer will not be considered to have accepted the goods until they have had the opportunity to examine them.
   • • • 1. True
         2. False

Difficulty: Basic

Topic: Consumer guarantees applying to goods

Standard/Graduate Attribute AACSB: Application of knowledge

Learning Outcome: LO 9.4 Summarise and discuss the various consumer guarantees applying to goods.

Essay: Write your answer in the space provided or on a separate sheet of paper.

1. What are the implied guarantees that must be included in every agreement by a manufacturer to supply goods to a consumer?

Difficulty: Complex

Topic: Consumer guarantees applying to goods

Standard/Graduate Attribute AACSB: Application of knowledge

Learning Outcome: LO 9.4 Summarise and discuss the various consumer guarantees applying to goods.

Liability of the manufacturer may extend beyond the original consumer who first acquired the goods from the seller to persons who subsequently derive title to them through a consumer - for example, by way of a gift or a second-hand purchase.

There is no liability for the manufacturer in relation to supply by sample if the manufacturer doesn’t supply the sample or doesn’t agree to a sample being offered.

The manufacturer may escape liability if the failure arose after the goods left their control.

1. How does a sale by sample differ from a sale by description?

Difficulty: Basic

Topic: Consumer guarantees applying to goods

Standard/Graduate Attribute AACSB: Application of knowledge

Learning Outcome: LO 9.4 Summarise and discuss the various consumer guarantees applying to goods.

LO9.5 Summarise and discuss the various consumer guarantees applying to services

Multiple choice: Choose the one alternative that best completes the statement or answers the question.

1. Which of the following is not a consumer guarantee in relation to the supply of services to a consumer?
   • • • 1. The services will be supplied within a reasonable time.
         2. The services will be of acceptable quality.
         3. The services will be rendered with due care and skill.
         4. The services will be reasonably fit for any disclosed purpose for which they are supplied.

Difficulty: Basic

Topic: Consumer guarantees relating to the supply of services

Standard/Graduate Attribute AACSB: Application of knowledge

Learning Outcome: LO 9.5 Summarise and discuss the various consumer guarantees applying to services.

1. To which of the following services do the consumer guarantees relating to the supply of services apply?
   • • • 1. Doctors.
         2. Architects.
         3. Contracts of insurance.
         4. All of the above.

Difficulty: Complex

Topic: Consumer guarantees relating to the supply of services

Standard/Graduate Attribute AACSB: Application of knowledge

Learning Outcome: LO 9.5 Summarise and discuss the various consumer guarantees applying to services.

Essay: Write your answer in the space provided or on a separate sheet of paper.

1. Identify and explain the consumer guarantees relating to the supply of service.

Difficulty: Basic

Topic: Consumer guarantees relating to the supply of services

Standard/Graduate Attribute AACSB: Application of knowledge

Learning Outcome: LO 9.5 Summarise and discuss the various consumer guarantees applying to services.

• Due care and skill; the guarantee that service providers must carry out services with due care and skill. Thus, the work must be undertaken at an acceptable level of skill.
• Fit for a particular purpose; the services provided must be reasonably fit for a specified purpose.
• Reasonable time for supply; the services must be supplied within a reasonable time frame if no time frame was agreed.

1. Why do you think the service guarantee of fit for a particular purpose does not apply to architects or engineers?

Difficulty: Moderate

Topic: Consumer guarantees relating to the supply of services

Standard/Graduate Attribute AACSB: Reflective thinking

Learning Outcome: LO 9.5 Summarise and discuss the various consumer guarantees applying to services.

LO9.6 Explain the rights of consumers under the ACL where there has been a supply of defective goods and services

Multiple choice: Choose the one alternative that best completes the statement or answers the question.

1. If the supplier of goods fails to comply with a consumer guarantee which is not a major failure, a consumer may:
   • • • 1. Require the supplier to remedy the failure.
         2. Immediately reject the goods.
         3. Seek compensation.
         4. Immediately have the failure remedied elsewhere.

Difficulty: Moderate

Topic: Consumers’ rights concerning guarantees for the supply of goods and services

Standard/Graduate Attribute AACSB: Application of knowledge

Learning Outcome: LO 9.6 Explain the rights of consumers under the ACL where there has been a supply of defective goods and services.

1. In relation to the supply of goods, when will a failure to comply with a consumer guarantee be considered a major failure?
   • • • 1. If the goods are substantially unfit for the purpose for which goods of that nature are commonly supplied.
         2. If the goods are significantly different from their description or sample.
         3. If the goods are unfit for a disclosed purpose or unsafe.
         4. All of the above.

Difficulty: Basic

Topic: Consumers’ rights concerning guarantees for the supply of goods and services

Standard/Graduate Attribute AACSB: Application of knowledge

Learning Outcome: LO 9.6 Explain the rights of consumers under the ACL where there has been a supply of defective goods and services.

1. Which of the following remedies are available to a consumer for a major failure to comply with a consumer guarantee?
   • • • 1. Rejection of the goods, plus compensation and damages for any foreseeable loss.
         2. Rejection of the goods or compensation plus damages for any foreseeable loss.
         3. Rejection of the goods or compensation.
         4. Rejection of the goods, plus compensation or damages for any foreseeable loss.

Difficulty: Complex

Topic: Consumers’ rights concerning guarantees for the supply of goods and services

Standard/Graduate Attribute AACSB: Analytical thinking

Learning Outcome: LO 9.6 Explain the rights of consumers under the ACL where there has been a supply of defective goods and services.

1. Which of the following will not protect a manufacturer from liability for a breach of the consumer guarantee of fitness for purpose?
   • • • 1. If the consumer did not rely on the skill or judgment of the manufacturer.
         2. If it was caused by something outside human control after it left the manufacturer.
         3. If it was caused by something outside human control during manufacture.
         4. If it was caused by someone else.

Difficulty: Basic

Topic: Consumers’ rights concerning guarantees for the supply of goods and services

Standard/Graduate Attribute AACSB: Application of knowledge

Learning Outcome: LO 9.6 Explain the rights of consumers under the ACL where there has been a supply of defective goods and services.

True/False: Identify whether the statement is True or False

1. The legal obligation to ensure that spare parts and repair facilities are reasonably available to consumers applies to both suppliers and manufacturers.
   • • • 1. True
         2. False

Difficulty: Basic

Topic: Consumers’ rights concerning guarantees for the supply of goods and services

Standard/Graduate Attribute AACSB: Application of knowledge

Learning Outcome: LO 9.6 Explain the rights of consumers under the ACL where there has been a supply of defective goods and services.

1. Under the ACL, a consumer has the option to sue both the immediate supplier and the manufacturer for breach of contract involving a defective product.
   • • • 1. True
         2. False

Difficulty: Basic

Topic: Consumers’ rights concerning guarantees for the supply of goods and services

Standard/Graduate Attribute AACSB: Application of knowledge

Learning Outcome: LO 9.6 Explain the rights of consumers under the ACL where there has been a supply of defective goods and services.

1. In some cases, the liability of a manufacturer for breach of the consumer guarantees extends beyond the original consumer.
   • • • 1. True
         2. False

Difficulty: Basic

Topic: Consumers’ rights concerning guarantees for the supply of goods and services

Standard/Graduate Attribute AACSB: Application of knowledge

Learning Outcome: LO 9.6 Explain the rights of consumers under the ACL where there has been a supply of defective goods and services.

Essay: Write your answer in the space provided or on a separate sheet of paper.

1. Do you consider that the remedies now available to consumers under the Australian Consumer Law are adequate?

Difficulty: Complex

Topic: Consumers’ rights concerning guarantees for the supply of goods and services

Standard/Graduate Attribute AACSB: Reflective thinking

Learning Outcome: LO 9.6 Explain the rights of consumers under the ACL where there has been a supply of defective goods and services.

1. What do you think is the significance of s 64 in Australian Consumer Law?

Difficulty: Complex

Topic: Consumers’ rights concerning guarantees for the supply of goods and services

Standard/Graduate Attribute AACSB: Reflective thinking

Learning Outcome: LO 9.6 Explain the rights of consumers under the ACL where there has been a supply of defective goods and services.