Consumer Contracts
Consumer Guarantees
If a consumer contract exists, then consumer guarantees of products (9) and services (4) apply.
Step 1: Applicability
Questions to consider:
• Is the buyer a consumer under s. 3 of ACL?
• Is the good a consumer good under s. 2 of ACL?
‘Consumer’ under s. 3(1):
• if the person acquires goods or services
• that do not exceed $40,000
• Personal, household or domestic use or consumption
‘Goods’ –
• Vehicle acquired for use on public road: s3(1)
• s. 3(2) will make the person not a consumer if product:
o used for re-supply, or to manufacture another good.
Step 2: Guarantees
Once the ‘consumer’ and ‘good’ part have been established, now look to see which guarantee’s apply under part 3-2 of ACL.
________Guarantees for Goods________
There are 3 main consumer guarantees for goods, as well as an additional 6 minor:
Guarantee as to Acceptable Quality: s 54 Acceptable quality is defined as:
• s 54 (1) – outlines that there is a guarantee of acceptable quality.
Issue/Topic Case Facts Held S180(1):Officer
act with care and diligence
ASIC v Healey (Australian Securities and Investments Commission)
• ASIC accused defendant directors of failing to act in accordance with their DoC and ensure
compliance of financial reporting obligations under the Corporations Act
• Q was it negligent for directors to have failed to detect errors where both management and external auditor- PricewaterhouseCoopers had not detected errors
• A diligent director should have noticed the failure to include the guarantees as current liabilities or atleast ask q’s about them
• Directors are entitled to rely on others but they must always bring an independent and enquiring mind to the exercise of their duties
• Liability under S180(1) does not depend on proof of dishonesty
S180(2):
Business Judgement rule
ASIC v Adler
Adler was in breach of his s180(1) duty because a reasonably careful and diligent director in his position would not have caused the payment of $10million to be applied to purchase the HIH shares.• No reasonable director in Adler’s position would have proceeded with the
acquisition (tech+
investment+ loan)
• Adler contravened s180-183
• S182 contravened as acquired HIH for purpose of inflating price
S180(3): Duty not to misuse the director’s position to obtain and use information
ASIC v Vizard
• Vizard – Non-executive director of Telstra• Had confidential info
• Vizard instructed Mr.Lay (accountant) to sell the shares held by CTI
• No case for insider trading
• Breaching director’s duties under
Corporations Act 2001, s183 & s232