News & Insights

Recently, the caravan industry has come under scrutiny from the ACCC for deceptive advertising, particularly regarding price and weight claims. A recent report found that of the 2,270 caravan owners surveyed, 80 per cent reported having experienced problems with their new caravan. To this point, it’s important for both businesses and consumers to be aware of the law in the event that things don’t go as planned.

Guarantees vs. warranties

Consumer Guarantees

Under the Australian Consumer Law (ACL), consumers enjoy consumer guarantees that any product and service purchased by them:

• is of an acceptable quality, including that it’s safe and free from defects;
• is fit for its particular purpose;
• matches its description;
• matches any sample or demonstration model (if provided); and
• meets any other additional promises made by the business.

Manufacturer’s warranties

It should be noted that these consumer guarantees are different to manufacturing warranties.

Consumer guarantees are the basic rights all consumers are entitled to. Meanwhile, warranties are additional and voluntary promises that a business may make in addition to consumer guarantees when providing a product or service.

When it comes to caravans, the Australian Competition and Consumer Commission (ACCC) have stated that although some manufacturers’ warranties may be a few years, the ACCC wouldn’t expect a new caravan to develop a major defect within the short time frame provided by the manufacturer’s warranty.

Consumer remedies

If a caravan fails to meet one of the above consumer guarantees, the consumer will be entitled to a repair, replacement, or refund as a remedy.

How is a remedy chosen?

The remedy to be provided to a consumer will depend on whether the relevant failure is major or minor.

A minor failure is one that is easily fixed and does not stop the consumer from using the caravan. In this circumstance, the supplier (not the consumer) may choose to repair the failure, replace the caravan or refund the consumer.

A major failure makes the caravan unsafe or unfit for its normal purpose and cannot be fixed within a reasonable time. In this circumstance, the consumer has the right to ask for their choice of a refund or replacement.

It’s important to note that sometimes, multiple minor failures may amount to a major failure. Further, if a business fails to provide a remedy within a reasonable time, the consumer will be able to choose the remedy they would like.

Are there any exceptions to these remedies?

Consumers will not be entitled to a remedy if one of the following applies:

• change of mind;
• abnormal use of the goods – this may include use that is inconsistent with the manufacturer’s handbook or other operating instructions;
• the goods were examined prior to purchase and a clear fault was not seen; or
• the consumer was made aware of the defect to prior to purchase.

We encourage all businesses and suppliers to consider whether any of these exceptions apply before determining whether a major or minor defect may be present.

Advice for businesses

Understanding consumer protection

It is important that all dealers and manufacturers correctly inform consumers of their right to such remedies. Businesses who do not comply risk facing hefty fines for misleading consumers.

Further, a consumer may claim compensation for consequential loss (including lost time or productivity) because of a business failing to meet one or more of the consumer guarantees. It should be noted that Courts and Tribunals do not award compensation for such loss easily, where customers need to provide evidence to substantiate this claim.

What happens if a consumer wants a replacement, but the model of caravan is no longer available?

The ACL provides that if a consumer seeks a replacement, the goods must be replaced with goods of the same type and of similar value if they are reasonably available.

It is emphasised that businesses should not make any adjustments for any use or depreciation in the goods. Therefore, the consumer should be refunded or offered a replacement caravan to the equivalent value of what they purchased it for.

Although some consumers may be opportunistically seeking an ‘upgrade’, the ACCC have stated that if an equivalent option is not available, consumers will need to choose between a repair or refund. It is also important that businesses do not mislead consumers into a replacement that is less than the required equivalent option.

Resolution of disputes

If a business provides a repair, replacement or refund to a customer, the manufacturer must reimburse the business for these costs – including parts and labour.

However, there may be some instances where businesses refuse to provide a remedy because they believe one of the exceptions (mentioned above) applies. In these circumstances, customers may report this dispute to the ACCC, or the relevant Fair Trading/Consumer Affairs depending on the relevant State.

A customer may make an application to the relevant Tribunal, usually after receiving legal advice. It should be noted that legal costs are generally not recoverable in Tribunals. In our experience, Tribunals are more likely to award customers a refund compared to a replacement as an equivalent option is not always available unlike monetary reimbursement.

Key takeaways for businesses

Each situation needs to be assessed on its own merits and facts, but it is important to act quickly and to communicate your position to the consumer clearly whatever the decision.

We encourage all businesses to consider the following tips and tricks:

1. Ensure sales representatives are not making representations beyond the caravans’ specifications;
2. Accurately communicate customers remedies under the ACL; and
3. Hold training sessions for staff on consumer guarantees.

We’re here to help

If you are unsure about what a major or minor fault is, or have a complex customer issue, we suggest reaching out to our Australian Consumer Law experts at Macpherson Kelley.