Made a purchase for your business that doesn’t work? Here’s what to do.
In small business every dollar counts, and making smart purchasing decisions is crucial to keeping your business running smoothly and profitably. However, even with the best intentions, problems can arise with products or services you've purchased. We outline how to address any issues with as little stress as possible.
When a product or service you have purchased for your business isn’t quite right, you may be unsure what action to take. Understanding your rights and guarantees under Australian Consumer Law will help you address problems and make sure you don’t end up with products or services that don’t work well for your business.
Understanding consumer guarantees
Under Australian Consumer Law, a business must meet a set of basic rights when they sell products or services. These basic rights are called consumer guarantees. These consumer guarantees ensure that the products or services meet certain standards and can’t be excluded or limited by the seller.
While many business owners are familiar with warranties, consumer guarantees are often misunderstood. It’s important to note that consumer guarantees are not the same as warranties—they are automatic and provide broader protections.
Your business qualifies for consumer guarantees on the goods or services you purchase for your business that are:
- under $100,000, or
- over $100,000 and normally bought for personal, domestic, or household use, or
- vehicles or trailers that are primarily used for transporting goods.
What do consumer guarantees do?
A business must meet a set of basic rights when they sell products or services. These basic rights are called consumer guarantees, and they are included in Australian Consumer Law.
Consumer guarantees outline the legal rights of consumers, including business customers, have when purchasing products of services. A consumer (including Businesses as consumers) has the right to expect that the product:
- is of acceptable quality
- matches the provided description
- meets any express warranties, and
- is fit for purpose.
When buying a service, a consumer has the right to expect the service is provided:
- with due care and skill
- fit for specified purpose, and
- within a reasonable time (if no time is set).
If the goods or services that the consumer purchases do not work properly or break, the purchaser may be entitled to a remedy, which may include a:
- repair
- replacement
- refund
- compensation
- cancellation of contract.
Who is responsible for resolving issues?
When a problem arises, the business that sold you the product or service is responsible for providing a remedy. It’s important to remember that under the ACL, the seller cannot simply pass the responsibility on to the manufacturer. If a product or service does not meet the consumer guarantees, you have the right to request a remedy from the seller, not the manufacturer.
If the seller tries to redirect you to the manufacturer, it’s essential to remind them of their obligations under the ACL. The seller is required to address your concerns directly. In turn, the manufacturer must refund the supplier for the cost of the remedy given to the consumer, such as compensation. This is known as “supplier indemnification.”
What are your options to resolve a problem with a product or service?
When a problem with a product or service occurs, the next steps depend on whether the issue is classified as a minor or major problem.
- Minor problem: These are issues that can typically be fixed quickly and with little inconvenience. The seller can choose to offer a refund, replacement, or repair. For services, this might involve resupplying the service or correcting the issue.
- Major problem: A major problem is one that cannot be easily fixed, is too difficult to resolve, or involves multiple smaller issues that, together, would have prevented you from making the purchase if you had known about them. In such cases, you have the right to choose whether you would like a refund, replacement, or repair, or, in the case of services, a resupply.
Additionally, if the problem has caused you to incur further losses—referred to as consequential loss—you may also be entitled to compensation. This is in addition to the remedy you seek for the original issue.
How to take action
If you encounter an issue with a product or service, it’s crucial to take action promptly. Start by contacting the supplier and outlining your concerns. Here’s a step-by-step guide to help you through the process:
- Document the problem: Clearly describe the issue and gather evidence to support your claim. This could include receipts, photos, or correspondence with the seller.
- Send a complaint: Use a structured approach, such as the letter of complaint template, to communicate your concerns to the supplier. Make sure to:
- Describe the problem and provide the evidence you’ve collected.
- Reference the relevant sections of the ACL that support your claim.
- State the outcome you’re seeking (for example, refund, repair or replacement).
- Request a response within a reasonable time frame.
- Evaluate your options: If the supplier does not comply with your request, consider your next steps:
- Seek legal advice: This can help you understand your rights and the potential outcomes of pursuing the issue further.
- Use dispute resolution services: Engage with services that can help mediate and resolve the dispute without going to court.
- Magistrates court action: If all else fails, taking the matter to court may be necessary, especially if the financial stakes are high.
When to use dispute resolution services
If you are unable to resolve the issue directly with the supplier, the SBDC’s dispute resolution service may be able to assist. This service is particularly useful for small business owners who need support to navigate the complexities of consumer law and achieve a fair outcome.
More information
See the guides and fact sheets about Australian Consumer Law and Consumer Guarantees:
- Problem with a product or service you bought (ACCC)
- Business.Gov – Australian Consumer Law (Business.Gov)
- Consumer Guarantees – a guide for consumers (ACCC)
SBDC services that can assist you:
- Free letter of complaint template
- Learn about our free dispute resolution service
- Get our advice on handling customer complaints
