Consumer Law: Applicability In B2b Contracts Explored

Consumer law does not apply to business-to-business contracts in the same way that it applies to business-to-consumer contracts. However, in some cases, consumer law can apply to B2B transactions. For example, in Australia, if a business acquires goods or services from another business as a 'consumer', certain statutory consumer guarantees apply. This includes transactions where goods or services cost less than $100,000, or are of a kind ordinarily acquired for domestic, household, or personal use. In the EU, consumer law applies to any contract term that has not been individually negotiated with the consumer, such as standard contract terms.

Consumer rights and fair trading

A consumer is defined as someone who purchases a product or enters into a contract in their personal capacity, rather than for business purposes. Consumer protection laws do not apply to business-to-business contracts in the same way. However, in the case of B2B transactions, if a business acquires goods or services as a 'consumer', certain consumer guarantees may still apply.

• Information and transparency: Consumers have the right to clear and accurate information about the goods or services they are purchasing. Contracts must be written in plain and understandable language, and all terms and conditions must be transparent, with no hidden clauses or unfair terms.
• Cooling-off periods: In some jurisdictions, consumers have the right to cancel a contract within a specified period, known as a cooling-off period. This allows consumers to change their minds about a purchase without penalty.
• Right to redress: Consumers have the right to seek redress if they are not satisfied with their purchase. This includes the right to repair, replacement, or refund for faulty goods, as well as the right to claim damages in some cases.
• Protection from unfair practices: Unfair or deceptive practices, such as misleading advertising or unfair contract terms, are prohibited. Consumers have the right to be treated fairly and not be taken advantage of by businesses.
• Data protection: When dealing with a consumer's personal data, businesses must comply with data protection and privacy laws.

It is important to note that consumer rights and fair trading laws may vary depending on the jurisdiction, and it is always advisable to seek legal advice when drafting or reviewing contracts to ensure compliance with the relevant laws and regulations.

Cooling-off periods

A cooling-off period is a 14-day window during which a consumer can cancel their order for any reason, without needing to justify their decision. This period is designed to give the purchaser an opportunity to change their mind. It is important to note that this right to cancel only applies to purchases made in the capacity of a 'consumer', meaning that the purchase must not have been carried out as part of a business activity.

The 14-day cooling-off period is triggered by the date the customer takes ownership of the goods or, in the case of services, the day after the customer completes the purchase. For example, if a customer purchases a pair of headphones online on June 1st, they have until June 15th to decide whether to keep the item or cancel and return it for a refund.

The cooling-off period applies to goods and services bought online, via mail order, or over the phone. It does not apply to purchases made in person, such as those made in a shop or on the seller's premises. Additionally, certain types of goods and services are exempt from the cooling-off period, including:

• Prescription medications and medical supplies
• Items that deteriorate quickly, like flowers or food
• Personalised goods or custom orders
• Sealed CDs, DVDs, or software, if the seal is broken
• Goods that become mixed with other goods after delivery
• Goods with seals that, if broken, could pose health and safety risks, such as makeup
• Contracts for accommodation, transport, vehicle rental, or catering services for specific dates
• Contracts concluded at auction
• Alcoholic beverages (with some exceptions)
• Goods with fluctuating prices during the cancellation period
• Foodstuffs, beverages, or household goods delivered via regular rounds to the consumer's home or workplace
• The purchase of houses or immovable property
• Construction of new or substantially new buildings
• Package travel, holidays, or tours
• Timeshare, long-term holiday products, resale, and exchange contracts

It is worth noting that businesses are required to inform consumers of their cancellation rights, and this information must be provided in a clear and understandable manner. If a business fails to do so, the cancellation period may be extended beyond 14 days.

During the cooling-off period, the consumer must notify the seller of their intention to cancel, and this can be done via email or phone. After notifying the seller, the consumer then has an additional 14 days to return the goods. The seller must refund the cost of any standard delivery charges, but the consumer will typically be responsible for return postage costs.

In summary, the cooling-off period is a consumer right that allows individuals to reconsider their purchases and cancel or return items without justification. This period provides an opportunity for consumers to protect themselves from unwanted or unnecessary purchases, especially in the context of distance selling where the risk of buyer's remorse is higher.

Sale of Goods Act

The Sale of Goods Act 1979 is an Act to consolidate the law relating to the sale of goods. It applies to contracts of sale of goods made on or after (but not before) 1 January 1894.

The Act covers the formation of the contract, the effects of the contract, the performance of the contract, and actions for breach of the contract.

Formation of the Contract

A contract of sale of goods is a contract by which the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration, called the price. The contract may be absolute or conditional.

Effects of the Contract

The Act outlines the rules for when property passes to the buyer, including when the parties intend it to be transferred, and when goods are delivered to a carrier or other bailee or custodier for the purpose of transmission to the buyer.

Performance of the Contract

The Act sets out the duties of the seller and buyer, including delivery and payment, and the rules about delivery.

Actions for Breach of the Contract

The Act covers the remedies available to the buyer and seller in the event of a breach of contract, including damages, specific performance, and interest.

Unpaid Seller's Rights

The Act also provides rights to an unpaid seller, including a lien on the goods or right to retain them until payment, a right of stopping the goods in transit, and a right of re-sale.

Exclusion of Implied Terms

The Act allows parties to exclude or vary implied terms by express agreement, course of dealing, or usage that binds both parties.

Savings and Repeals

The Act also includes savings and consequential amendments, repeals, and savings relating to other legislation.

Consumer protection law

In the context of business-to-consumer contracts, certain terms are implied into all contracts, whether for the sale of goods or the supply of services. A seller cannot exclude or restrict liability for breach of these implied terms. For example, in the sale of goods, the following key conditions are implied:

• Good title – the seller has the right to sell the goods, and they are free from any undisclosed issues.
• The goods correspond with their description.
• Satisfactory quality – the goods meet the standard that a reasonable person would consider satisfactory, taking into account the description, price, and other relevant factors.
• Fitness for purpose – the goods will be reasonably fit for any purpose the seller is expressly or implicitly made aware of.
• Correspondence with samples – the goods supplied match any samples shown to the buyer before purchase.

Similar conditions apply to contracts for the supply of services, where the primary obligation of the seller is to perform the service with reasonable skill and care.

In the event that goods do not comply with the terms of the sales contract, consumers have certain prescribed remedies available to them. These include:

• Rejection – consumers can reject goods and request a refund, provided they complain within a reasonable time.
• Damages – a buyer can claim damages, typically the cost of repairing or replacing the goods. If the consumer has accepted the goods, their only remedy is to claim damages.
• Repair or replacement – the consumer can request a repair or replacement within a reasonable time. Sellers can refuse if the cost would be disproportionately high compared to the alternative.
• Partial or full refund – if repair or replacement is not possible or fails, the consumer may request a full or partial refund.

It is important to note that consumer protection laws may vary depending on the jurisdiction, and specific laws such as the Australian Consumer Law (ACL) or EU regulations may have their own unique provisions.

Consumer guarantees

In the European Union, when a consumer buys a good or service online or via other means of distance communication (telephone, mail order) or outside a shop (door-to-door salesperson), they have the right to return the item or cancel the service within 14 days without providing any justification. This is sometimes referred to as the cooling-off period or the withdrawal period. EU law also stipulates that consumers must be given a minimum 2-year guarantee as protection against faulty goods or goods that don't look or function as advertised.

In Australia, consumer guarantees apply to products and services that are normally bought for personal or household use. Additionally, a business can be considered a consumer if the product or service bought for business use meets certain conditions, such as costing less than $100,000 including GST or being a vehicle used to transport goods on public roads.

In New Zealand, the Consumer Guarantees Act (CGA) protects consumers by allowing them to seek repairs, replacements, or refunds when goods are faulty and setting minimum guarantees for all products and services. The CGA does not apply to commercial products or services bought for business use.

It is important to note that consumer guarantees do not apply in certain situations, such as private sales where the seller is not running a business or when products are bought for use in production, manufacturing, or repair.

Frequently asked questions