Sample solution to Question One, ACTY 5320 Exam, Semester Two, 2019
Issue
The issue is whether Alex can obtain relief against Delicious Homebrew Ltd under the
Consumer Guarantees Act 1993.
Law
The Consumer Guarantees Act 1993 (CGA) provides minimum guarantees for products and
services supplied by parties in trade to consumers.
The applicable provisions of the CGA are as follows:
1. A “consumer” is defined in section 2 of the CGA to mean someone who:
a. acquires from a supplier goods or services of a kind ordinarily acquired for
personal, domestic or household use or consumption; and
b. does not acquire the goods or services for certain commercial purposes.
2. A “supplier” is also defined in section 2 of the CGA to include someone who:
a. sells goods to a consumer; or
b. supplies services to a consumer.
3. “Goods” are defined in section 2 to include personal property of every kind (whether
tangible or intangible).
4. “Services” are defined to include any rights, benefits, privileges or facilities that are to
be provided by a supplier under a contract for or relating to the performance of work
whether with or without the supply of goods.
5. The CGA provides the following guarantees in respect of goods:
a. That the goods will be of acceptable quality (s 6). Under s 7(1) the meaning
of “acceptable quality” includes that the goods are (i) fit for all the purposes
for which goods of the type in question are commonly supplied, (ii) safe and
durable as a reasonable consumer aware of the state and condition of the
goods would regard as acceptable having regard to (iii) the nature of the
goods, (iv) the price of the goods, (v) the nature of the supplier and the
context in which the supplier supplies the goods, (vi) any representation made
about the goods by the supplier and (vii) all other relevant circumstances of
the supply of the goods.
b. That the goods will be reasonably fit for any particular purpose the consumer
makes known and that the supplier represents that they are fit, except in
circumstances where the consumer does not rely on the supplier’s skill or
judgment (s 8).
c. That, where goods have been supplied to a consumer by reference to a
sample or demonstration model or by description, the goods supplied
correspond with the sample or demonstration model in quality and correspond
with the description (ss 9 and 10).
6. Section 18 of the CGA provides that where a supplier has breached any of the above
guarantees relating to supply of goods:
a. If the failure is of a substantial character (which includes that the goods are
unsafe, as set out in section 21), the consumer may reject the goods in the
manner set out in section 22, namely by giving notice of rejection and the
reasons why and then returning the goods. Section 23 provides that the
consumer can choose either to have a refund of the money paid or to have
goods of the same type and similar value to replace the rejected goods.
b. The consumer may also obtain damages for any losses or damage as a result
of the failure which was reasonably foreseeable as liable to result from the
failure.
7. The CGA provides the following guarantees in respect of services:
a. That the service will be carried out with reasonable care and skill (s 28).
b. That the service will be reasonably fit for purpose and achieve a result that
the consumer makes known to the supplier at the time of agreeing to buy the
service except where it can be shown that the consumer did not rely on the
supplier’s skill or judgment (s 29).
8. Section 32 of the CGA provides that where a supplier has breached any of the above
guarantees relating to supply of services:
a. If the failure is of a substantial character (which includes that the product of
the services is unsafe or that the services would not have been acquired by a
reasonable consumer fully acquainted with the nature and extent of the
failure, as set out in s 36), the consumer can cancel the contract for service
by giving notice in writing to the supplier (s 37).
b. If the consumer cancels the contract, the consumer shall be entitled to a
refund of money paid for the services unless a court orders otherwise.
c. The consumer may also obtain remedies for losses or damage resulting from
the failure which was reasonably foreseeable.
Application
Alex has purchased a beer brewing machine for use in his home. The beer brewing
machine has been specifically manufactured for home use and is sold by a business that
contemplates “home brews” through its own business name. Alex has not acquired the
brewing machine for any commercial purpose of his own. The beer brewing machine is an
item of tangible personal property, therefore it is a “good” for the purposes of the CGA.
Alex has also purchased services relating to (a) installation of the beer brewing machine and
(b) lessons in how to use the machine over the course of eight weeks. These are “services”
for the purposes of the CGA.
Delicious Homebrew Limited has sold goods and services to Alex, therefore Delicious
Homebrew is a “supplier” and Alex is a “consumer” under the CGA.
Alex agreed to buy a Mark 3 model beer brewing machine. He was sold this model by
reference to a sample in Delicious Homebrew’s shop. What he actually received was a Mark
2 model beer brewing machine which did not have the same capabilities as a Mark 3 model.
For this reason, the Mark 2 model was not of the same quality as a Mark 3 model. In this
respect, there has been a breach of the guarantee that the goods supplied did not
correspond with the sample in Delicious Homebrew’s shop.
The beer brewing machine, being a Mark 2 model instead of a Mark 3 model, was not fit for
the purposes of the beer brewing capacity that Alex thought he would be getting and the
machine Alex received was not safe having regard to the price he paid and the level of trust
he clearly put in Delicious Homebrew and the level of expertise that Josh appeared to
convey. On this basis the guarantee of acceptable quality has been breached.
It was very clear that Alex was purchasing the machine for the purposes of brewing beer.
Delicious Homebrew represented that the machine it sold to Alex would be fit for that
purpose. Although it is possible that the Mark 2 was still fit for the purpose of making some
sort of beer, it was nevertheless not fit for the purpose of making the beer that Delicious
Homebrew represented it would be, being the beer that a Mark 3 was capable of producing.
This is a breach of the guarantee as to fitness for purpose.
The installation of the beer brewing machine was carried out by Andrew who was not a
certified technician. When Alex was purchasing the installation service, he was advised that
a certified technician would install the beer brewing machine for two reasons: The first
reason was to ensure optimal performance and the second reason was to ensure that the
manufacturer warranty would be available to Alex. The installation by someone who was not
a certified technician means that the manufacturer warranty will not be honoured by the
manufacturer. This is a breach of the guarantee that the installation service will be supplied
with reasonable care and skill. Given the importance of the manufacturer warranty, it is very
unlikely that a reasonable consumer would agree to purchase the installation service on the
basis that it would negate the manufacturer warranty by the use of an uncertified technician.
Josh failed to take reasonable care when teaching Alex how to use the machine he had
installed in his home. If Josh had been more careful, he would have known that the machine
was a Mark 2 machine, especially given his expertise in selling beer brewing machines, and
he would have known that the formula he supplied to Alex would have been incompatible
with the Mark 2 machine. Accordingly, there has been a breach of the guarantee that
services will be supplied with reasonable care and skill. As a direct result of this breach, the
careless services supplied by Josh are unsafe and have caused damage to Alex’s kitchen.
This type of damage, being directly caused by the explosion, is foreseeable.
Similarly, the services supplied were not fit for the purpose of being taught how to brew beer,
as the brewing technique was clearly incompatible with the Mark 2 machine and it was
evident that Alex was reliant on Josh to teach him as Alex had no skills of his own.
Accordingly, the guarantee that a service will be fit for purpose has also been breached.
The breach of guarantees has been of a substantial character because the goods and the
product of the services are unsafe.
Conclusion
On this basis Alex is entitled to:
(a) Reject the beer brewing machine and seek a refund of the price paid or a
replacement product. He will need to do this by notice in writing to Delicious
Homebrew.
(b) Cancel the contract for the installation and obtain a refund of the amount paid for the
installation. He will need to do this by notice in writing to Delicious Homebrew.
(c) Cancel the contract for the provision of brewing lessons and obtain a refund of the
amount paid for them. He will need to do this by notice in writing to Delicious
Homebrew.
(d) Claim damages for the costs of replacing the shattered windows in the kitchen, being
damages that are reasonably foreseeable from the breach of the guarantees relating
to the services.
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