Retailer manufacturer indemnity ACL: why the seller can't pass you on

You take a faulty product back to the shop and hear: "That's a manufacturer issue. You'll need to contact them." Under the Australian Consumer Law (ACL), that answer doesn't move your consumer guarantee claim: the seller remains responsible to you, and its recovery of costs from the manufacturer is a matter between those two businesses. In some cases you may also have a separate damages claim against the manufacturer, explained below.

If the fault could make the goods unsafe (overheating, sparking, a gas or brake problem, a child product), stop using them, get them checked, and look for a recall on the ACCC Product Safety recall search.

Quick answer

For the consumer guarantee remedies, who supplied the goods to you decides who you claim against, not who made them. For the guarantees of acceptable quality, fitness for purpose, description and sample (sections 54 to 57), your rights run primarily against the business that sold you the goods.

What you can likely ask the seller for depends on the failure:

• A non-major fault that can be fixed: you can require the seller to remedy it within a reasonable time. The seller chooses only how: repair, replacement with goods of an identical type, or refund.
• A major failure, or a fault that can't be remedied: you may be able to reject the goods (if the right to reject hasn't been lost under section 262) and choose a refund or replacement, or keep them and claim compensation for any reduction in value (details below).
• The manufacturer's own warranty wasn't honoured, or repairs or spare parts aren't available: those guarantees (sections 58 and 59(1)) concern obligations of the manufacturer, and section 259(1)(b) excludes them from the remedies against the seller. The route is generally a damages claim against the manufacturer under section 271(5).
• A separate claim against the manufacturer: for some failures, including acceptable quality, you may also be able to claim damages from the manufacturer directly (section 271). That is an extra option, not a reason for the seller to turn you away.

If the seller still refuses after you've written to it, see the options under "What if the business refuses" below.

What the law actually says

The guarantees bind the seller. When a business supplies goods in trade or commerce to a consumer, the goods must be of acceptable quality (section 54 of the ACL). That means they must be as fit for all the purposes for which goods of that kind are commonly supplied, acceptable in appearance and finish, free from defects, safe and durable as a reasonable consumer fully acquainted with their state and condition (including any hidden defects) would regard as acceptable. That standard has regard to the nature of the goods, their price (if relevant), statements on packaging or labels, representations by the supplier or manufacturer, and other relevant circumstances. It is judged at the time of supply.

Other guarantees cover:

• fitness for a disclosed purpose (section 55)
• matching the description (section 56)
• matching a sample or demonstration model (section 57).

Section 259 gives you remedies against the supplier when any of these isn't met:

• Major failure, or a failure that can't be remedied: you can reject the goods (if the right to reject hasn't been lost under section 262) and choose a refund or a replacement of the same type and similar value, if one is reasonably available (section 263). Alternatively, you can keep them and claim compensation for any reduction in their value below the price paid or payable (section 259(3)(b)).
• Non-major failure that can be remedied: the business gets the first reasonable opportunity to fix it, by repair, replacement or refund, within a reasonable time (sections 259(2) and 261). If it refuses or doesn't do so within a reasonable time, you can have it fixed elsewhere and recover all reasonable costs of doing so, or reject the goods (subject to section 262).
• Other loss: you can also claim other loss caused by the failure that was reasonably foreseeable (section 259(4)). You need to be able to evidence it, show you took reasonable steps to limit it, and not claim the same loss twice.

What counts as a major failure. Under section 260(1), a failure is major if any of these applies:

• the goods would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure
• they depart in one or more significant respects from the description, sample or demonstration model
• they are substantially unfit for a purpose for which goods of the same kind are commonly supplied, and can't, easily and within a reasonable time, be remedied
• they are unfit for a disclosed purpose made known to the supplier (or a person who conducted prior negotiations), and can't, easily and within a reasonable time, be remedied
• they are not of acceptable quality because they are unsafe.

Under section 260(2), two or more failures can together be a major failure. That applies if a reasonable consumer fully acquainted with the nature and extent of those failures, taken as a whole, would not have acquired the goods. This applies to contracts entered into on or after 18 December 2020.

How the seller recovers from the manufacturer. Under section 274, a manufacturer must indemnify the seller in two situations:

• Damages the seller pays you. This covers damages for reasonably foreseeable loss under section 259(4), where the manufacturer is or would be liable to you under section 271 for the same loss (section 274(1)).
• The seller's costs of certain failures. This covers costs the seller incurs because it is liable to you for (section 274(2)):
  • a failure of the acceptable quality guarantee
  • a failure of the fitness for purpose guarantee, where you made the purpose known to the manufacturer (directly, through the seller, or through the person who conducted prior negotiations)
  • a failure of the description guarantee, where the description was applied by or on behalf of the manufacturer, or with its consent.

The seller has 3 years to bring that recovery action. Time runs from the earlier of the first day it made a payment towards, or otherwise discharged (even in part), its liability to you, such as paying for a repair, or the day you first started a proceeding against it (section 274(4)). The Act sets no separate start date for a claim for costs.

The indemnity operates between the seller and the manufacturer. It doesn't remove the seller's liability to you or require you to pursue the manufacturer instead.

Your separate claim against the manufacturer. You can also sue the manufacturer directly for damages:

"Manufacturer" is defined widely. It includes:

• a business that produces, processes or assembles the goods
• a business that puts its name or brand on goods
• a business that holds itself out as the manufacturer
• an importer, where the actual maker has no place of business in Australia.

What you can recover from the manufacturer. Damages are measured under section 272. They cover:

• any reduction in value below the lower of the price paid or payable and the average retail price at the time of supply, and
• reasonably foreseeable loss, including the cost of inspecting and returning the goods to the manufacturer, if you can evidence it and took reasonable steps to limit it.

Limits on the manufacturer claim.

• Defences: a manufacturer isn't liable for an acceptable quality failure caused only by an act, default, omission or representation of someone other than the manufacturer or its employees or agents, or by a cause independent of human control after the goods left its control. It also isn't liable where the failure arises only because the seller charged more than the recommended or average retail price (section 271(2)). The description claim has only the first two of those defences, and the first covers only another person's act, default or omission, not a representation (section 271(4)).
• Warranty repairs first: if you asked the manufacturer under its warranty to repair or replace the goods, you can't sue it for the reduction in value unless it refused, failed, or took longer than a reasonable time (section 271(6)).
• Time limit: an action must be started within 3 years after you first became, or ought reasonably to have become, aware that the guarantee wasn't complied with (section 273). That limit applies only to manufacturer actions, not to your claim against the seller.

Repairs, parts and the manufacturer's warranty. Section 58 is a guarantee that the manufacturer will take reasonable action to ensure repair facilities and parts are reasonably available for a reasonable period after supply. It doesn't apply if the manufacturer took reasonable action to ensure you were given written notice, at or before the time you agreed to the purchase, that they wouldn't be available (or not after a specified period).

Section 259(1)(b) excludes sections 58 and 59(1) from the seller remedies. So the seller can't be required to refund or replace goods just because parts are unavailable or the manufacturer's warranty wasn't honoured. Any claim against the seller in that situation runs through another guarantee, usually section 54, and unavailable parts don't by themselves prove a durability failure. A warranty given by the seller itself is different: section 59(2) makes it a seller guarantee. Our guide to express warranties under section 59 has more.

The seller can't contract out. Under section 64, a term is void to the extent it purports to exclude, restrict or modify the guarantees or the remedies, including a term saying faults are "manufacturer's responsibility only". For goods or services not of a kind ordinarily acquired for personal, domestic or household use, section 64A lets the supplier's contract limit its liability (for goods, to repair, replacement or equivalent goods, or their cost, but not for the title guarantees). That limit doesn't apply if the consumer shows that relying on it isn't fair or reasonable.

A seller that tells you you have no rights against it may also be making a false or misleading representation about your rights or remedies (section 29(1)(m)), as well as engaging in misleading conduct under section 18. You can claim damages under section 236 for loss caused by such a contravention. That claim must be brought within 6 years after the cause of action accrued. You need evidence of the loss, should take reasonable steps to limit it, and can't recover the same loss twice.

When this applies (and when it doesn't)

You must be a consumer under section 3. For goods, you're a consumer if any one of these applies:

• the amount paid or payable did not exceed $100,000
• the goods are of a kind ordinarily acquired for personal, domestic or household use or consumption (this is about the kind of goods, not your own use)
• the goods are a vehicle or trailer acquired mainly to transport goods on public roads.

You're not a consumer for goods acquired for re-supply, or to use up or transform, in trade or commerce, in the course of production or manufacture, or of repairing or treating other goods or fixtures on land. Check how section 3 applies to you.

The sale must be in trade or commerce. Most sole traders are covered. A genuine one-off private sale carries no guarantee claim against the seller.

Other situations to check:

• Auctions: sales by auction conducted by the seller's agent don't carry the guarantees in sections 54 to 59.
• Disclosed defects: acceptable quality isn't breached for defects specifically drawn to your attention before you agreed to buy, or ones an examination you made ought reasonably to have revealed.
• Damage you caused: acceptable quality isn't breached where you caused the problem (or failed to take reasonable steps to prevent it) and the goods were damaged by abnormal use. Both conditions are needed.

Marketplaces and overseas sellers. The ACCC says that on a marketplace your guarantee rights run against the seller you buy from, not the platform itself, though the platform may be able to help; if the platform itself sold you the goods, it is that seller (see step 1 below). The ACCC also says an overseas business that supplies goods directly to consumers in Australia must follow the ACL, including the consumer guarantees, but the ACL doesn't cover you if the business doesn't directly offer its products in Australia, if the goods go to an overseas address and are then forwarded, or if the whole transaction happens overseas. Getting a remedy from an overseas business can be hard in practice. Our guide to buying from overseas has more.

Timing. The ACL has no single warranty-style expiry for the guarantees, but limitation laws and forum rules still apply. The right to reject ends when the section 262 rejection period ends, and delay can make it harder to show a fault existed at supply.

What to do today

1. Identify who supplied the goods. Check the checkout screen, receipt and the terms that applied when you ordered. That business is your respondent. Look up who the manufacturer or Australian importer is too, in case you need the manufacturer route.

2. Gather proof of purchase. For a purchase of $75 or more (excluding GST), the seller must give you proof of transaction as soon as practicable. For a purchase below $75, you can ask for proof as soon as practicable after the supply, and the seller must give it within 7 days of your request (section 100). Proof of purchase is evidence, not a precondition. A bank record may be sufficient, depending on whether it identifies the business, the transaction and the goods clearly enough.

3. Document the fault. Take photos or video, note the date you first noticed it, and keep every message, including any "contact the manufacturer" reply.

4. Get an independent expert opinion if the cause is disputed. A written report from another repairer or technician should cover the cause, whether and how the fault can be fixed, the cost, and any effect on value.

5. If you paid recently by card, ask your card issuer whether a chargeback may be available. If you used buy now pay later, ask the provider about its own dispute process. Time limits follow the card scheme's or provider's rules, not the ACL, so check now. There's no chargeback for a change of mind, and none is guaranteed. Contact the seller first and describe the dispute accurately.

6. Write to the seller. Include:

   • the purchase date
   • what failed
   • the guarantee you rely on (usually section 54)
   • the remedy you require.

   Note that the guarantees run against the seller. Set a deadline: 14 days is a practical default, not an ACL requirement. You can draft this letter for free with fairgo.

7. If you reject the goods (and the right to reject hasn't been lost under section 262), say so in writing. State the ground, say whether you choose a refund or a replacement, and return the goods. If returning them would involve significant cost because of the nature of the failure or the goods' size, height or method of attachment, the seller must collect them at its expense (section 263).

8. Before handing over a device for repair, back up your data and read the repair notice. By the time a repairer accepts goods for repair, it must give you any notice the regulations require (section 103): a warning that repair may result in loss of data if the goods are capable of retaining user-generated data, and a prescribed statement if its practice is to replace goods with refurbished goods or use refurbished parts. Not every repair needs both. Accepting a repair doesn't by itself waive your statutory rights, and repeated failures may support a major failure argument (including under section 260(2)), though the right to reject may still be lost under section 262.

9. If the issue is the manufacturer's warranty or unavailable parts, write to the manufacturer. Keep the 3-year limit in section 273 in mind.

What if the business refuses

If the seller refuses or ignores your deadline, the right next step depends on the dispute type and amount:

• Your state or territory consumer protection body. It may help, for example by contacting the business or conciliating, if your complaint meets its criteria. Most expect you to have tried to resolve the matter with the business first, and eligibility rules vary by state and dispute type (in the ACT, for example, statutory conciliation applies only where the remedy you seek is worth $5,000 or less). These bodies don't make binding orders in ordinary consumer disputes and can't make the business settle. Contact details are at /agencies.
• A tribunal or court with jurisdiction. In NSW, Victoria, Queensland, the ACT and the NT, a tribunal (NCAT, VCAT, QCAT, ACAT or NTCAT) hears many consumer claims within its limits. In Western Australia, South Australia and Tasmania, ordinary consumer claims go to the Magistrates Court. Jurisdiction depends on each forum's enabling legislation, the type of claim and the amount, so confirm the forum and its current thresholds on the official site before filing. You can usually run a claim without a lawyer, though some forums restrict legal representation (QCAT, for example, requires permission). Check current filing fees on the official site, and ask about fee exemptions, reductions or deferrals if cost is a concern. Our guide to choosing the right tribunal or court has more.
• The ACCC. The ACCC investigates systemic conduct rather than individual disputes, so it won't resolve your claim, but reporting a pattern of conduct can still be worthwhile.

If either business offers to settle, read the offer carefully: a "full and final" settlement or release may end your claim.

Common mistakes

• Waiting on the manufacturer while the rejection period runs. The right to reject is lost under section 262 if any of these applies:
  • (a) the rejection period has ended. That is the period from supply within which it would be reasonable to expect the failure to become apparent, having regard to the type of goods, their likely use, how long they can reasonably be used and the amount of use.
  • (b) the goods were lost, destroyed or disposed of by you.
  • (c) they were damaged after delivery for reasons not related to their state or condition at the time of supply.
  • (d) they were attached to, or incorporated in, any real or personal property and can't be detached or isolated without damaging them.
• Treating warranty expiry as the end of your rights. A manufacturer's warranty sits alongside the guarantees and doesn't replace them. Durability is judged by the section 54 test, not the warranty period.
• Claiming the same loss twice. You can't recover the same loss from both the seller and the manufacturer.

Related reading

• Business refused your refund? Here's what to do next
• Phone broken after the warranty expired
• Faulty laptop and the consumer guarantees
• Section 59: express warranties under the ACL
• Section 58: repairs and spare parts

This article is general information about Australian Consumer Law, not legal advice. It also touches on complaint and escalation pathways (state and territory consumer bodies, tribunals and courts, the ACCC, ACCC Product Safety, online marketplaces' own help processes, manufacturers' warranty processes, card chargeback rules and buy now pay later providers' dispute processes) and limitation laws, whose scope, rules, thresholds and processes sit outside the ACL or can change. Confirm the current position with the relevant body before lodging. For advice on your specific case, see your state or territory consumer body — full list at /agencies.