section 260 ACL: what counts as a 'major failure' (and what doesn't)

The difference between a "major failure" and a "minor failure" under the Australian Consumer Law is not just a label — it determines who gets to choose the remedy. Get it right and — while the right to reject still applies — you can choose a refund or replacement, or keep the goods and claim compensation. Get it wrong and the business can hand you a repair instead. Section 260 of the ACL sets out what a major failure is for goods, and a separate (but related) test applies to services. This article unpacks both.

Quick answer

Whether a failure is "major" depends on the nature and severity of the problem, not just how much you paid or how long you've had the item. For goods, section 260 sets out the circumstances in which a failure to comply with a consumer guarantee is treated as a major failure — any one of them can be enough. They include goods that are unsafe, goods that can't be used for their normal purpose, goods that differ significantly from their description, and goods a reasonable consumer would not have bought knowing about the failure. For services, a separate test applies under section 268: a failure may be major if a reasonable consumer would not have acquired the service knowing the failure, if the service is substantially unfit for its purpose and can't be fixed within a reasonable time, if it fails to achieve a result you made known to the supplier, or if it creates an unsafe situation.

The classification matters because it determines who chooses the remedy. For goods, a major failure generally gives you the choice: reject the goods and choose a refund or replacement (if the right to reject is still available), or keep them and seek compensation for the reduction in value. A non-major failure gives the business the first opportunity to fix the problem — though if they fail to do so within a reasonable time, further options may become available to you.

What the law actually says

Section 260 of the ACL lists the circumstances in which a failure to comply with a consumer guarantee is a major failure for goods. Any one of them is sufficient on its own.

1. A reasonable consumer would not have bought the goods. The goods have a problem that a reasonable consumer, fully aware of the nature and extent of the failure, would not have acquired. This is a broad, objective test focused on the seriousness of the failure at the time of supply.

2. The goods depart significantly from their description or sample. If the goods depart in one or more significant respects from their description, or from a sample or demonstration model by reference to which they were supplied, the failure may be major. "Significant" does the work here — a minor colour variation is unlikely to qualify; goods described as waterproof that let in water almost certainly do.

3. The goods are substantially unfit for their common purposes and cannot be made fit within a reasonable time. If the goods can't do what goods of that kind are commonly supplied to do — and the problem can't easily be remedied within a reasonable time — the failure is major. That "within a reasonable time" element matters: if the business can fix it quickly, this limb may not apply.

4. The goods are substantially unfit for a specific purpose the consumer disclosed, and cannot be made fit within a reasonable time. This connects to section 55 of the ACL (fitness for a disclosed purpose). If you expressly or impliedly made a particular purpose known, it was reasonable to rely on the supplier's skill or judgment, and the goods are substantially unfit for that purpose and can't be remedied within a reasonable time, the failure may be major.

5. The goods are unsafe. If the goods are unsafe, the failure is major under section 260. In practice the question is whether the goods are unsafe in the relevant circumstances — not whether the business regards the risk as minor.

The services test

Section 260 applies to goods. For services, the major failure test is set out in section 268 of the ACL. A failure to comply with a consumer guarantee for services is major if:

• A reasonable consumer would not have acquired the service had they known the nature and extent of the failure;
• The service, taken as a whole, is substantially unfit for its purpose and cannot be made fit within a reasonable time;
• The service — and any product resulting from it — does not achieve a result the consumer made known to the supplier, and that cannot be remedied within a reasonable time; or
• The service creates an unsafe situation.

This is a distinct test, and it matters. A haircut that is merely uneven may not meet the threshold; a hairdresser who applies the wrong chemical and causes scalp burns almost certainly does. A builder who runs a week late may not have caused a major failure; one who leaves structural work incomplete and the site unsafe likely has.

What the remedies look like

Once a major failure is established, the ACL's remedies framework applies — sections 259 to 263 for goods (including section 261, on what happens once you reject the goods), and section 267, read with section 268, for services.

For a major failure in goods, you may:

• Reject the goods and choose a refund or a replacement of the same type, where the right to reject is still available; or
• Keep the goods and seek compensation for the reduction in their value.

For a major failure in services, you may:

• Cancel the contract and recover money paid for the unsupplied or unconsumed portion of the service, where available; or
• Keep the contract and seek compensation for the reduction in value.

Compensation for reasonably foreseeable consequential loss may also be available.

For a non-major failure in goods, the supplier generally gets first opportunity to remedy it — by repair, replacement, or refund, at their election. For a non-major failure in services, the supplier generally gets a reasonable time to remedy the failure. If the supplier doesn't remedy within a reasonable time, you may be able to have the problem fixed elsewhere and recover reasonable costs, or in some cases reject the goods or cancel the contract.

The right to reject goods is not unlimited. Under section 262 of the ACL, the right to reject can be lost if the rejection period has ended, if the goods have been lost, destroyed, or disposed of, if they have been damaged after delivery for reasons unrelated to the failure, or if they have been attached to or incorporated into other goods in a way that can't be undone without damage.

When this applies (and when it doesn't)

The major failure framework applies where you acquired the goods or services as a consumer within the meaning of the ACL. In broad terms, that covers goods or services costing $100,000 or less, or of a kind ordinarily acquired for personal, domestic, or household use — subject to the ACL's exclusions, such as acquisition for re-supply or for use in a manufacturing or repair process. Services carry their own exclusion concepts, so check the position for a service against the ACL's consumer definition.

The framework applies to purchases from businesses. The ACL applies to persons acting in trade or commerce, which includes most sole traders as well as companies — a personal trainer, a freelance tradesperson, or a sole-trader mechanic will generally be subject to the ACL even though they are individuals. Private sales between consumers (for example, a private Gumtree listing) are generally outside the ACL's scope.

The major failure test also does not apply where:

• You caused the problem. A failure you caused through misuse, accident, or failure to follow care instructions is not a failure to comply with a consumer guarantee.
• You were told about the defect before you bought. If the seller disclosed the problem and you bought anyway, you generally cannot later claim on that specific defect.
• The failure is trivial. Not every defect is a failure to comply with a guarantee, and not every failure to comply is major. A small scratch on the underside of a table is unlikely to breach the acceptable quality guarantee at all, let alone constitute a major failure.
• The goods are second-hand from a private seller. Consumer guarantees apply to businesses, not private individuals selling their own goods.

One important nuance: the ACL does not set a single fixed warranty-style expiry period for consumer guarantee claims. Timing still matters, though — delay can make it harder to show the fault reflects a lack of acceptable quality at the time of supply, and the right to reject goods may lapse if you have kept them for a significant period. Raise problems in writing as soon as you identify them, and keep a dated record.

What to do today

If you believe a failure meets the major failure threshold, here is a practical sequence:

1. Identify which limb of section 260 (or section 268 for services) applies. Be specific. "The goods are unsafe" is cleaner and more persuasive than a general complaint that something went wrong.
2. Document the failure thoroughly. Photos, video, dates, and a clear description of what the goods or service cannot do. If the goods are unsafe, document this carefully — unsafe goods are treated as a major failure.
3. Write to the supplier or business in clear terms. State the date of purchase, describe the failure, identify the relevant ACL section, state that you consider the failure to be major, and specify the remedy you are choosing (refund, replacement, or compensation). Email creates a record; use it.
4. Give a reasonable deadline. Ten to fourteen business days is usually reasonable for most disputes. State what you will do if they do not respond — for example, escalate to your state's Fair Trading body or file a tribunal claim.
5. Keep the goods where it's safe to do so. Don't dispose of them if you intend to reject — the business may need to inspect them. If they are unsafe or perishable and can't be kept safely, preserve clear evidence of their condition instead.

If you need help drafting the letter, fairgo can generate one for you in a few minutes. The wizard identifies the relevant ACL sections automatically and produces a letter you send under your own name.

For how the remedies work in practice, see our guide to replacement, repair and refund.

What if the business refuses

If the business disputes that the failure is major, or refuses to provide the remedy you've chosen, you have escalation options.

Your state or territory Fair Trading body offers a free conciliation service. They will contact the business on your behalf and attempt to broker a resolution. The Fair Trading body does not make binding orders in ordinary consumer disputes and cannot compel a business to take part — but many do engage, and a conciliation letter from a regulator carries weight. Full contact details are at /agencies.

State and territory tribunals — NCAT in NSW, VCAT in Victoria, QCAT in Queensland, and equivalents elsewhere — can hear many ACL disputes. You can often file without a lawyer, and fees are typically modest. However, tribunals only have jurisdiction where their enabling legislation confers it, and for many ordinary ACL disputes the Magistrates Court or equivalent court may be the correct binding forum. The right forum depends on the type of dispute and the amount claimed — confirm the correct forum and its current claim thresholds on the official tribunal or court website before filing. See our guide to choosing between tribunals for an overview.

The major failure classification is often the central dispute in these proceedings. Businesses frequently argue a failure is minor when the consumer says it is major. Tribunals and courts apply the section 260 test objectively — the question is not what the business thinks, but what a reasonable consumer in your position would conclude. Come prepared with documentation, evidence of the failure, and a clear argument about which limb applies.

For a worked example, see washing machine repair refused — what to do.

Common mistakes

A few patterns come up repeatedly in major failure disputes:

• Accepting "it's only a minor fault" without checking. Businesses sometimes characterise failures as minor to avoid giving you the remedy of your choice. Check the section 260 criteria yourself — particularly the safety limb and the "reasonable consumer would not have bought" limb, which are often overlooked.
• Conflating the goods and services tests. Section 260 applies to goods; section 268 applies to services. If you paid for a service (a tradesperson, a salon, a personal trainer), the services test is the one that matters. The structure is similar but not identical.
• Waiting too long before raising the problem. The longer you wait, the harder it becomes to establish that the failure existed at the time of supply rather than developing through use. Raise it in writing as soon as you identify it.
• Disposing of the goods. Once you lose the right to reject under section 262, you may lose the refund-or-replacement pathway that depends on rejection — though other remedies may still be available. Keep the goods until the dispute is resolved.
• Asking for the wrong remedy. For a major failure in goods, you choose the remedy — refund, replacement, or compensation. For a major failure in services, the options are cancellation with recovery of money paid for the unsupplied or unconsumed portion, or keeping the contract and seeking compensation or a price reduction. Asking for something outside this framework can muddy the dispute.
• Skipping the written demand. A phone call is not a demand letter. A written letter that cites the ACL, identifies the failure, and specifies the remedy you want creates a record — and often resolves the dispute without escalation.
• Going straight to the ACCC. The ACCC investigates systemic conduct and does not resolve individual disputes. For your specific case, your state Fair Trading body and the relevant tribunal or court are the right forums.

For a broader overview of what the major failure concept means in practice, see what "major failure" really means under the ACL.

Related reading

• What "major failure" really means under the ACL
• Washing machine repair refused — what to do next
• Replacement vs repair vs refund — which remedy can you choose?

This article is general information about Australian Consumer Law, not legal advice. The ACL is complex and your situation may have details that change the analysis. For advice on your specific case, see your state's Fair Trading body — full list at /agencies.