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 are substantially unfit for their normal purpose and can't easily be fixed, goods that differ significantly from their description, and goods a reasonable consumer fully acquainted with the nature and extent of the failure would not have bought. For services, a separate test applies under section 268: a failure is major if a reasonable consumer fully acquainted with the nature and extent of the failure wouldn't have acquired the service; the service is substantially unfit for a purpose services of that kind are commonly supplied for, unfit for a particular purpose you made known, or not of such a nature, or quality, state or condition, that it might reasonably be expected to achieve a result you made known, and can't easily and within a reasonable time be remedied; or it creates an unsafe situation.

The classification matters because it determines who chooses the remedy. For goods, a major failure (or one that can't be remedied) 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 that can be remedied gives the business the first opportunity to fix the problem — though if it doesn't 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. A reasonable consumer fully acquainted with the nature and extent of the failure would not have acquired the goods. 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 a purpose goods of the same kind are commonly supplied for and cannot easily and within a reasonable time be made fit. If the goods are substantially unfit for 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 unfit for a purpose the consumer disclosed and cannot easily and within a reasonable time be made fit for it. 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 unfit for that purpose and can't easily and within a reasonable time be remedied, the failure may be major. Unlike limb 3, this limb doesn't require the goods to be substantially unfit.

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.

Multiple failures. Two or more failures that aren't major on their own are also together a major failure if a reasonable consumer fully acquainted with them, taken as a whole, wouldn't have bought the goods (section 260(2)).

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 fully acquainted with the nature and extent of the failure would not have acquired the service;
• The service is substantially unfit for a purpose services of that kind are commonly supplied for and can't easily and within a reasonable time be remedied;
• The service is unfit for a particular purpose the consumer made known and can't easily and within a reasonable time be remedied;
• The service is not of such a nature, or quality, state or condition, that it might reasonably be expected to achieve a result the consumer made known, and can't easily and within a reasonable time be remedied; or
• The supply of the service creates an unsafe situation.

Two or more failures that aren't major on their own are together a major failure if a reasonable consumer fully acquainted with them, taken as a whole, would not have acquired the service (section 268(2)).

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 likely does.

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 263, on what happens once you reject the goods), and sections 267 to 270 for services.

For a major failure in goods, or a failure that can't be remedied, you may:

• Reject the goods, if that right hasn't been lost, and choose a refund or a same-type, similar-value replacement if reasonably available; or
• Keep the goods and seek compensation for the reduction in their value.

For a major failure in services, or a failure that can't be remedied, 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.

You can also claim other reasonably foreseeable loss (section 259(4) for goods, section 267(4) for services), if you can evidence it, took reasonable steps to limit it, and don't claim the same loss twice.

For a non-major failure in goods that can be remedied, the supplier gets the first reasonable opportunity to fix it, by repair, replacement or refund, within a reasonable time. For a non-major failure in services that can be remedied, you can require the supplier to fix it within a reasonable time. If the supplier refuses or doesn't do so within a reasonable time, you can have the problem fixed elsewhere and recover the reasonable cost, or reject the goods (subject to section 262) or cancel the services contract.

The right to reject goods is not unlimited. Under section 262 of the ACL, the right to reject is lost if the rejection period has ended (it runs from supply, not from when you noticed the fault, for as long as it would be reasonable to expect the failure to become apparent, given the type of goods, their likely use, and how long and how much they can reasonably be used), if you have lost, destroyed or disposed of the goods, if they were damaged after delivery for reasons unrelated to their condition when supplied, or if they have been attached to or incorporated in real or personal property and can't be detached or isolated without damaging them.

When this applies (and when it doesn't)

The major failure framework applies where you acquired the goods or services as a consumer under section 3 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 — either is enough. Section 3 excludes goods (not services) acquired for re-supply, or to use up or transform in trade or commerce in production or manufacture, or in repairing or treating other goods or fixtures on land, and section 63 takes some services, such as insurance, out of the services guarantees; check how these apply to your purchase.

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. If you caused the problem and the goods were damaged by abnormal use (misuse, accident, or ignoring care instructions), the acceptable quality guarantee generally isn't breached.
• 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. The guarantees apply to supplies in trade or commerce, not a genuine one-off private sale.

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 ends when the section 262 rejection period ends (see above). Deadlines for bringing a claim also apply under state and territory limitation laws and forum rules. 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. If the cause or seriousness is disputed, get a written report from an independent repairer or expert covering cause and cost; it carries more weight than your own assessment.
3. Ask about a chargeback early. If you paid by card, ask your card issuer now whether a chargeback is available; if you used buy now pay later, ask the provider about its dispute process. Both follow the card scheme's or provider's own time limits, not the ACL's.
4. 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).
5. Give a reasonable deadline. Ten to fourteen business days is reasonable for most disputes (a practical default, not an ACL requirement). State what you will do if they do not respond — for example, escalate to your state or territory consumer body or file a claim with a tribunal or court with jurisdiction.
6. 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. 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 consumer protection body 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, waivers or deferrals if cost is a concern. Our guide to choosing the right tribunal or court has more.

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 limbs objectively, not by what the business thinks. 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 is to show the fault reflects a lack of acceptable quality (including durability), not wear or misuse. 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 or replacement (if the right to reject hasn't been lost), 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 case, use your state or territory consumer body, then a tribunal or court with jurisdiction.

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?
• Business refused your refund? Here's what to do next

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, and card chargebacks) 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.