Online trader Best Buy Australia gets trade practices law wrong

Best Buy Australia Pty Ltd caught our attention when it was fined by ACMA for spamming.  So we took a look at their T&Cs, just out of interest.

Perhaps unsurprisingly, they get the law seriously wrong when it comes to implied warranties and liability.

Here’s what BBA got wrong, and how to avoid the same mistake.

The law in a nutshell

Let’s begin by summarising a key part of the Trade Practices Act 1974 (‘TPA’).

First, though, a note.  We’re going to talk about goods, to simplify things.  But very similar law applies to services as well.

Goods that you buy may fall into one of three categories.

• The first category is goods of a kind that are ordinarily acquired for personal, domestic or household use or consumption, regardless of their cost. We’ll call those ‘PDH Goods’.
• The second category is goods that cost under $40,000, but are not ordinarily acquired for personal, domestic or household use or consumption. We’ll call those ‘Non-PDH Goods’.
• The third category is good that both cost more than $40,000 and are not ordinarily acquired for personal, domestic or household use or consumption. We’ll call those ‘Non-consumer Goods’.

Let’s dispense with Non-consumer Goods

For present purposes, the TPA has nothing to say about Non-consumer Goods.  You’re free to buy or sell them on any liability terms you agree on.

That leaves us with PDH Goods and Non-PDH Goods.

What PDH Goods and Non-PDH Goods have in common

PDH Goods and Non-PDH Goods are both protected in a special way by the TPA.  It says that all agreements to supply them always include a promise that they’ll be of ‘merchantable quality’.

You can’t exclude that promise.

How PDH Goods and Non-PDH Goods differ

It’s simple.

• For Non-PDH Goods, although you cannot exclude the promise of ‘merchantable quality’, you are allowed to limit your liability if the promise is breached. Basically, you may limit it to replacing the goods, or paying the cost of replacing them.
• For PDH Goods, you can’t exclude the promise of ‘merchantable quality’ and you can’t limit your liability for breaking the promise.

Repeat:  If you sell goods, and they are PDH Goods (i.e. they are of a kind that are ordinarily acquired for personal, domestic or household use or consumption) you cannot limit your liability in any way if they are not of merchantable quality.  Not at all.  Not a whisker.  Not a sausage.

It’s not quite as bad as it seems

The general law places certain limits on what a person can be sued for.  You always have the protection of those limitations.  But for PDH Goods, you can’t try to use contract terms to reduce your potential liability even further.

So how does Best Buy Australia get this wrong ?

First, note that BBA sells goods like cameras, garden tools and baby high chairs.  Its product range looks like it’s 100% made up of products that are of a kind that are ordinarily acquired for personal, domestic or household use or consumption – ‘PDH Goods’.

And what does its contract say about its liability ?

We will not be liable for any loss of income, loss of profits, loss of contracts, loss of data or for any indirect or consequential loss or damage of any kind howsoever arising and whether caused by tort (including negligence), breach of agreement or otherwise.

Our maximum summative liability for any Product supplied to you whether in contract, agreement, and tort (including negligence) or otherwise shall in no circumstances exceed the amount payable by you to us in respect of the Product(s) in question.

Under the Trade Practices Act 1974 (“Act”), where implied conditions and warranties cannot be excluded, any liability in Best Buy Australia for breach of such conditions and warranties … shall be limited, to the option for Best Buy Australia to replacement of the Product(s) or the re-supply of the same Product(s).

Sorry, guys, but you have it wrong

We’ll say it again.  For PDH Goods, any purported contractual limitation of liability is void. Dead in the water.  Doesn’t work.

But worse – it may be a criminal offence, as well

Section 53(g) of the TPA says:  ‘A corporation shall not, in trade or  commerce, in connexion with the supply or possible supply of goods … make a false or misleading representation concerning the existence, exclusion or effect of any condition, warranty, guarantee, right or remedy.’

And section 75AZC of the TPA goes on to make that an offence … with a maximum penalty of over $1 million.

The ACCC notices these things

For its 2004 report Shopping online: rights and obligations when trading over the internet, the ACCC reviewed the trading terms of 1,000 Australian consumer websites and concluded that in over half of the cases, contract terms were likely to breach the TPA by including exclusion clauses, limitations of liability and disclaimers that aren’t valid.

Quoting from the report:

• Businesses are increasingly using online terms and conditions to try to exclude statutory warranties and conditions. This is likely to mislead consumers about their rights and therefore risks breaching s. 53(g) and s. 52 of the TPA.
• The issue of warranties was the second highest conduct complained about to the ACCC in 2002-03, amounting to 13 per cent of overall complaints.
• Misrepresentations about the availability of warranties and the rights of consumers under s. 53(g) was ranked fourth in the top 10 conducts where the matter may breach the Act, with 713 complaints in 2002-03.
• Online conduct is a priority for the ACCC.

So here’s what you should be doing

Do you sell goods (or services) that are of a kind that are ordinarily acquired for personal, domestic or household use or consumption, regardless of their cost ?

If ‘yes’, check your T&Cs.  Do they say that:

• your liability is limited in any way ?
• you can’t be sued for consequential or indirect loss, etc ?
• you only have to replace or refund on the goods if faulty ?

If ‘yes’, you probably have a serious problem.  Get those terms legally reviewed a.s.a.p.