BUSINESS LAW

Case studies

Submitted By: Komaljeet Kaur

Student ID: 13832645

 QUESTION - 1

James purchases a new refrigerator from a department store. He pays $1000 for the
refrigerator. He receives a ‘one-year manufacturer warranty’ for the product. After
one year and two months, the motor in the refrigerator stops working.

James contacts the department store where he purchased the product and asks for
a replacement refrigerator. The store attendant apologises and says ‘Sorry, you are
out of warranty’.

James seeks your advice as to whether he has a case to get a replacement.

ANSWER
Issue - Has there been a breach of consumer guarantee as per Australian
Consumer Law.

Rules - As per section 54 guarantee as to acceptable quality, when goods are

sold to the customer other than by way of auction, a guarantee exists that they
must be of acceptable quality. Acceptable quality of goods means that goods
must achieve all the purposes for which that type of goods are generally made.
Also, the goods must be acceptable in appearance and finish, free from
defects, safe, and durable.
A reasonable customer aware about the state and condition of goods,
including any hidden defects, consider goods to be of acceptable quality,
taking into consideration the nature and price of goods, any statement made
about the goods on packaging or any other representation made by the seller
or manufacturer with regards to the goods.
The nature of the remedy depends on the type of failure. A customer can claim
for a replacement if there is a major failure. As per section 260 of Australian
Consumer Law major failure arises when goods are significantly different from
what was shown to the customer, do not fit its normal purpose and cannot be
made fit easily and within a reasonable time, and the goods are not of
acceptable quality because of their unsafe nature.
Section 58 guarantee as to repairs and spare parts implies that when a person
supplies goods to the customer other than by auction, the manufacturer of the
goods must ensure that there are facilities available for the repair of the goods,
or part of them for a reasonable period after goods are sold or supplied to the
customer.
Application – Before applying rule there must be a clarification of the
difference between guarantee and warranty. Guarantee is considered as a
promise made by the manufacturer that if the goods do not meet the
acceptable quality they will be repaired, replaced or consumer will be
compensated. Whereas, manufacturer’s warranty is a written assurance or
representation made by the supplier at the time of selling goods to a customer
that if the goods or parts of them are defective the business will repair or
replace goods or parts of them or provide compensation to the customer. It is
also known as a warranty against defects.
The major difference between both is the source of obligation. Guarantees
have a lawful approach which implies that there must be a minimum set of
standards that are applicable to all goods and services involved in any
transaction. On the other hand, warranties are additional benefits or
representations made to the customer with regards to goods or services.
In some cases, the remedies provided under manufacturer’s warranty exceeds
the remedies that are available under guarantee. However, in some other
cases, the consumer can claim remedy under consumer guarantees even if the
manufacturer’s warranty period has expired. According to Australian
Consumer Law, consumer have statutory rights which are not limited to a set
time period. Instead, these rules apply for the duration of time that is
reasonable to expect, given the cost and quality of the item. It means that
even if the manufacturer’s warranty has expired, the consumer may be
entitled to a remedy under their consumer rights.
In this case, it is reasonable to expect that an expensive refrigerator should not
have a serious fault just after 14 months of normal use. James could argue that
the goods are not of merchantable quality and can claim for the item to be
replaced even if the warranty had expired. The supplier cannot get rid of his
duties on basis of just warranty period expired, as the guarantee related to the
product and customer’s rights in ACL will protect customer’s claims related to
the product. The supplier cannot mislead James regarding his rights related to
the product as it is not limited to a time period given the price and nature of
the refrigerator.
As a reasonable customer, it is obvious for James to expect that a $1000
refrigerator would last longer than a year. Also, the defect in the refrigerator
was major which implies that it should be replaced or repaired although
warranty has expired, guarantee and customer’s rights still apply.
Conclusion – James can claim for a remedy under ACL free of any charge on
the basis that the refrigerator is not of acceptable quality and he is entitled to
its replacement as per his statutory rights defined in Australian Consumer Law.
 QUESTION – 2

Jason is riding a bicycle at night with no lights nor any reflective material on the
bicycle or on his clothing. He is riding in the middle of the road on dark stretch of
road on the outskirts of Brisbane.

Sarah is driving within the speed limit and is paying attention when she collides with
Jason. Jason is injured and he brings legal proceedings against Sarah alleging that
she has been negligent.

REQUIRED

Advise Sarah whether she has a possible defence against the action brought by
Jason. Refer in your answer to any relevant sections of the Civil Liability Act 2003
(Qld).

ANSWER

Issue - Whether there is a breach of duty of care and damages can be claimed
based on negligence.
Rules – According to section 9 of the Civil Liability Act there will only be a
breach of duty of care if the defendant does not take all precautions what a
reasonable person would have taken in the same situations. In other words, it
is not an absolute obligation; the defendant just needs to consider that
standard of care and do what a reasonable person would have done in similar
situations.
Some points that need to be kept in mind before deciding the reasonable
person have taken precautions against the risk of harm include mainly the
probability, seriousness, social utility, and burden of taking precautions to
avoid the harm.
Further, as per section 10 before deciding the liability for breach of duty some
points must be considered such as:
  The burden of taking precautions to avoid a risk of harm includes the
burden of taking precautions to avoid similar risks of harm for which the
person may be responsible; and
 The fact that a risk of harm could have been avoided by doing something
in a different way does not of itself give rise to or affect liability for the
way in which the thing was done; and
 The subsequent taking of action that would (had the action been taken
earlier) have avoided a risk of harm does not of itself give rise to or
affect liability in relation to the risk and does not of itself constitute an
admission of liability in connection with the risk. (Queensland
Legislation)
The contributory negligence section 23 of the civil liability act implies that if a
person or his acts are partially responsible for his or her own loss, in that case,
the damage claims will be limited to the extent of their shared fault.
Application – Negligence take place when someone failed to take reasonable
precautions to avoid a loss or damage to someone which they know would
have occurred if care was not taken. In this case, both parties own a duty of
care for each other. A duty of care exists when the risk or damage was
reasonably foreseeable, and both the parties closely related and should take
care not to put the other party at risk. Reasonably foreseeable harm implies
that the person at fault must know that his or her actions can cause harm or
damage to others if reasonable care is not taken.
Both Jason and Sarah have a duty of care for each other in the form of
following traffic rules and not being careless which can harm others and the
person himself. Jason can be clearly seen as breaching his duty of care by not
using the light on his bike which is unlawful. Breach of duty takes place when
a person fails to take reasonable precautions that a reasonable person would
have taken to avoid any harm or damage to others. Jason is legally bound as
per traffic rules to use light or any other reflective material which he fails to
comply with. So, he is contributing to his own harm which clearly states a
situation of contributory negligence.
On the other hand, Sarah is paying full attention while driving her car and
taking all precautions to avoid any risk of harm to anyone. But we can assume
that Sarah even though took all precautions, but she might fail to stop her car
on time which may have avoided the crash.
Sarah as a defendant needs to prove that Jason was careless and partially
responsible for his own loss as he fails to comply with the traffic rules. She can
also state that he has breached his duty of care towards her because he must
follow road instructions and should not ride in the middle of the road without
any indicator light at night.
Sarah can argue based on contributory negligence by Jason and his breach of
duty of care towards her to follow traffic rules and instructions. As Jason was
negligent about his protection the proportion of damages claimed will be
divided as per the ratio of both parties’ fault.
Conclusion – Sarah has a defense against Jason on basis of contributory
negligence as he himself partially responsible for his own damage and can also
argue on the grounds of breach of duty of care by him for not complying with
traffic rules.