Providing compensation

A consumer can claim compensation from you for consequential loss when goods or services fail to meet a consumer guarantee. Consequential losses are costs to the consumer in time and money because something went wrong.

What would I have to pay?

If a consumer is successful in a claim for consequential loss, you may have to pay for losses that:

  • result from a failure to meet a consumer guarantee, and
  • were reasonably foreseeable.

You would not have to pay for:

  • problems unrelated to your conduct or the goods you supplied
  • losses caused by something completely independent of your business, after the goods left your control.

Example 1:  a consumer recently bought a car, which leaked oil on her driveway. A neighbour’s dog ran through the oil and into her house, dirtying the carpet. The car dealer would not have to pay for carpet cleaning, as the dealer could not predict that a dog would run through the oil and into the house – the cost was not reasonably foreseeable.

Example 2: a consumer’s washing machine breaks down due to a fault. As a result, there is water damage to carpet in part of the house. The supplier may be responsible for the cost of replacing the carpet damaged by flooding from the faulty washing machine.

Putting a value on consequential loss

It can be hard to put a dollar figure on consequential loss. Compensation should put the consumer in the position they would have been in if the goods or services had met the consumer guarantees.

Example: a consumer used a liquid cleaner according to instructions to remove a stain on his new curtains. The product damaged a curtain in the living room. As the curtain was new, the supplier would probably have to meet the cost of replacement. Compensation would be less for curtains in poorer condition.

You cannot write a term into a sales contract that says you will not be responsible for any loss, unless:

  • the goods or services were sold to the consumer for use in their business, and
  • the term was brought to the consumer’s attention at the time of sale.

If you attempt to contract out of the consumer guarantees when selling goods or services to a consumer, you may be misleading the consumer about their legal right to compensation. Misleading conduct is a breach of the Australian Consumer Law. Penalties apply if you break the law.

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