Many businesses mistakenly assume that the Australian Consumer Law only applies to individual consumers. However, business-to-business (B2B) transactions can fall within its scope, creating legal obligations for suppliers and offering protections to business purchasers.
If you’re supplying or acquiring goods or services as part of a business, this article, written by our eCommerce and consumer law lawyers explains when the ACL applies – and what to do to stay compliant.
Key Takeaways
- The Australian Consumer Law (ACL) can apply to B2B transactions in Australia
- Consumer guarantees cannot be excluded or limited by contract if the ACL applies
- The $100,000 threshold determines when a business is treated as a “consumer”
- Misleading or deceptive conduct and unconscionable conduct rules apply to all B2B dealings
- Small business contracts may also be protected from unfair terms under the ACL
- Businesses must review standard contracts to ensure compliance with the ACL
Understanding Consumer Guarantees in B2B Transactions
What Are Consumer Guarantees?
Consumer guarantees are statutory rights under the ACL, found in Schedule 2 of the Competition and Consumer Act 2010 (Cth). These guarantees automatically apply when goods or services are supplied to a “consumer” (including certain businesses).
Key consumer guarantees include:
- Goods must be of acceptable quality
- Goods must match their description or sample
- Goods must be fit for their specified purpose
- Manufacturers must ensure spare parts and repairs are available
- Services must be delivered with due care and skill
- Services must be provided within a reasonable time
Legal Tip: These guarantees cannot be excluded or limited by contract if the ACL applies.
If you’re selling products or services via the web, this guide helps you understand when the Australian Consumer Law applies to online businesses.
When is a Business considered a “Consumer” under the ACL?
A business can be considered a “consumer” for ACL purposes if:
- It acquires goods or services costing less than $100,000; or
- The goods or services cost more than $100,000 but are of a kind ordinarily acquired for personal, domestic or household use; or
- The goods are commercial road vehicles or trailers used mainly to transport goods on public roads.
Note: The threshold increased from $40,000 to $100,000 from 1 July 2021 (see Treasury Laws Amendment (Acquisition as Consumer – Financial Thresholds) Regulations 2020).
Important: If goods are bought for resupply, your business is not considered a consumer under the ACL.
How Courts Interpret “Consumer” in B2B Transactions
Australian courts focus on the ordinary use of goods or services, not the buyer’s specific purpose (or your business’s intended use).
Case Examples:
- Carpet Call Pty Ltd v Chan: A nightclub buying carpet was a “consumer” good because carpets are usually bought for domestic use
- Jillawarra Grazing Co v John Shearer: An air seeder, though acquired for personal use, was considered commercial due to its typical application (i.e. not a consumer good)
- Four Square Stores (QLD) Ltd v ABECopiers: A photocopier was not a consumer good as it is generally bought for commercial use
Key Provisions of the ACL Affecting B2B Transactions
Section 18 – Misleading or Deceptive Conduct
All businesses must avoid misleading or deceptive conduct “in trade or commerce”. This applies to all commercial activities, including B2B dealings, regardless of whether consumer guarantees apply.
Businesses must not engage in conduct that misleads or deceives.
Section 20 & 22 – Unconscionable Conduct
The ACL prohibits unconscionable conduct in business transactions. Section 22 sets out factors for determining if conduct is unconscionable.
Factors considered include:
Bargaining power imbalance
Failure to disclose key terms
Lack of good faith
Use of undue pressure
Unfair Contract Terms
Unfair contract terms are void in both consumer and small business contracts. Examples of unfair terms include those that:
- Allow one party to unilaterally vary contract terms
- Permit only one party to terminate without cause
- Impose excessive penalties
Exclusions and Limitations in B2B Contracts
Consumer guarantees cannot be excluded or limited by contract if the ACL applies (section 64(1)). Any term attempting to do so is void to the extent it restricts statutory guarantees.
For goods not ordinarily acquired for personal, domestic or household use, businesses may limit their liability under certain circumstances (section 64A), but strict requirements apply.
Practical Steps for B2B ACL Compliance
Here’s how to reduce your legal risk:
1. Contract Review and Drafting
- Ensure all standard contracts acknowledge the operation of the ACL
- Avoid clauses that exclude or limit statutory guarantees unless expressly permitted
- Check that limitation of liability clauses comply with section 64A
2. Due Diligence in Sales Practices
- Verify all statements and representations made during negotiations are accurate
- Keep clear records of communications and agreements
- Avoid pressure tactics during negotiations
3. Stay Informed
- Be aware that both Commonwealth and state/territory versions of the ACL may apply
- Understand which courts have jurisdiction in case of disputes
Stay updated with relevant industry codes referenced in the ACL’s unconscionability provisions
Real-Life Example: How the ACL Applies in B2B
Scenario: A Tech Company Buys Office Equipment
Business A, a growing tech startup, purchases $25,000 worth of ergonomic chairs from Business B, a commercial furniture supplier. The supplier promotes the chairs as “medical-grade” and “suitable for prolonged professional use.”
A month after delivery, multiple chairs begin breaking, causing discomfort and productivity issues for staff. The supplier refuses a refund, stating that the sale was “business to business” and therefore not covered by the Australian Consumer Law (ACL).
What Happens Next?
Business A seeks legal advice and discovers:
The chairs cost under $100,000, so Business A is considered a “consumer” under the ACL.
The chairs were not of acceptable quality, breaching consumer guarantees.
The supplier’s advertising claims may also amount to misleading conduct under Section 18 of the ACL.
Outcome:
Business A successfully demands a full refund and compensation for additional costs. The supplier is warned by the ACCC for potential breach of consumer law obligations in B2B transactions.
For guidance on ensuring your marketing materials meet legal standards, check out our article Is Your Advertising Legally Compliant?.
Frequently Asked Questions
Does Australian Consumer Law apply to business to business contracts?
Yes, the Australian Consumer Law (ACL) can apply to business-to-business contracts in certain circumstances.
While the ACL is often associated with consumer protection, it also extends to transactions between businesses where one business is considered a “consumer” under the law.
For example, if a business purchases goods or services valued under $100,000, or if the goods or services are ordinarily acquired for personal, domestic, or household use, ACL protections may apply.
Can you contract out of consumer guarantees in B2B transactions?
No. Under section 64(1) of the ACL, any attempt to exclude, restrict or modify consumer guarantees is void if the transaction meets the ACL’s consumer criteria.
What is the current monetary threshold for a business to be considered a consumer under the ACL?
$100,000. This applies to goods or services acquired after 1 July 2021.
Do unfair contract term protections apply to all B2B contracts?
No. They apply to consumer contracts and small business contracts as defined by the ACL.
What are the consequences of breaching the ACL in B2B transactions?
Consequences include civil penalties, damages, reputational harm, and unenforceable contract terms. Regulatory bodies such as the ACCC can also seek injunctive relief.
How do I know if my business contract is compliant with the ACL?
Review your contracts for compliance with consumer guarantee provisions, ensure limitation of liability clauses are valid, and seek guidance on complex issues involving ordinary use or pricing thresholds.
For best practices when drafting refund policies, see our comprehensive overview of sales refund terms and conditions.
