What Does ‘Fit For Purpose’ Mean in Australia?

Put simply in Australian Law a product or service being “fit for purpose” simply means that the product or service in question does what it’s meant to do.

For example, if someone sells a commercial premises and then it’s discovered that the premises has a crumbling foundation that no longer allows for the building to be used safely, it could be argued that the building is not fit for purpose.

If you’re in business, you should understand the laws surrounding the fit-for-purpose obligation that every business owner has to his clients/customers to protect your business and avoid legal issues. If your business is involved in a dispute regarding a product or service being not fit for purpose, then it’s a good idea to speak with one of our expert commercial lawyers to find out where you stand. Or keep reading to learn more about fit-for-purpose laws in Australia and how they apply to you as a business owner.

Understanding Fit For Purpose In Australian Law

For a product or service to be “fit for purpose” in Australian law, it must accomplish its intended function. For example, if a seller markets a computer with various functions, it must be capable of performing those functions for it to be considered fit for purpose. 

The Australian Consumer Law (ACL) outlines the various rights consumers enjoy regarding purchased goods or services in all states and territories in Australia. These include consumer guarantees like product safety and fit-for-purpose that sellers must meet. 

If the seller doesn’t meet these guarantees, the buyer might request remedies like refunds or replacements. The law covers both consumers and businesses as per the following conditions: 

  • Fit for purpose law for consumer transactions: A consumer transaction involves sales worth $40,000 or less. If the value exceeds $40,000, the product must be meant for domestic, household, or personal use/consumption.  
  • Fit for purpose law for commercial transactions: ACL also has business consumer rights for goods/services worth under $100,000. The law also applies to goods/services worth over $100,000, provided they were for personal, domestic, or household use. 

The Sale Of Goods Act: Fit For Purpose 

The Australian Commercial Law is the national guideline on business-to-business (B2B) and business-to-consumer (B2C) transactions. However, each state and territory also has The Sale of Goods Act, which defines the laws on the sale of goods in that region. 

You can find the links to the Sale of Goods Act of your state or territory below:

The Sales of Goods Act implies the conditions a sale must meet for the fit-for-purpose obligations to apply. These conditions are: 

  1. Buyer’s intent: The buyer mentioned the reason(s) for purchasing the seller’s good(s). 
  2. Reliance on the seller: The buyer relied on the seller’s skill and judgment. 
  3. The seller is in the business: The seller normally provides/sells the specific goods.

Condition 1: Buyer’s Intent

Before entering into a contract or agreement on the sale of goods, you (the buyer) must explain the purpose of purchasing the goods. You can do this expressly or by implication, meaning the seller understands what you intend to do or achieve with their product. 

For example, before signing a contract of sale for a lawn mower, you should indicate whether it’s for commercial or domestic use. The seller, therefore, clearly understands your intended purpose.

Condition 2: Reliance On The Seller’s Skills And Judgment 

In this second requirement, the buyer must clearly express the specific purpose they want the product to achieve. The explanation must be done in a way that indicates the buyer relies on the seller to use their skills and judgment to offer the best product for the specified purpose. 

The assumption here is the seller knows more about the goods/services than the buyer. The seller is better positioned to identify the product that would fulfil the buyer’s intended purpose. Using our earlier example, the buyer would rely on the seller to provide the right lawnmower for commercial or domestic purposes.

Condition 3: The Seller Is In The Business of Selling The Specific Good 

To meet this requirement, the seller must be in the business of selling specific products. If the seller takes orders for a specific good, whether they’re experienced or not, they automatically meet this requirement. 

For example, if the seller accepts lawnmower orders, it means they are in the business and are liable to the ‘fit for purpose’ obligation.

Why The Fit For Purpose Law Is Important 

Besides appearing in sales of goods, a fit-for-purpose clause can appear in a contract. The clause might appear in different terminologies, but the obligations remain the same. A supplier must ensure the services/goods they offer are fit for purpose and fulfil their intended purpose. 

As a supplier/seller, it’s important to understand the fit-for-purpose obligations. Not meeting them can cause various issues, including losing customer trust, ruining your reputation, and affecting repeat business. 

The affected consumers might also request remedies, including repairs, replacement, or refunds. Repeatedly breaching consumer guarantees can also lead to legal consequences, including penalties and court orders to rectify the breach. 

Legal Advice On Fit For Purpose Laws

Legal matters, like ‘fit for purpose’ obligations, can seem overwhelming. However, with the right legal partner, you’ll conduct business without the stress of dealing with legal issues. 

At Aditum Lawyers, we work with businesses, providing expert advice on commercial legal matters. Contact our team today for a free consultation with one of our professional business lawyers. 

Further Reading & Resources

  1. https://consumer.gov.au/consumers-and-acl
  2. https://www.fairtrading.nsw.gov.au/buying-products-and-services/guarantees,-contracts-and-warranties/consumer-guarantees
  3. https://www.lawhandbook.sa.gov.au/ch18s03s01.php

Disclaimer: The information provided in this article is for general informational purposes only and should not be construed as legal advice. Consult with a qualified commercial lawyer for personalised advice regarding your specific situation.