The next topic in Industry Legal Group’s article series, based on Emma Dalley’s presentation at the AAAA Expo

At the AAAExpo, Industry Legal Group’s Emma Dalley presented a seminar on the top five most common legal enquiries Industry Legal Group receives. In this edition, Industry Legal Group takes a deeper look at the topic of customer supplied parts.

Liability for customer supplied parts
If a customer supplies parts to a business, then the business is not the supplier of the parts for the purpose of the Australian Consumer Law (ACL) consumer guarantees relating to the supply of goods. This means that if there is a defect with the parts, the customer does not have a basis to make a claim in relation to that defect under the ACL consumer guarantees relating to goods.
However, the ACL consumer guarantees relating to the delivery of services remain relevant when fitting customer supplied parts, including the:
• guarantee as to due care and skill (section 60), that the business will provide the services, such as fitting the part, with due care and skill;
• guarantee as to fitness for a particular purpose (section 61), that if the consumer lets the business know (including by implication), that they would like the service for a particular purpose, there is a guarantee that the services (and the resulting product), will be reasonably fit for that purpose; and
• guarantee as to a reasonable time for supply (section 62), that the business will deliver the services within a reasonable time.
Even though the business is not liable under the ACL in relation to the supply of goods, the customer may still make a claim against the business that the business will need to defend.
Additionally, the customer relies on the skill and judgment of the business in the delivery of the services. This reliance on skill and judgment is complicated when the customer supplies parts.
For example, if the business has suitability concerns regarding the part, it is prudent for the business to let the customer know why the business has the concern, as using an unsuitable part, and failing to advise on this, may result in the business not meeting its consumer guarantees relating to the provision of services.

Must a business accept customer supplied parts?
The business may choose to fit customer supplied parts.

Relevant considerations
If the business is considering accepting customer supplied parts to fit to a vehicle, relevant considerations for the business include, whether:
• the part is correct or if parts are missing;
• the part is fit for purpose;
• the business is familiar with the part quality, history or specifications;
• fitting the part could have a detrimental impact on the vehicle (if so, has the customer been informed);
• the part comes with a warranty; and
• the business will suffer loss of profit (eg. due to the time taken to fit an unfamiliar part).

Precautions that may be taken
Precautions that may be taken by the business when accepting customer supplied parts include:
• set the customer’s expectations, for example, if the part is unknown to the business and/or potential outcomes of fitting the part are unknown to the business, let the customer know that the part may not achieve the desired result;
• ensure the customer is aware of any potential issues with the part; and
• if the business does not consider the part is fit for purpose, or has a defect that the business has noted, then the business should not fit the part and inform the customer that the business is of the opinion that the part is not fit for purpose or has a defect.
If the business has provided such information to the customer, Industry Legal Group recommends setting the information provided out in writing, having the customer read the information, and sign and date the next to the information. While doing this does not prevent a claim being made against the business, it does provide evidence that the business can use in its defence should a claim arise.

Recommendations
If fitting a customer supplied part, Industry Legal Group recommends obtaining the customer’s:
• acknowledgement the customer supplied the part;
• acknowledgement they were informed of the potential consequences of using the part and/or a part that does not meet the necessary standards;
• acknowledgement that the business does not offer a warranty on the part and are not the supplier of the part for the purpose of the consumer guarantees; and
• agreement that they release and indemnify the business from loss or damage caused by the part.
Industry Legal can provide the following to your business under the membership retainer:
• a notice regarding customer supplied parts and potential issues; and
• a deed of release setting out the part supplied by the customer and clarifying that the business is not a supplier under the ACL for the parts (noting that the ACL consumer guarantees relating to services will apply to the business and cannot be contracted out of).

Takeaways
The key takeaways are:
• the business can choose whether or not to fit customer supplied parts;
• if the business does accept customer supplied parts, Industry Legal Group recommends the business take precautions, including an acknowledgement that the part was supplied by the customer, providing information on potential issues or short comings with the part in writing signed by the customer and entering into a deed in respect of the parts; and
• if the business accepts customer supplied parts, the business will not be the supplier of the parts for the purpose of the ACL consumer guarantees relating to the supply of goods, however, the ACL consumer guarantees relating to the supply of service will apply to the business.

AAAA Member Benefits
Industry Legal Group provides advice to members on commercial law matters.
If you have any questions relating to the above information, please contact Industry Legal Group on 1300 369 703 or aaaa@industrylegalgroup.com.au

This document is intended for general information purposes only and should not be regarded as legal advice. Please contact Industry Legal Group if you require legal advice.