INSIGHTS: Spotlight on Fitness: an overview of Australian Consumer Law

May 12, 2014

On 1 January 2011 the Australian Consumer Law (ACL) introduced some significant changes to the obligations on suppliers of services and goods. This update sets out a few practical tips on how fitness businesses can limit complaints and stay on the right side of the consumer law.

Under the ACL, you guarantee that services supplied to clients:

  • are provided with due care and skill
  • are reasonably fit for any particular purpose specified by the client and will achieve any specified results they might reasonably expect to achieve
  • are provided within a reasonable time (when no time is set).

If you supply goods in addition to your services, you must ensure that those goods (among other things):

  • are of acceptable quality
  • are reasonably fit for any disclosed purpose.

These guarantees are sometimes called the “non-excludable consumer guarantees” since any attempt to limit or exclude them will be void, save for some very limited situations mentioned below.

It is not possible to mention the ACL without pointing out the prohibition on unfair terms. Parts of a fitness business’s standard terms can be held to be void where they attempt to restrict or exclude the non-excludable consumer guarantees or if they are considered unfair. We will deal with this topic in greater depth in the next article in the series, although a client complaint will often involve both the consumer guarantees and prohibition on unfair terms.

What do the Consumer Guarantees mean to me in a practical sense?

Supplying services with due care and skill means that you will use an acceptable level of skill or technical knowledge when providing the services and take all reasonable care to avoid loss or damage when providing the services. The most practical approach to avoiding a breach is to only give advice about particular matters within your expertise and by making reasonable efforts to protect your clients’ safety. There are also some legal ways you may be able to use to limit your liability in the event your client sustains a foreseeable physical injury, as noted below.

Fitness for purpose relates to the objectives and likely results that you will discuss with the client at the outset of their participation. It may be that a client says “I want to lose 10 kg for my wedding in 3 months’ time” or “I am training for a marathon”. You can help limit complaints by managing expectations and helping your clients set realistic goals and by tailoring an exercise program that is appropriate and safe.

If you accept pre-payments (including selling vouchers) for exercise, you will need to provide those services in a reasonable time if no bookings are made at the time of sale. Accordingly, although there may be a temptation to sell as many as possible, fitness businesses should ensure that they are not over-committed, so when a client seeks to redeem their voucher the business can offer a slot within a reasonable time.

What can the client claim under the ACL if he or she is not happy with the service you provided?

This depends on whether there is actually a failure to comply with a consumer guarantee. If there has in fact been a failure then the available remedies to the client depend on whether it is a major or a minor failure. Generally speaking, a failure will be considered major if the client would not have purchased the service in the first place had he or she known of the issue. All other failures are considered minor.

When the problem with the service (or goods) is minor, the fitness business can choose between:

  • providing a repair; or
  • offering the consumer a replacement or a refund.

When there is a major failure, you should allow the consumer to choose between:

  • cancelling the services for a refund; or
  • keeping the contract and getting compensation for any difference in value.

If the client complains and you do not agree to refund or another solution, they may take action through legal proceedings in a court or tribunal or, more commonly these days, by first complaining to a Consumer Protection agency. Consumer protection agencies are known to be active in contacting fitness businesses direct to discuss solutions where there may have been a breach of the ACL.

However, if you feel there is no failure on the part of the fitness business, you may not be obliged to offer refund or another solution. It is not always your fault if things don’t work out but if this happens, you should seek to gain a clear understanding of the client’s concerns and if in doubt seek expert legal advice.

Do you have to give a refund if the client simply changes their mind?

No, a fitness business does not have to give a refund when a client simply changes their mind about the services they have purchased.

However, the ACL also prohibits unfair terms in standard form contracts and certain consumer protection agencies have looked carefully at the use of cancellation fees. For example, if you have standard terms that allow you to charge the client for the duration of the contract after they have tried to cancel, this part of your terms could be void. Generally speaking, your cancellation fee should represent a genuine estimate of the loss to your business caused by the cancellation.

Can I give my own guarantee?

You certainly can. Many suppliers use their own guarantees as a marketing tool. For example, “Refund if not totally satisfied” or, “Lose 5 kg in a month or your money back”.

However you have to be careful in how you word the guarantee so that it does not appear to limit or exclude the non-excludable consumer guarantees in any way. If it does, it can make part of your terms void.

A good way to protect your position is by ensuring that any conditions or qualifications to your guarantee are clearly spelt out in writing and brought to the client’s attention prior to them entering into an agreement with you.

For instance, in the case of “Lose 5 kg in a month or your money back”, although it may seem obvious, you may also wish to state that this guarantee is subject to the client strictly following the exercise program designed by the fitness business, combined with an appropriate diet (noting any nutritional advice provided from yourself within your expertise and qualifications, or a registered dietician to whom you have referred the client).

One thing that you should bear in mind is that if your guarantee goes further than your legal obligations, then it may impact your insurance policy. This is something you should check with your insurer before launching a guarantee promotion.

Please contact Mark Fitzgerald, Nevena Brown or Georgina Odell for more information. Download this article.