Legal Principle

If Grant needs to take legal action against the manufacturer of underwear, he can take
derivative actions under S54 under Australia Consumer Law. This section of the law relating
to guarantee of acceptable quality is enforceable against the suppliers of goods as well as
manufacturers on behalf of the consumer.
Arguments
In order to apply S54, they are few sub-sections under s54 need to be fulfiled when applying
the derivative action against director. These sub-sections are:
1. Under s54(1), there is a guarantee that the goods are of acceptable quality if there is a
person supplies goods to a consumer while the supply does not occur by way of sale
by auction. In this case, the manufacturer sold the underwear to the sellers and
ultimately sold to Grant, thus the sale of underwear is not by auction. Therefore, the
underwear is to be taken of as acceptable quality.
2. Under s54(2), the goods supplied to a customer must be of acceptable quality. This
section of the law requires that goods be fit for the purposes they are commonly used
for, acceptable in appearance and finish, free from defects, safe and durable, all
according to the standards of a "reasonable consumer". In this case, the underwear is
fit for the purposes they are commonly used for and it is durable and acceptable in
appearance and finish. However, the underwear is not safe and it is not free from
defects as Grant was affected by dermatitis after wearing the underpants that contain
metal sulphite in the material of underwear. Thus, the underwear is not to be taken of
acceptable quality.
3. S54(3) specifies five relevant matters reasonable consumer shall have regard to in
deciding whether goods acceptable in terms of the quality aspects. The relevant
matters are nature, price, statements on packaging or labels, representations by
supplier or manufacture and other relevant circumstances. In other words, it involves
the application of reasonable customer test as regards durability. In this case, there is
no any relevant matters as regards durability relate to the underwear and thus this
subsection is fulfilled. Therefore, the underwear is taken to be of acceptable quality.
4. S54(4) specifies that the goods are of acceptable quality if the consumer agreed to
the goods even if defects were specifically drawn to the purchasers attention before

the acceptance of goods was made. In this case, Grant had no any idea the underwear
is defect as it is hard for Grant to discover the material of underwear contain chemical
at the time of purchase. Thus, the underwear is not taken to be of acceptable quality
5. Under s54(5), the goods is not considered as acceptable quality if the goods are
displayed for sale or hire. In this case, the underwear is not displayed for sale or hire
and therefore under s54(5) the underwear is taken to be of acceptable quality.
6. S54(6) shows that the goods is acceptable quality if the consumer causes the goods to
become of unacceptable quality or fails to take reasonable steps to prevent them from
becoming of unacceptable quality. In addition, if they are damaged by abnormal use,
the goods is considered as acceptable quality. In this case, the defective underwear is
caused by the negligence of manufacturer by leaving chemical in the material of
underwear. Therefore, the underwear is not taken to be of acceptable quality under
s54(6).
7. S54(7) specifies that the goods is acceptable quality if the consumer examines the
goods before the consumer agrees to the supply of the goods because the examination
ought reasonably to have revealed that the goods were not of acceptable quality. In
this case, there is no examination has been made by Grant at the time he purchased
the underwear from seller as the chemical left in the material of underwear is hard to
be discovered by a reasonable consumer.

Conclusion
As a conclusion, both the manufacturer and seller are not liable for breaching S54 because
they fail to fulfill the two elements under S54(2), s54(4) and s54(6).