Warranties Against Defects

The ACCC Leeway is Finished

Source: Mason Sier Turnbull

Introduction

The content of warranties against defects is regulated by requirements imposed by the Australian Consumer Law (“the ACL”) as of 1 January 2012. Temporary leeway was granted by the ACCC for goods that were manufactured prior to November 2011, but that leeway has now ended.

Companies must now ensure all warranties against defects provided in respect of goods or services comply with the requirements of the ACL, or face the risk of harsh penalties.

What Warranties and Goods the Requirements Apply to

A warranty against defects is a representation made to a consumer in connection with the sale of goods or services at or around the time of the sale, to the effect that a person will:

  • repair or replace the goods or part of them;
  • rectify or provide the services again; or
  • give compensation to the customer.

The representation is usually in the form of a document such as a warranty card, however a warranty against defects can even take the form of writing on the packaging of a product.

The ACL requirements only apply to warranties against defects provided for goods or services that either:

  • cost less than $40,000;
  • are for the main purpose of being for personal, domestic or household use; or
  • are a vehicle or trailer primarily used to transport goods on public roads.

The Requirements

A warranty against defects must:

  • be in clear, plain language;
  • concisely state what the supplier must do to honour the warranty and what the consumer must do to be entitled to claim under the warranty;
  • include the following text, verbatim:
    • ‘Our goods come with guarantees that cannot be excluded under the Australian Consumer Law. You are entitled to a replacement or refund for a major failure and compensation for any other reasonably foreseeable loss or damage. You are also entitled to have the goods repaired or replaced if the goods fail to be of acceptable quality and the failure does not amount to a major failure.’

This mandatory text should be included even if the warranty against defects is provided in respect of services or where goods are provided by a manufacturer, even though the remedies described in the mandatory text may not necessarily apply to such goods or services;

  • prominently state the following information about the supplier;
    • their name;
    • their business address;
    • their telephone number; and
    • their email address (if any);
  • state the period within which the consumer is entitled to claim under the warranty;
  • set out the procedure for the consumer to claim under the warranty including the address to which a claim may be sent;
  • state who will bear the expense of claiming the warranty and if the expense is to be borne by the supplier — how the consumer can claim expenses incurred in making the claim; and
  • state that the benefits to the consumer given by the warranty are in addition to other rights and remedies of the consumer under a law in relation to the goods or services to which the warranty relates.

Where a warranty is printed on the packaging, the ACL requires even these warranties to comply with the Requirements. The ACCC will however not prosecute companies who combine a package warranty with a complete warranty provided inside the product, such as with a warranty card. It is not sufficient however for the information to be provided in store or online.

Penalties for Non-Compliance

A failure to comply with the warranty against defects requirements could result in penalties of up to $50,000 for a corporation and $10,000 for an individual, per offence. It will be difficult for a supplier to raise a valid defence for failing to comply with the requirements, so prevention is the best remedy in these circumstances.

In many cases, it may be better for a supplier to give no warranties against defects rather than provide one that does not comply with the ACL requirements.

Conclusion

Companies who provide warranties against defects for consumer goods or services must now ensure that all warranties are up to date and comply with the ACL requirements. Suppliers of goods or services should complete a stocktake of the warranties they offer and ensure they comply where required.

Care should be taken to update warranties on packaging, or to include further information inside the package that complies with the requirements. It is not enough to refer a customer to a website or pamphlet in store.

Don’t risk harsh penalties for non-compliance, update your warranties now.

Should you have any queries or require more information contact our Corporate Advisory Principal, John Sier, on 03 8540 0200 begin_of_the_skype_highlighting 03 8540 0200 FREE end_of_the_skype_highlighting or  john.sier@mst.com.au.