Don’t let your defect warranties be defective

Do you provide services directly to customers? Or do you supply both goods and services together? And when you do, do you also offer a defect warranty for your services?

If you’ve answered yes to the above, here is one last question: are you aware of the recent changes to the mandatory wording requirements for defect warranties under the Australian Consumer Law?

Changes? What changes?

The Australian Consumer Law (ACL) currently requires that defect warranties for the supply of goods include mandatory wording.

However, from 9 June 2019, recent changes will now require mandatory wording for services as well as goods.  

So, if you provide services (or goods and services together) and offer consumers a defect warranty, you will need to update your documentation to comply with this change.

 

influence legal warranty
Time to review your warranty documents

What is a defect warranty?

Under the ACL, consumers are given a bundle of automatic rights in relation to the goods and services they purchase. These are known as consumer guarantees. These guarantees protect consumers if they are sold faulty products or services, giving them remedies against the supplier, including the right to repair, replacement, or refund.

Alongside these consumer guarantees, suppliers and manufacturers often offer defect warranties in respect of the quality and standard of their goods and/or services.

A defect warranty is a promise that, if a customer receives defective goods and/or services, the supplier will:

  • repair or replace the products;
  • resupply or fix a problem with the services; or
  • compensate the customer.

The ACCC provides the following example:

“A consumer purchases a motor vehicle that comes with a three year or 100,000km written warranty outlining what the manufacturer will do if there are certain problems with the vehicle. This is a warranty against defects and must comply with the requirements of the ACL.”

It’s important to note that a defect warranty need not be set out on a warranty card, or similar. It might be in any of your business documentation, such as your consumer contracts, terms & conditions, receipts, or even on product packaging.

What is the mandatory wording?

The reason for the inclusion of the mandatory wording is to ensure that consumers are informed of their rights under the ACL and are aware that the consumer guarantees cannot be excluded by the warranty.

The existing mandatory wording for defect warranties for goods is:

“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.”

The new mandatory wording for services is as follows:

For the supply of services only:

“Our services come with guarantees that cannot be excluded under the Australian Consumer Law. For major failures with the service, you are entitled:

  • to cancel your service contract with us; and
  • to a refund for the unused portion, or to compensation for its reduced value

You are also entitled to be compensated for any other reasonably foreseeable loss or damage.

If the failure does not amount to a major failure, you are entitled to have problems with the service rectified in a reasonable time and, if this is not done, to cancel your contract and obtain a refund for the unused portion of the contract.”

For the supply of goods and services together:

“Our goods and services come with guarantees that cannot be excluded under the Australian Consumer Law. For major failures with the service, you are entitled:

  • to cancel your service contract with us; and
  • to a refund for the unused portion, or to compensation for its reduced value.

You are also entitled to choose a refund or replacement for major failures with goods. If a failure with the goods or a service does not amount to a major failure, you are entitled to have the failure rectified in a reasonable time. If this is not done you are entitled to a refund for the goods and to cancel the contract for the service and obtain a refund of any unused portion. You are also entitled to be compensated for any other reasonably foreseeable loss or damage from a failure in the goods or service.”

Are there any other warranty requirements?

The ACL also requires that your warranty documentation is in clear and plain language that is easy for consumers to read and understand. You must also provide a number of specific details into the warranty document, including:

  • the business contact details, such as the business name, address, phone number, and e-mail address;
  • information of how a consumer may make a claim under the warranty, and what the business must do to honour the warranty;
  • the remedies available for defects; and
  • the warranty period.

What should you do now?

With the 9 June 2019 deadline right upon us, we recommend you review and update your warranty documentation to ensure you have included all the relevant mandatory text.

If you have any concerns or questions about how these changes may affect you, or if you would like more information about compliance with the ACL, please contact us.

Author: Blake Motbey, Paralegal.

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