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Warranty Against Defects – Does Your Business Comply?

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By William Riddle, Lawyer, MST Lawyers

If your business provides a warranty to consumers for defects, you may need to immediately review your warranty document to ensure it complies with the Australian Consumer Law (ACL).

Previously, only businesses that provided a warranty against defects to consumers for goods (for example, to repair them, rectify them, or to provide compensation to the consumer) had to ensure their warranty document contained a ‘mandatory statement’ pursuant to the Competition and Consumer Regulations 2010 (Regulations).

Following changes to the law on 9 June 2019, the obligations surrounding the ‘mandatory statement’ included in any warranty document have changed.

If you are a business that supplies a service or a combination of goods and services, you must now include a mandatory statement with warranty documentation issued to consumers.

For businesses supplying services only, the mandatory statement is as follows:

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

    1. to cancel your service contract with us, and
    2. 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.”

If you are a business that provides goods and services, the statement must refer to both “goods” and “services” as well as contain an additional portion of text that addresses a refund or replacement for any defective goods.

It is an offence to provide a warranty against defects that fails to comply with the prescribed requirements pursuant to the Regulations. 

The ACL provides for penalties of up to $50,000 for breaches by a corporation and penalties of up to $1.1 million for corporations that make false or misleading representations concerning the existence, exclusion or effect of any condition, warranty, guarantee right or remedy.

The recent tightening of the prescribed requirements is an indication that the ACCC will be ‘clamping down’ on the mandatory statements issued with warranties against defects.

There are additional requirements prescribed by the Regulations. For instance, the warranty must be in a document that is ‘transparent’ and concisely states what the consumer must do to entitle them to claim the warranty.

It may also be a good time to review your terms and conditions generally. As we have written in previous articles, we are finding that many of our clients are also encountering difficulties with the requirements surrounding consumer guarantees and the unfair contract terms provisions of the ACL.

1.            Unfair Contract Terms Fairly Dealt With

2.            Unfair Contract Terms (Small Business Loans) Update

3.            Court of Appeal Confirms Services to be Provided under Consumer Guarantees Not Limited by Contractual Obligations

If you would like assistance with ensuring that your terms and conditions comply with the requirements prescribed by the Regulations, please contact a lawyer in our Corporate Advisory team by email or call +61 3 8540 0276.