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If you supply customers with services that come with warranties against defects, you need to be aware of the recent changes to the Australian Consumer Law (ACL). As of 9 June 2019, you will need to include mandatory wording in all of your warranty documentation, including:

  • customer contracts;
  • terms and conditions (T&Cs); or
  • other documents evidencing your warranty against defects.

The Australian Competition and Consumer Commission (ACCC) may impose penalties on businesses that do not comply with these requirements. This article will explain what these new mandatory clauses include and when you will need them included in your warranty documentation.

What is a Warranty Against Defects?

A ‘warranty against defects’ is a statement that businesses make to customers that if the goods or services that they sell are defective, the business will:  

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

You can make these representations in any document, including your:

  • consumer contracts;
  • terms and conditions (T&Cs);
  • marketing materials;
  • receipts;
  • product packaging; or
  • on your website.

You should take care when using words such as ‘12-month warranty’ or ‘replacement guarantee’, as these will likely count under the ACL as a warranty against defects.

Do The Warranty Provisions Apply To Your Business?

If you are directly providing customers with services (or goods and services together) and you offer a warranty against defects, you can assume that the new laws will apply to you.  

It’s important to note that the ACL already requires businesses who supply goods to consumers and offer a warranty against defects to include mandatory text in their documentation. So, nothing will change for these businesses.

There are a few businesses that are exempt from these requirements. However, these exemptions are somewhat confined (for example, to certain businesses that transport or store goods, supply insurance or that supply gas, electricity or telecommunication services).

Accordingly, you should seek legal advice to determine whether you might fall under one of these exceptions.

What is the New Mandatory Wording?

Warranties for Goods Only

Mandatory wording where you are supplying goods (only) and offering a warranty already exists:

“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.”

Warranties for Services Only

From 9 June 2019, the following mandatory wording will need to be included in your warranty documentation when you are supplying 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.”

Warranties for Goods and Services

From 9 June 2019, the mandatory wording that you will need to include in your warranty documentation where you are supplying goods and services is:

“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 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.”

Other Requirements for Warranties

It is crucial to seek advice before offering a warranty against defects. This is because the ACL requires that you present your warranty documentation in a particular way and that it includes specific information.  

For example, the above mandatory wording must be available with the product or service itself. It is not sufficient to refer consumers to information on a website or in-store.

Additionally, your warranty documentation must also be:

  • in plain language and legible;
  • provided to your customers where the supply takes place, or at the time it takes place; and
  • available with the product.

Your warranty documentation must also include:

  • what your business will do if the goods or services are defective;
  • what your customer must do when a defect arises;
  • your contact information (such as your name, business address, phone number and email);
  • how long the warranty will apply for;
  • how your customer must make a claim under warranty;
  • who is responsible for expenses in making a warranty claim (i.e. if the customer needs to send the product to you, specify who is responsible for the postage costs); and
  • a statement that the warranty is additional to the consumer’s rights and remedies at law.

Key Takeaways

From 9 June 2019, the ACL will require you to place mandatory wording in all of your warranty documentation. This wording will apply if you supply services or goods and services together. If you only provide goods, you should already have included mandatory wording within your warranty documentation. If you have any questions about reviewing and drafting warranties against defects, contact LegalVision’s contract lawyers on 1300 544 755 or fill out the form on this page.

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