Reading time: 3 minutes

It is common for businesses to offer consumers warranties for their goods or services. Some businesses even offer warranties or support packages to consumers at an additional price.

Many consumers, however, are unaware that they are already entitled to a range of protections under the Australian Consumer Law (ACL). Similarly, many businesses don’t realise that they can land themselves in trouble by providing a warranty that does not comply with the ACL – or by charging consumers for rights that they already have.

What is a warranty against defects?

A warranty against defects is a representation made to a consumer that, if goods or services are defective, a person will:

  • repair or replace the goods;
  • provide services again or rectify the services; or
  • wholly or partly recompense the consumer.

What are the requirements?

A business must not give a consumer a document that evidences a warranty against defects unless certain information is provided, including:

  • what the business must do if goods are faulty or defective;
  • what the consumer must do to entitle them to claim the warranty;
  • the name, address and telephone number of the business;
  • the warranty period;
  • what a consumer must do to claim under the warranty; and
  • whether the business or the consumer is responsible for expenses associated with a claim and how the consumer can claim expenses.

A warranty against defects must also be in a document that is transparent and state that the benefits to the consumer given by the warranty are in addition to other legal rights and remedies of the consumer.

Finally, a warranty against defects must contain the following mandatory text:

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.

False representations

In addition to these requirements, the ACL prohibits a person from making a false or misleading representation that a consumer is required to pay for a right that the consumer already has under the ACL or any other law.

What are the consequences?

A business may face penalties if it fails to comply with its warranty obligations:

  • for providing a non-compliant warranty against defects, the maximum penalty is $50,000 for companies and $10,000 for individuals; and
  • for a false or misleading representation about a consumer’s right to a warranty, the maximum penalty is $1.1 million for companies and $220,000 for individuals.

Enforcement example

In May 2015, the Federal Court of Australia ordered the operator of an online electronics store to pay $100,000 in penalties for making false or misleading representations about the availability of refunds and the extent of liability for faulty goods.

This case demonstrates that the Australian Competition and Consumer Commission (ACCC) is willing to take enforcement action against sole traders and small-to-medium businesses for breaching the ACL. All businesses need to be diligent in ensuring compliance with the ACL.

Conclusion

The ACCC has published an advertising and selling guide, which contains some information about the obligation of businesses in relation to warranties against defects.

If you still need assistance understanding your obligations under the ACL, you should speak to an experienced business lawyer. At LegalVision, we can help you make sure your warranties comply with the ACL, so give us a call on 1300 544 755.

Webinars

Redundancies and Restructuring: Understanding Your Employer Obligations

Thursday 7 July | 11:00 - 11:45am

Online
If you plan on making a role redundant, it is crucial that you understand your employer obligations. Our free webinar will explain.
Register Now

How to Sponsor Foreign Workers For Your Tech Business

Wednesday 13 July | 11:00 - 11:45am

Online
Need web3 talent for your tech business? Consider sponsoring workers from overseas. Join our free webinar to learn more.
Register Now

Advertising 101: Social Media, Influencers and the Law

Thursday 21 July | 11:00 - 11:45am

Online
Learn how to promote your business on social media without breaking the law. Register for our free webinar today.
Register Now

Structuring for Certainty in Uncertain Times

Tuesday 26 July | 12:00 - 12:45pm

Online
Learn how to structure to weather storm and ensure you can take advantage of the “green shoots” opportunities arising on the other side of a recession.
Register Now

Playing for the Prize: How to Run Trade Promotions

Thursday 28 July | 11:00 - 11:45am

Online
Running a promotion with a prize? Your business has specific trade promotion obligations. Join our free webinar to learn more.
Register Now

Web3 Essentials: Understanding SAFT Agreements

Tuesday 2 August | 11:00 - 11:45am

Online
Learn how SAFT Agreements can help your Web3 business when raising capital. Register today for our free webinar.
Register Now

Understanding Your Annual Franchise Update Obligations

Wednesday 3 August | 11:00 - 11:45am

Online
Franchisors must meet annual reporting obligations each October. Understand your legal requirements by registering for our free webinar today.
Register Now

Legal Essentials for Product Manufacturers

Thursday 11 August | 11:00 - 11:45am

Online
As a product manufacturer, do you know your legal obligations if there is a product recall? Join our free webinar to learn more.
Register Now

About LegalVision: LegalVision is a commercial law firm that provides businesses with affordable and ongoing legal assistance through our industry-first membership.

By becoming a member, you'll have an experienced legal team ready to answer your questions, draft and review your contracts, and resolve your disputes. All the legal assistance your business needs, for a low monthly fee.

Learn more about our membership

Need Legal Help? Submit an Enquiry

If you would like to get in touch with our team and learn more about how our membership can help your business, fill out the form below.

Our Awards

  • 2020 Innovation Award 2020 Excellence in Technology & Innovation Finalist – Australasian Law Awards
  • 2020 Employer of Choice Award 2020 Employer of Choice Winner – Australasian Lawyer
  • 2020 Financial Times Award 2021 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review
  • 2021 Law Firm of the Year Award 2021 Law Firm of the Year - Australasian Law Awards
  • 2022 Law Firm of the Year Winner 2022 Law Firm of the Year - Australasian Law Awards