CONSUMER LAW
WARRANTY AGAINST DEFECTS
Many manufacturers and suppliers (of goods and of services) provide their customers with a warranty against defects (Warranty) The questions a business may wish to ask in relation to such a Warranty include: • Does my Warranty comply with the Australian Consumer Law (ACL)? • Does my Warranty provide terms and conditions that assist to protect the business?
Complying with the ACL A warranty against defects is defined in the ACL as a representation communicated to a consumer, at or about the time of supply, that if the goods or services (or part of them) are defective, the business will repair or replace goods (or part of them), resupply or fix a problem with services (or part of them) or provide compensation to the consumer. The ACL requires a Warranty to be transparent and clearly include the following information: • what the customer must do to be entitled claim the Warranty; • what the business will do to honour the Warranty; • the business name, address, telephone and email; • the period within which the defect must appear; • the process for making a claim, including the address to send the claim; and • who will be liable for the expense of making the claim, and if it is the business, how the customer can claim such expenses. The ACL also requires the following to be included in the Warranty: • a statement to the effect that the Warranty benefits are in addition to other rights and remedies available to the consumer under the law in respect of the warranted goods or services; and
• a mandatory statement, the exact wording of which is provided in the ACL, which varies depending on whether the business giving the Warranty provides only goods, only services or both goods and services, below is the mandatory wording for a business that provides both goods and services. Below is the mandatory wording for a business that provides both goods and services: “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.” If a Warranty does not comply with the ACL, a court may order that a penalty be paid up to a maximum of $50,000 for a body corporate and $10,000 for an individual. In making this determination the court will have regard to the nature and extent of the failure, loss or damage suffered due to the failure, the circumstances of the failure to comply and if the business has been found to have failed to comply with the requirement previously.
Other Warranty features A Warranty may also include other features that limit the Warranty and assist to protect the business. Such Warranty features may include: • a clause preventing the Warranty being transferred to a third party. This prevents persons who are not the customer to whom the business provided goods and/or services, from making a Warranty claim against the business (for example, where a vehicle is sold, the purchaser is prevented from making a claim under the Warranty); • circumstances in which a Warranty claim will not be successful, for example, if the customer uses a vehicle abnormally or fails to take reasonable steps to look after the vehicle, and this causes the issue (for example, failing to service the car as required where this causes a part the subject of the claim to fail); • requiring the customer to return the vehicle to the business for assessment and, if the
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Warranty claim is valid, the business repairing the vehicle; and • exclude reasonably foreseeable loss.
Other ACL considerations Importantly, Warranties operate concurrently with the consumer guarantees provided under the ACL. A Warranty cannot exclude, modify or replace the consumer guarantees as this is prohibited under the ACL. This means that if the Warranty period is finished a customer may still have a claim against the business under the ACL. Additionally, the failure to meet the consumer guarantees enables the consumer to claim reasonably foreseeable loss.
Takeaways The key takeaways are: • supplier and manufacturer Warranties must comply with the requirements set out in the ACL; • clauses can be included in Warranties to assist to protect the business; • Warranties operate concurrently with the consumer guarantees under the ACL and do not replace the consumer guarantees; and • a claim may be made under the consumer guarantees even where a Warranty period expires. This document is intended for general information purposes only and should not be regarded as legal advice. Please contact Industry Legal Group if you require legal advice. Individual liability limited by a scheme approved under professional standards legislation.
AAAA Member Benefits Industry Legal Group provides advice to members on commercial law matters. If you have any questions relating to the above information, please contact Industry Legal Group on 1300 369 703 or aaaa@industrylegalgroup.com.au
