Paul Anderson | October 2011 | Business & Property
From 1 January 2012, new rules apply to warranties against defects provided by suppliers of goods and services to a consumer.
Who does it impact? Any business that provides goods or services to a consumer in trade or commerce.
What action should be taken?
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New regulations for warranties against defects
Every business needs to review its warranty documents well in advance of 1 January 2012 to ensure compliance.
Background There are two types of warranties given by suppliers of goods and services to consumers. Firstly, there are implied guarantees given under the Australian Consumer Law (“ACL�) (which replaced the Trade Practices Act, 1976) which cannot be excluded as a matter of law. Secondly, there are additional promises which are often referred to as express or voluntary warranties but which are known under the ACL as warranties against defects. An example might be if a car manufacturer provides a three year or 100,000 km warranty. This is a warranty against defects as distinct from a guarantee implied under the ACL. There is no legal obligation for a supplier to give a warranty against defects but if he does, he must comply with the new regulations.
Definition As from 1 January 2012, new provisions will come into force relating to warranties against defects which all suppliers of goods and services in trade or commerce to a consumer must comply with. This follows the proclamation of the commencement of the relevant part of the Trade Practices (Australian Consumer Law) Amendment Regulations 2010 (No.1).
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New regulations for warranties against defects
A “warranty against defects” is defined as “a representation communicated to a consumer in connection with the supply of goods or services at or about the time of supply to the effect that a person will (unconditionally or on specified conditions): (a) repair or replace the goods or part of them; or (b) provide again or rectify the services or part of them; or (c) wholly or partly recompense the consumer; if the goods or services or part of them are defective, and includes any document by which such a representation is evidenced.” A warranty against defects does not need to be provided in a formal document. Any material with writing will suffice e.g. packaging or a label.
New rules Under the new Regulation 90, the following requirements are prescribed. A warranty against defects must:
(g) state that the benefits to the consumer under the warranty against defects are in addition to other rights and remedies of the consumer e.g. guarantees implied under the ACL; (h) also include word for word the mandatory text as set out in subregulation 2, the thrust of which is to draw to the consumer’s attention his rights under the guarantees implied by the Australian Consumer Law. Any oral representation made concerning the warranty against defects must be consistent with the document provided to the customer.
Interaction with consumer guarantees Warranties against defects are always in addition to the guarantees implied under the ACL. In some instances, the warranty against defects will provide the consumer with remedies that exceed those provided by the consumer guarantees. In other cases, the consumer guarantees may provide a remedy after a warranty against defects period has expired.
(a) be in a document that is transparent i.e. it must be clear and legible;
Penalties
(b) concisely state:
Failure to comply with the new regulations can result in a fine up to a maximum of $50,000 for a corporation and $10,000 for an individual.
(i) what the person giving the warranty must do so that the warranty is honoured; and (ii)
what the consumer must do to claim the warranty.
(c) prominently state the supplier’s name, business address, telephone number and email address, if any; (d) state the period within which a defect must appear if the consumer is to be entitled to claim the warranty; (e) set out the procedure for the consumer to claim the warranty including the address to which a claim may be sent; (f) state who will bear the expense of claiming the warranty and, if it is the supplier, how the consumer can claim the expenses;
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Paul Anderson | October 2011
The ACL has broader rules against misleading and deceptive conduct and false or misleading representations. A breach of these provisions can result in penalties of up to $1.1million for a corporation and $220,000 for an individual.
Conclusion Small businesses need to review their documentation providing warranties against defects to ensure the documentation complies with the new regulations. There will also be a training issue to ensure that all staff are aware of the new provisions. Fortunately, there is a significant lead time to commencement of the new regulations on 1 January 2012 to ensure compliance.
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Paul Anderson Partner T: 02 8257 5742 M: 0418 491 395 paul.anderson@turkslegal.com.au
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