Extended, voluntary and express warranties

Sellers, manufacturers and service providers can make extra promises about their goods or services as a way of giving consumers more confidence in their quality, or the level of consumer protection if things go wrong. These promises are known as warranties.

If there is a problem with a good or service, the terms and conditions of the warranty generally set out what consumers can claim and how they should go about making a claim.

It is important to remember that regardless of any warranty a business chooses to offer, consumers still have rights under the consumer guarantees. The extra warranty does not alter or limit consumers’ rights under the guarantees, and businesses should be careful that their warranties do not mislead consumers about their rights.

Warranties can be written or verbal and are known by a number of other names. For example:

  • store warranties
  • extended warranties
  • manufacturers’ warranties
  • money-back guarantees
  • store refund policies
  • store exchange policies
  • new car warranties

These warranties can be broadly grouped into two categories, express and voluntary warranties (also known as warranties against defects).

Express warranties

Express warranties are any undertaking, assertion or representation relating to the quality or condition of goods or services, the availability of servicing or parts for the goods or services, the availability of matching goods, which may induce a person into acquiring the goods or services.

For example:

A department store tells a consumer that a dining set is brand new and unbreakable. This is an express warranty about the condition and the characteristics of the dining set.

Voluntary warranties (also known as warranties against defects)

Voluntary warranties are any promises made by a seller, manufacturer or service provider about what they will do if there is a problem with goods or services, i.e. repair or replace goods or parts, resupply or fix problems with services or provide compensation.

The ACL refers to voluntary warranties as ‘warranties against defects’.

A voluntary warranty is essentially a contract between the consumer and the business providing the warranty. As such, businesses may include any requirements in the warranties that do not breach the competition and consumer provision provisions in the Act.

Some common requirements in voluntary warranties are:

  • Packaging – a consumer may be required to bring goods back in their original packaging in order to claim under the warranty
  • Warranty cards – consumers may be required to return a ‘warranty card’ to activate a voluntary warranty.

It is important to remember that while businesses may include these requirements in a voluntary warranty, they cannot impose such restrictions on consumers’ rights under the consumer guarantees.

For example

A motor vehicle is sold with a 3 year or 30,000km warranty which outlines what the manufacturer will do if there are certain problems with the vehicle. This is a voluntary warranty.

Extended warranties

Extended warranties are a type of voluntary warranty. Extended warranties generally extend the period of protection given by a voluntary warranty for a cost.

Businesses should take particular care when describing and selling extended warranties to ensure that consumers are not misled into thinking that they are required to pay for rights that are already provided by the consumer guarantees.

For example:

A computer is sold with a free 12-month warranty given by the manufacturer. The seller advises the consumer that they need to purchase a three year extended warranty, otherwise they will have no right to a remedy after the 12-month warranty period expires.

In this case, the seller is likely to have breached the ACL by advising the consumer that they need to pay for rights provided for under the consumer guarantees.

Express and voluntary warranties

Voluntary warranties often include an express warranty – i.e. they include a statement that the goods are of a certain standard or quality and also explain what the business will do if the goods don’t meet the standard or quality.

If this is the case, businesses must comply with all of the ACL’s requirements in relation to both express and voluntary warranties.

What does the ACL say about warranties?

The provisions of the ACL relating to misleading or deceptive conduct and specific misrepresentations apply to warranties as they do to all other conduct by a business.

There are also consumer guarantees that sellers and manufacturers will honour any express warranty they give about their goods.

There are also specific provisions relating to false or misleading representations about the consumer guarantees or consumers’ rights under the consumer guarantees.

This means that businesses must ensure that any warranty they give is honest and accurate and does not give a false impression about the good or services or the remedies available when something goes wrong. Businesses must also take care to ensure that their express warranties do not mislead consumers about their rights under the consumer guarantees.

For example

A department store tells a consumer that a dinner set is brand new and unbreakable. In fact, the dinner set has been used and returned by a customer and three cups break when they are taken out of the box.

When the consumer takes the dinner set back to the store the sales assistant tells them the business has a 'no returns' policy and refuses to provide a remedy.

In this case, the consumer has causes of action in relation to a number of the consumer guarantees, including the guarantee that sellers will honour any express warranty. The consumer will also have causes of action against the store in relation to the misleading statements about the quality of the goods and the consumers’ rights under the consumer guarantees.

Warranties against defects – the Regulations

The ACL also includes some specific requirements in relation to voluntary warranties or warranties against defects. These requirements are contained in the Trade Practices (Australian Consumer Law) Regulations 2010 (No. 1) (the Regulations).

The Regulations require that businesses must:

  • give warranties against defects in a transparent document stating what business giving the warranty and the consumer must be do for the warranty to be honoured
  • prominently state the name of the person giving the warranty, their business address, telephone number and email address (if any)
  • state the length of the warranty
  • set out the procedure that a consumer must follow to obtain a remedy under the warranty
  • state who will bear the costs associated with making a warranty claim, e.g. the
  • state the benefits that the warranty gives in addition to the rights and remedies under the consumer guarantees
  • include the 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 goods fail to be of acceptable quality and the failure does not amount to a major failure.

These requirements apply from 1 January 2012, giving businesses time to ensure that their voluntary warranties meet these requirements.

Repair notices – the Regulations

The Regulations require that any business who repairs goods which are capable of retaining user-generated data must give the consumer a notice stating that the repair of goods may result in loss of the data.

If the repairer sometimes supplies refurbished goods as an alternative to repairing goods or refurbished parts in the repair of goods, the notice must state:

Goods presented for repair may be replaced by refurbished goods of the same type rather than being repaired. Refurbished parts may be used to repair the goods.

These requirements apply from 1 July 2011, giving businesses time to ensure that they are in a position to give consumers the appropriate notice.