As a supplier or manufactureryou may provide promises to consumers about what you will do if something goes wrong with a good or service. These promises are often referred to as voluntary warranties. Under the Australian Consumer Law (ACL), these are called ‘warranties against defects’.
It is important to remember that a warranty against defects is provided in addition to consumer guarantees and does not limit or replace them. Further information about the interaction between consumer guarantees and warranties against defects is provided below.
From 1 January 2012 if you choose to provide a warranty against defects to consumers then the document you provide evidencing that warranty must comply with specific ACL requirements. Sometimes a business can be considered a ‘consumer’. See 'who will be considered a consumer?' for further information.
The ACL is administered and enforced jointly by the ACCC, State and Territory consumer protection agencies) and where relevant, ASIC (the ACL Regulators).
A warranty against defects is a representation communicated to a consumer that as a business you will:
repair or replace goods (or part of them)
resupply or fix a problem with services (or part of them)
provide compensation to the consumer
if the goods or services (or part of them) are defective.
A representation will only be a warranty against defects if it is made at or around the time that goods or services are supplied.
A promise about what you as a supplier or manufacturer will do if something goes wrong with a good or service can be a warranty against defects under the ACL even if it is not provided in a formal document. Any material with writing on it could evidence a warranty against defects, for example wording on the packaging or on a label, if those words contain such a promise.
Example:
A consumer purchases a motor vehicle that comes with a three year or 100,000km written warranty outlining what the manufacturer will do if there are certain problems with the vehicle. This is a warranty against defects and must comply with the requirements of the ACL.
If you provide goods or services to consumers with a document evidencing a warranty against defects you must adhere to the requirements of the ACL.
The ACCC and other ACL Regulators expect compliance with the requirements at all levels of the supply chain (that is, suppliers and manufacturers alike).
Example:
A consumer hires a tiler to renovate his or her bathroom. The contract states that the tiler will repair any tiles that become loose within five years of the tiling being carried out. This contract contains a written warranty against defects and the tiler must ensure that the document complies with the requirements of the ACL.
All documents ‘evidencing’ a warranty against defects must be presented in a certain way, and must include specific information to ensure that consumers understand the warranty and know how to make a claim.
What is a 'document evidencing a warranty against defects'?
Many goods are sold with a warranty against defects. This is often highlighted on a label or packaging or attached to a sale docket or receipt—for example, statements like ‘2 year warranty’ or ’12 month replacement guarantee’. The warranty against defects is also often described in a document inside the product’s packaging.
For the purposes of the warranty against defects provisions, a ‘document’ includes any material on which there is writing or printing, or on which there are marks or symbols. A document which contains a description of the features or terms of a warranty against defects will be a ‘document evidencing a warranty against defects’. While such a document will often consist of a piece of paper or pamphlet outlining the terms and conditions of a warranty and be provided by a business inside the product’s packaging, the packaging itself may also, in some circumstances, be considered a document evidencing the warranty against defects.
In circumstances where a product’s packaging may be considered to be a document evidencing a warranty against defects and there are also warranty documents inside or otherwise attached to the product, provided:
the information required by the ACL and the mandatory text are included with warranty documents inside or otherwise attached to the product, and
this information is not inconsistent with the statement on the packaging
the ACL Regulators will consider that this meets the warranty against defects requirements. However, the mandatory information must be available with the product itself—it is not sufficient to refer consumers to information on a website or in-store.
Example:
A manufacturer of electric drills includes a representation on the drills packaging that it will repair any drill if a fault arises within three years of purchase. As this is a representation about what the manufacturer will do if a drill is defective, the packaging is a document evidencing a warranty against defects, and all the information required by the ACL would need to be set out on the packaging itself. However, if inside the package there is a separate warranty document containing all the information required by the ACL that is not inconsistent with the statement on the packaging, the ACL Regulators will regard this as compliance with the warranty against defects requirements.
Promotional material constituting a document, given to the customer close to the time of supply, may amount to a warranty against defects and therefore must include the information required by the ACL.
Where promotional material does not constitute a document and is not given to the consumer close to the time of supply, it is unlikely to trigger the warranty against defects requirements. However, businesses must be careful not to mislead customers about their warranty and consumer guarantees rights and ensure that the information provided in warranty documents with the product comply with the warranties against defects requirements and are not inconsistent with the statement on the promotional material.
What information must be included in documents which evidence a warranty against defects?
A document which evidences a warranty against defects must state:
what you as the business (giving the warranty) must do if goods are faulty or defective – e.g. repair or replace the goods
what the consumer must do to entitle them to claim the warranty – e.g. cease using the goods when a fault arises or contact the supplier or manufacturer and point to the defect
the following information about the business giving the warranty:
name
business address
telephone number
email address (if any)
the warranty period—i.e. how long the warranty lasts for
what a consumer must do to claim under the warranty—i.e. how to contact you and where to send the claim
whether you or the consumer are responsible for expenses associated with a warranty claim and how the consumer can claim back any expenses incurred
that the benefits provided to the consumer by the warranty are in addition to other rights and remedies available to the consumer under the law.
In addition to the requirements above, a document evidencing a warranty against defects must include mandatory text to ensure consumers are aware that any warranty against defects operates in addition to consumers’ rights under the ACL. This mandatory text is:
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.
For further information about acceptable quality under the Australian Consumer Law click here.
Example:
A consumer purchases an air conditioning unit and has it installed in his or her home. The unit was sold with a written warranty that the manufacturer would replace the unit if anything went wrong within the first two years of purchase. This is a document evidencing a warranty against defects.
As part of the warranty against defects the manufacturer must provide all the information set out above, in particular the procedure for the consumer to claim the warranty and who will bear the expense of claiming the warranty. Given the logistics of returning the unit it is important for the manufacturer to set out what the consumer needs to do to claim their warranty—e.g. contact the manufacturer to come and inspect the good and remove the good, and set out who will bear the expense of claiming (expense of transportation, removal etc).
Can I include extra words to explain consumers’ rights under the ACL?
Businesses are free to include extra information in a warranty against defects to explain how the consumer rights in the ACL apply. However, businesses must take care to ensure any extra information they include in their warranty does not limit or negate the mandatory text.
This may be relevant in situations where goods are sold to different types of purchasers—for example, those who fall within the definition of ‘consumer’ outlined above, and those who do not.
If you sell goods to different types of purchasers, some of whom are ‘consumers’ within the meaning in the ACL, you must comply with the warranties against defects requirements regardless of whether you also sell to purchasers who are not considered ‘consumers’ within the meaning in the ACL.
You may include extra information to explain how the consumer rights in the ACL are limited in circumstances where a purchaser does not fall within the meaning of ‘consumer’ in the ACL.
If you provide a warranty against defects in relation to goods that are not ordinarily acquired for personal, household or domestic use and your business chooses to limit its liability to the extent allowed by the ACL, you may also include extra text to explain this.
It is important to remember that you must honour any promises—whether verbal or in your warranty—that you make, regardless of how the rights in the ACL apply to that particular transaction.
If providing a written warranty against defects, the information must be expressed in reasonably plain language, be legible and presented clearly either when:
the supply of the good or service takes place—i.e. when a consumer purchases a good, or
about the time the supply of the good or service takes place—e.g. a warranty may be provided with a good when it is delivered even though the consumer purchased it at an earlier time.
Example 1:
A mobile phone manufacturer provides a warranty against defects on the packaging that it will repair the phone if any fault arises within one year of purchase. The packaging must therefore also outline all the prescribed requirements and must be expressed clearly and legibly.
Example 2:
A business sells hand painted goods and provides on a warranty card that it will replace any goods within one year if the paint starts to fade. The business refers consumers to its website for further information. This is likely to breach the ACL. In order to comply with the ACL the business must provide consumers with all the prescribed requirements on the warranty card rather than referring consumers to its website for further information.
How do the warranties against defects requirements interact with the consumer guarantees?
Warranties against defects are always provided in addition to the consumer guarantees contained in the ACL.
In some instances a warranty against defects will provide the consumer with remedies that exceed those provided by the consumer guarantees. However, in other cases, consumers may be entitled to a remedy under the consumer guarantees after a warranty against defects period has expired.
You must take care to ensure that consumers are not misled, either through oral representations or in the words of a warranty against defects, into thinking that their rights are limited to the remedies or timeframe set out in a written warranty against defects.
Example:
A consumer purchases a laptop computer with a written warranty against defects that states the manufacturer will replace or repair the computer if any fault arises within 12 months of purchase. If the laptop breaks down after 18 months, the manufacturer cannot automatically advise the consumer that he or she has no entitlement to a remedy as the warranty has expired. The consumer may still be entitled to a remedy under the consumer guarantees imposed under the ACL.
Further information on the consumer guarantees is available here.
Is a warranty against defects different to an express warranty?
The ACL contains requirements in relation to express warranties and warranties against defects. An express warranty relates to the quality or standard of a good, whereas a warranty against defects relates to the steps that you will take to fix a problem with a good or service.
The ACL requires that suppliers and manufacturers honour any express warranty they give about a good or service.
An express warranty is any undertaking, assertion or representation made by you as a business that relates to the:
quality, condition or performance of the goods
the availability of servicing, supply of parts or identical goods
which may induce consumers into purchasing the goods or services—e.g. a statement that a good will last four years without any defects.
Warranties against defects often contain an express warranty. If your warranty against defects includes an express warranty you must ensure that you honour the express warranty and comply with the requirements in relation to warranties against defects.
It is difficult to update some warranties against defects, are there any transitional arrangements?
A number of businesses have advised ACL Regulators that due to the long lead times associated with many consumer products, and the nature of the packaging of those products, there will be some goods in the supply chain that, as at 1 January 2012, do not contain warranty documents that are compliant with the warranty against defects requirements of the ACL.
The ACL Regulators recognise that transitional practical difficulties may arise in the application of the new provisions. Accordingly, until September 2012, when considering the appropriate enforcement response to any contravention of the warranty against defects requirements that apply to stock in the supply chain manufactured and packaged prior to 1 November 2011, the ACL Regulators will have regard to:
whether there are serious practical difficulties in updating warranty documents—e.g. the warranty is in a tamper-proof package; and
whether the supplier has taken all reasonable steps to otherwise convey the mandatory text and information required by the ACL to consumers—e.g. by placing a compliant sticker on the outside packaging, or by erecting prominent, clear, point-of-sale signs including the mandatory text and information at all cash registers in a prominent position.
Example:
A business may erect a sign saying:
Dear customer Many of our products come with a guarantee or warranty from the manufacturer. In addition, they 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 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. Full details of your consumer rights may be found at www.consumerlaw.gov.au.
In these circumstances the ACL Regulators are unlikely to take enforcement action.
These transitional arrangements will not be extended beyond 30 September 2012.
How will the ACL Regulators assess non-compliance with the warranties against defects requirements?
In the event that the ACCC and other ACL Regulators identify non-compliant stock they will consider this on a case-by-case basis, and any action taken will be proportionate to any consumer detriment that is associated with the non-compliance, consistent with the ACL Compliance and Enforcement Policy.For more information regarding this policy, please click here.
Are there any other requirements that I need to be aware of?
It is important to remember that when providing a warranty against defects you must also comply with the broader requirements of the ACL, in particular the rules against misleading or deceptive conduct and false or misleading representations. Misleading representations may incur a maximum penalty of $1.1 million for corporations and $220,000 for individuals.
You must also ensure that when you make oral representations to consumers, you do not mislead them about their rights or about the goods or services they are purchasing.
Example:
A consumer purchases a bread maker. The bread maker comes with a warranty against defects clearly specifying all the requirements of the ACL and outlining that the manufacturer will repair or replace the bread maker if it becomes faulty within two years of purchase. The sales representative verbally confirms that the bread maker will be replaced if it becomes faulty within two years of purchase.
After 18 months the bread maker becomes faulty and the consumer contacts the manufacturer to claim the warranty, only to be told that the manufacturer does not need to comply with the warranty.
Although the manufacturer has complied with the ACL by providing the necessary information in the warranty document, they are likely to have engaged in misleading or deceptive conduct by falsely representing that there is a two year warranty and then refusing to honour this warranty.
What if I don’t comply with the warranties against defects requirements?
If you do not meet the requirements outlined in the ACL for warranties against defects, you may face penalties up to a maximum of $50,000 for corporations and $10,000 for individuals.
In addition, misleading representations may incur a maximum penalty of $1.1 million for corporations and $220,000 for individuals.
For further information on the ACL visit the website www.consumerlaw.gov.au which contains information on all areas of the ACL including the Regulations and links to a number of publications.
You can also call the ACCC’s Small Business Helpline on 1300 302 021.
Please note that while this material provides general information about businesses’ obligations and examples to help clarify these obligations, it should not be relied on as legal advice or a definitive list of how the law applies.
