Warranties against defects
As a supplier or manufacturer, you may provide promises to consumers about what you will do if something goes wrong with a product or service. These promises are often referred to as voluntary warranties or manufacturers’ warranties. Under the ACL, these are called ‘warranties against defects’.
A warranty against defects is a representation communicated to a consumer that as a business if the goods or services (or part of them) are defective 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.
Example: A consumer buys a car that comes with a ‘manufacturer’s warranty’. The warranty says the manufacturer will repair the vehicle if it has a serious mechanical failure within three years of the purchase date. This is a ‘warranty against defects’ under the ACL.
A representation will only be a warranty against defects if it is made at or around the time that products or services are supplied.
To ensure consumers understand the warranty and know how to make a claim the ACL requires that all documents ‘evidencing’ a warranty against defects for goods or services provided to consumers must:
- be presented in a certain way
- include specific information
- include mandatory text.
A key point to remember is that a warranty against defects is provided in addition to consumer guarantees and does not limit or replace them.
The mandatory text for the supply of goods is:
Our goods come with guarantees that cannot be excluded under the ACL. You are entitled to a replacement or refund for a major failure and for 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.
The mandatory text for the supply of services is:
Our 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 be compensated for any other reasonably foreseeable loss or damage.
If the failure does not amount to a major failure, you are entitled to have problems with the service rectified in a reasonable time and, if this is not done, to cancel your contract and obtain a refund for the unused portion of the contract.
The mandatory text for the combined supply of goods and services is:
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.
A consumer may be entitled to a remedy under the consumer guarantees after a warranty against defects period has expired. No set timeframes apply to the consumer guarantees—how long they apply depends on the nature of the good or service in question.
You must note the difference between promises made to consumers via voluntary warranties and your responsibilities under the consumer guarantees.
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. Depending on the circumstances the consumer may still be entitled to a remedy under the consumer guarantees imposed under the ACL.
Warranties against defects may set out requirements that consumers must comply with. For example, a warranty against defects on a motor vehicle may require the consumer to ensure any servicing is carried out:
- by qualified staff
- according to the manufacturer’s specification
- using appropriate quality parts where required.
If you wish to seek to restrict a customer’s freedom to choose, for example, who they use as a repairer, you should get advice on the prohibitions on ‘exclusive dealing’ found in the Competition and Consumer Act 2010. Exclusive dealing broadly involves a trader imposing restrictions on a person’s freedom to choose with whom or in what or where they deal.