Australia: Warranties Against Defects - A New Regulation Will Apply From 1 January 2011

Last Updated: 21 April 2011
Article by Geoff Taperell

Manufacturers, retailers and service providers will need to act soon to review and revise documents containing warranties against defects so that they will be ready to comply with a new regulation taking effect on 1 January 2012

INTRODUCTION

When suppliers give warranties as to the quality or fitness of their goods or services, they usually undertake to repair or replace defective goods, supply defective services again, or otherwise recompense the end purchasers. These warranties are usually set out in warranty documents packaged with goods or in terms and conditions of supply.

NEW OFFENCES

From 1 January 2012, giving to a consumer a document containing a warranty against defects in connection with the supply of goods or services will be prohibited if the warranty does not comply with regulation 90 of the Competition and Consumer Regulations 2010

It will also be an offence to represent directly to a consumer that a warranty against defects applies to goods or services unless the warranty complies with regulation 90. For instance, a retailer will commit an offence if it says to a customer that a product is covered by a manufacturer's warranty against defects if the printed warranty card accompanying the product does not comply with the regulation. Similarly, the manufacturer of the product will commit an offence if its advertising or promotional material for the product refers to a non-compliant warranty against defects. Offences against these requirements are punishable by fines of up to $50,000 per offence for body corporates, and $10,000 for individuals. 1 Other remedies such as injunctions and damages may also be ordered for breaches.

WHAT IS A 'WARRANTY AGAINST DEFECTS'?

A 'warranty against defects' is defined as follows 2 : A 'warranty against defects' is 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):

  1. repair or replace the goods or parts of them; or
  2. provide again or rectify the services or part of them; or
  3. wholly or partly recompense the consumer;
  4. if the goods or services or part of them are defective, and includes any document by which such a representation is evidenced.

'CONSUMER'

The definition only applies if the representation is made to a 'consumer'. A person acquires goods or services as a 'consumer' if, and only if:

  1. the price for the goods or services is $40,000 or less; or
  2. the goods or services in question are of a kind ordinarily acquired for personal, domestic or household use or consumption.

Also, a person who acquires a vehicle or trailer for the transport of goods on public roads does so as a consumer, but a person who acquires goods for resupply or for the purpose of using them up or transforming them in trade or commerce, does not acquire as a consumer. 3

Clearly 'consumer' has a much broader meaning in this context than someone who acquires consumer type goods.

REQUIREMENTS OF REGULATION 90

The regulation4, requires that any warranty against defects to which it applies must:

  1. be in a document that is legible, presented clearly and expressed in reasonably plain language (this is defined as 'transparent') and must also:
  2. concisely state:
    • what the person who gives the warranty must do so that the warranty may be honoured; and
    • what the consumer must do to entitle the consumer to claim the warranty;
  3. prominently state the name, business address, telephone number and email address of the person or entity giving the warranty;
  4. state the period or periods within which a defect in the goods or services must appear if the warranty is to apply;
  5. set out the procedure for claiming under the warranty, including the address to which a claim may be sent;
  6. state who will bear the expense of claiming under the warranty and, if it is the party giving the warranty, how the consumer can claim expenses incurred in making the claim;
  7. state that the benefits to the consumer under the warranty are in addition to other rights and remedies of the consumer under a law in relation to the goods or services to which the warranty relates; and
  8. include the following 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 for 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.'

It appears that, although the text set out in h) above refers only to goods, it must be included even if the 'warranty against defects' relates only to services.

WHAT TO DO

Manufacturers will need to review and, as necessary, revise, their printed warranty cards and any other documents, such as manuals and terms and conditions, in which warranties against defects are set out.

Retailers are in a difficult position. The prohibitions in the Competition and Consumer Act 2010 are against 'giving' to a consumer a non-compliant warranty document or representing to consumers that such a warranty applies. Consequently, if a warranty document accompanying goods does not comply with regulation 90, the retailer will commit an offence because the retailer gives it to the consumer, even though the document has been supplied by the manufacturer of the goods. Retailers will have to take steps to ensure that the warranty documents supplied by the manufacturers/suppliers of the goods and services they resell comply with regulation 90.

TAKE STEPS NOW TO REVISE, REPRINT AND REPLACE WARRANTY DOCUMENTS

Unlike other provisions of the Competition and Consumer Regulations 2010, the commencement of regulation 90 was deferred until 1 January 2012 to allow enough time for businesses to review, revise and reprint documents containing warranties against defects. Because of the time needed to convert to new documentation, businesses would be well advised to act now


1    Sections 192, 224 of the Australian Consumer Law (ACL).
2    Section 102 of the ACL.
3   Section 3 of the ACL.
4    Regulation 90 of the Competition and Consumer Regulations 2010.

© DLA Phillips Fox

DLA Phillips Fox is one of the largest legal firms in Australasia and a member of DLA Piper Group, an alliance of independent legal practices. It is a separate and distinct legal entity. For more information visit www.dlaphillipsfox.com

This publication is intended as a first point of reference and should not be relied on as a substitute for professional advice. Specialist legal advice should always be sought in relation to any particular circumstances.

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Authors
Geoff Taperell
 
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