The requirements on express warranties against product defects under the Australian Consumer Law (ACL) will become even stricter after 1 January 2012.
The requirements will apply in respect of products sold to "consumers" after 1 January 2012 for personal, domestic or household use, or where the value of the order is AUD$40,000 or less (which would include sales by one business to another business, as a "consumer" can be a business).
There is a prohibition against supplying goods to consumers in Australia with any warranty document that does not comply with the new requirements after 1 January 2012. The penalty for non-compliance is a fine of up to $50,000.
Some of the key requirements for any such warranty against defects that is given by a business are:
- a concise statement of what the business must do to honour the warranty and what the consumer must do to claim the warranty (including the procedure the consumer must follow and the address to which claims may be sent)
- it must contain the business' name, business address, phone number and email address (if any)
- a statement of the warranty period
- details of who will bear the expense of claiming the warranty, and if the expense is to be borne by the business, how the consumer can claim expenses incurred in making the claim
- a statement that the benefits given by the warranty are in addition to a consumer's other rights and remedies
- a statement in a particular form prescribed by the Regulations to the ACL, regarding other legal rights the consumer has, and
- it must be transparent and in plain English.
Whilst these requirements are generally good practice, the prescribed wording required by the Regulations is Australian-specific, and warranties will not comply with the Regulations unless this wording has been included, regardless of the rest of the content.
The new requirements apply to warranties against defects given by a business when selling a product to an end user.
Also, where a business supplies a product to a reseller with a manufacturer's warranty against defects that does not comply with the new requirements, and that reseller then on sells to an end consumer with the same non-compliant manufacturer's warranty, that reseller could also be fined by the ACCC.
An issue which may require some management for certain businesses is if any resellers of that business' products carry stock packaged with an old, non-compliant warranty against defects notice, and sell that stock after 1 January 2012. If this is an issue, one option may be to set up a system whereby the reseller supplies a separate, revised, compliant warranty document to the customer at the time of purchase, which clearly supersedes the non-compliant document.
Where appropriate, a business should review its warranties for compliance, and consider how to manage the issue.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
