When the Australian Consumer Law (ACL) commenced in January 2011, consumers were
provided with statutory guarantees in respect of the products and services they acquire.
These statutory guarantees include that, for example, products are of acceptable quality
when they are sold to a consumer and fit for any purpose if a purpose is specified by the
supplier or consumer.
From 1 January 2012, suppliers and manufacturers are subject to additional obligations in
respect of products supplied to customers for which a warranty against defects is given. If
Direct Selling Organisations (DSOs) have not already amended their documentation to
comply with these obligations (where relevant), they should do so immediately.
What is a “warranty against defects”?
Also known as a “manufacturer’s warranty”, a warranty against defects is a warranty
provided by suppliers and/or manufacturers to consumers in respect of goods supplied
around the time that a consumer acquires those goods that:
the goods will be free from defects for a particular time period; and
if there are defects, the consumer will be entitled to the repair or replacement of the
products, or to have the services (or part of the services) resupplied or to claim
Warranties against defects are in addition to the consumer guarantees provided under the
ACL and cannot limit or replace those statutory consumer guarantees.
Does your company provide any warranties against defects?
If your DSO provides any specific warranties against defects in respect of the products
which are supplied, those warranties must now meet the following criteria:
they must be written in plain language so that they are easy to understand;
the warranty must include the warrantor’s name, business address, phone number and
email address (if they have one);
the claim period and procedures for making a claim must be specified; and
the consumer’s rights under the warranty must be stated to be in addition to the
consumer guarantees under the ACL, which cannot be excluded.
Please note that documents which set out a warranty against defects must also include a
mandatory statement which is required under regulation 90 of the Competition and
Consumer Regulation 2010:
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.
To date, there has been no enforcement activity by the Australian Competition and
Consumer Commission (ACCC) in respect of warranties of this type as a grace period was
given to companies to comply with these new requirements. However, the ACCC has
stated that the grace period will end on 30 September 2012. Accordingly, as this date has
now passed companies can expect the ACCC to take enforcement action.
Companies that fail to comply with this requirement may face civil penalties of up to
$50,000 while individuals may face penalties of up to $10,000. Companies and individuals
may also be liable for criminal penalties.
If your DSO offers warranties against defects in respect of any of its products or services,
the warranties should be reviewed to ensure that they comply with the ACL requirements.
The content of this article is intended to provide a general guide
to the subject matter. Specialist advice should be sought about your
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