Many businesses provide warranties against defects to their customers. However, recent changes to the law have substantially affected how those defects are to be offered.

A warranty against defects is a promise to a consumer to do something if a good or service, or a part of a good or service, turns out to be defective. It is a promise in addition to the Consumer Guarantees provided under the Australian Consumer Law (“ACL”); it does not and cannot limit or replace the Consumer Guarantees.

For example, suppliers or manufacturers of goods may provide a warranty that promises consumers:

• that goods will be free from defects for a certain period of time; or
• that a consumer in possession of a defective good will be entitled to the repair or replacement of that good or to otherwise receive a refund or some other form of compensation.

If your business provides warranties against defects you must comply with the strict requirements set out in the ACL. The penalty for non-compliance with the ACL can be up to $50,000 for companies and up to $10,000 for individuals.

The ACL requires that a warranty against defects given by a person:

• Be in a document that is transparent.

• Prominently state the following information about the person giving the warranty:
  • the person’s name;
  • the person’s business address;
  • the person’s telephone number;  and
  • the person’s email address (if any).
• Concisely state:
  • what the person who gives the warranty must do if the goods or services are defective (for example, repair or replace the goods); and
  • what the consumer must do to claim the warranty (such as use the relevant goods in their intended manner).
• State the period of the warranty.
• Set out the procedure for the consumer to claim the warranty, including details of how to contact the person providing the warranty and where to send the claim.
• State who will bear the expense of claiming the warranty and, if the expense is to be borne by the person who gives the warranty, how the consumer can claim expenses incurred in making the claim.
• State that the benefits to the consumer given by the warranty are in addition to other rights and remedies of the consumer at law in relation to the goods or services to which the warranty relates.
• Include the following statement: ‘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 more information on warranties against defects or the Australian Consumer Law generally please contact Partner Claire Carton.