How to word your warranties

Do you provide a warranty against defects for your goods and services?  Mandatory wording may apply under Australian Consumer Law.

What is a warranty against defects?

Suppliers and manufacturers of products often make promises about what they will do if a product is faulty.  These are called ‘warranties against defects’ under the Australian Consumer Law, and there are specific legal requirements for a compliant warranty against defects.

Under the Australian Consumer Law (ACL), warranties against defects must operate in addition to rights available to consumers under the Consumer Guarantees under the ACL.  For example, a retailer cannot state that they will only provide a 6 month warranty for goods, as the Consumer Guarantees provide that remedies must be available to consumers for faulty goods for a ‘reasonable’ period of time.  How long is ‘reasonable’ will depend on a number of factors, including the product type, price and reasonable consumer expectations.

Mandatory wording for goods warranties

To prevent confusion amongst consumers regarding their rights, the Competition and Consumer Regulations 2010 (Cth) (Regulations) provide mandatory wording to be included in warranties against defects provided in regards to goods:

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.

Previously, there was no such wording requirement for services, however new laws are set to apply for the provision of warranties in relation to services, and those in relation to goods and services.

New mandatory wording for services and goods and services warranties

From 8 June 2019, amendments to the Regulations will apply, requiring businesses to include mandatory wording for warranties against defects that apply to the provision of services, and to the provision of goods and services (provided together).

Mandatory wording – for services

Where a business is providing a warranty against defects for services, the mandatory text 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.

Mandatory wording – for goods and services

Where a business is providing a warranty against defects for both goods and services, the mandatory text 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.

  • Your next steps if you offer a warranty against defects
  • You must ensure that your warranties against defects are updated to reflect these new requirements to avoid infringing the ACL to avoid the hefty penalties that can be applied. Not only is the wording mandatory but including it can also reduce your risk of infringing the misleading representation provisions of the Australian Consumer Law.
  • Recently in New Zealand, jewellery company, Michael Hill (New Zealand) was penalised with a NZ$169,000 fine for breaching NZ consumer laws. Like Australian law, the NZ legislation required specific details about how an additional warranties should be set out, which were not complied with.
  • In addition to the mandatory wording, other requirements for warranties against defects apply in Australia, so it is imperative to have your warranties drafted by an experienced retail lawyer.

If you need assistance in reviewing and amending your warranties to ensure that they are compliant with the Australian Consumer Law, do not hesitate to contact me at rosalyn@gladwinlegal.com.au or give me a call on 1300 033 934 for a no-obligation quote.

Source: Competition and Consumer Regulations 2010