New mandatory wording requirements for warranties against defects

Businesses that supply customers with services (or goods and services together) that come with warranties against defects need to be aware of the recent amendments to the Competition and Consumer Regulations 2010 (Cth). From 9 June 2019, these businesses must include mandatory wording in their warranty documents.

The new mandatory text that will be required alerts customers that the consumer guarantees set out in the Australian Consumer Law (ACL) cannot be excluded from the warranty. The new mandatory text relating to services or goods and services together is in addition to existing mandatory text requirements in relation to the supply of goods.

What is a warranty against defects?

A warranty against defects is a statement made by a business to its customers that if the goods or services are defective, the business will:

• repair or replace the goods;
• resupply or rectify an issue with the services (or part of them); or
• refund or compensate the consumer.

Who do the new requirements apply to?

The ACL provisions regulating warranties against defects are limited to where the warranty is given to a consumer in connection with the supply of goods, services, or goods and services together. A person acquires goods or services as a 'consumer' if:

• the price of the goods or services is $40,000 or less; or
• the goods or services are of a kind ordinarily acquired for personal, domestic, or household use or consumption; or
• the goods comprise a vehicle or trailer for use principally in the transport of goods on public roads.

Some services do not require the mandatory text to be included in warranty documents, including:

• services supplied under a contract of insurance;
• certain gas, electricity, or telecommunications services; or
• services for transporting or storing goods where the goods are used for business, trade, professional, or occupational purposes.

What is the mandatory text?

From 9 June 2019, the following mandatory text must be included in warranty documentation for the supply of services:

"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."

From 9 June 2019, the mandatory text for the supply of goods and services together 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."

What other information must be included?

In addition to the mandatory text, the document which evidences a warranty against defects must:

• outline what the business must do if goods are faulty or defective;
• outline what the customer must do to entitle them to claim the warranty — for example, cease using the goods when a fault arises or contact the supplier or manufacturer and point to the defect;
• provide certain information about the business giving the warranty (name, business address, telephone number, email address (if any);
• state the warranty period;
• set out the procedure for the consumer to claim under the warranty, including the address where a claim must be sent;
• set out who will be responsible for expenses associated with a warranty claim and how the consumer can claim back any expenses incurred; and
• state that the benefits provided to the consumer by the warranty are in addition to other rights and remedies available to the consumer under the law.

What should you do?

Businesses who provide a warranty against defects in connection with the supply of services (or goods and services together) must update their warranty documentation to include the mandatory text by no later than 9 June 2019.

If you require clarification or assistance in complying with the new requirements, please contact Robert Neely.