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2019 Mandatory Wording for Warranties against Defects when supplying Services

Consumer Guarantees under the ACL

A business may choose to offer a warranty against defects which is in addition to the automatic consumer guarantee rights under the Australian Consumer Law (ACL). The ACL is a national law which promotes fair trading and the provision of consumer protection. The Productivity Commission recommended that Australian governments should adopt the following overarching objective for the ACL:

To improve consumer wellbeing by fostering effective competition and enabling the confident participation of consumers in markets in which both consumers and suppliers trade fairly and in good faith.

Part 3-2 of the ACL deals with consumer transactions and the regime provides consumers who acquire goods and services from suppliers with a set of statutory rights and remedies. This means that when a consumer buys goods and services they come with automatic guarantees to meet certain standards such as acceptable quality and matching description for goods and acceptable care and skill and fitness for purpose for services.

Warranty against Defects

A warranty against defects is a representation made to a consumer that if goods or services are defective, a person will repair or replace the goods, resupply or rectify the services or provide compensation to the consumer. A warranty is additional to consumer guarantees under the ACL and does not replace them. This means that the consumer guarantees continue to apply whether a warranty is supplied by a supplier or manufacturer.

Effective 8 June 2019, if your business supplies services or supplies goods with services, and you offer a warranty against defects, prescribed wording must be used to outline consumers’ guarantees and rights under the Australian Consumer Law (ACL).

Mandatory Wording for Services

You must display this text:

Our services come with guarantees that cannot be excluded under the Australian Consumer Law. For major failures with the service, you are entitled:
1. to cancel your service contract with us; and
2. 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

You must display this text:

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:
1. to cancel your service contract with us; and
2. 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 failure 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 or damage from a failure in the goods or service.

There is nothing novel about the mandatory wording requirement as these have been implemented since 2012 for businesses supplying goods to consumers. However, with the 2019 mandatory wording requirement, those businesses supplying services, or a combination of goods and services must use the prescribed wording.

Application to a ‘Consumer’ only

The regulations only apply where the warranty is given to a consumer under the ACL if they purchase:

  • goods or services that cost less than $40,000;
  • goods or services that cost more than $40,000 but are of a kind ordinarily acquired for domestic, household or personal use or consumption; or
  • a vehicle or trailer primarily used to transport goods on public roads.

Other mandatory requirements

In addition to the new mandatory wordings, the regulations provide that the warranty against defects must:

  • be in a document that is transparent;
  • state what the person must do to entitle them to claim the warranty;
  • include the prescribed text in relation to goods, services or goods and services as mentioned above;
  • prominently state the information about the person who gives the warranty, such as the name, business address, telephone number, and email address (if any);
  • state the warranty period;
  • set out the procedure for the consumer to claim the warranty including the address where a claim may be sent;
  • 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 a claim; and
  • state that the benefits to the consumer given by the warranty are in addition to other rights and remedies of the consumer under a law in relation to the goods or services to which the warranty relates.

Exceptions

The prescribed new wording is not required for:

  • insurance services;
  • certain gas, electricity or telecommunication services; or
  • services for transporting or storing goods where the goods are used for business, trade, professional or occupational services.

Penalties

Compliance with these changes is crucial as failure to incorporate the compulsory wording will result in a pecuniary penalty of up to $50,000 for a company and up to $10,000 for individuals.

Also, a business can be in contravention of section 18 of the ACL as failure to include the prescribed wording can amount to misleading or deceptive conduct which is a violation of section 29 of the ACL for false representations.

Johanne Sarcilla, B.A., LL.B

Contact W3IP Law on 1300 776 614 or 0451 951 528 for more information about any of our services or get in touch at law@w3iplaw.com.
Disclaimer. The material in this post represents general information only and should not be taken to be legal advice.

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