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The transitional period for businesses to bring their warranties into line with the new requirements of the Australian Consumer Law (ACL) ends on 30 September 2012. If you offer a warranty against defects for your products and have not yet checked if it complies, there is only one week left.
What is a ‘warranty against defects’?
A warranty against defects is a representation provided by a business to a consumer that if the goods or services they provide are defective, the business will repair or replace the goods, resupply or fix the services, or provide adequate compensation to the consumer. Such a warranty must be provided at or around the time the goods or services are supplied, and does not necessarily need to be contained in a formal document. Businesses need to be careful with the representations their employees make to consumers at the time of sale of goods or services, as they may be providing consumers with an unintended warranty against defects. Product labelling and advertising material may also inadvertently contain promises to consumers in relation to warranties against defects.
Expiry of transitional period
During the transitional period, the Australian Competition and Consumer Commission (ACCC) agreed to take a more lenient approach in enforcing the new warranty requirements against businesses. This allowed businesses time to update their product packaging and supporting documentation if they required. In particular, for goods manufactured and packaged prior to 1 November 2011, the ACCC considered:
- the business’ practical difficulties in updating its warranty documents during this period, and
- whether the business took any other reasonable steps to notify consumers of these new developments during this period.
After 30 September 2012, the ACCC will no longer provide such leeway to businesses when dealing with warranty against defect claims.
Who do the requirements apply to?
The ACL applies to purchases of goods or services to the value of less than $40,000, or if the products are valued higher than that amount, are goods or services ordinarily obtained for domestic, household or personal use. If the purchase price is less than $40,000, the ACL applies to contracts between companies, as well as sales to individuals. All documents containing a warranty against defects must adhere to the new requirements under the ACL.
What are the warranty requirements?
Under the new provisions, a warranty against defects must be provided in a document that is transparent. The document must also concisely state:
- the manner in which the warranty will be honoured by the business
- what steps the consumer must take to claim the warranty
- the time period during which the warranty can be claimed
- details of which party will be responsible for the costs associated with the warranty claim
- that the warranty is provided in addition to other rights and remedies available to the consumer at law, and
- all of the business’ contact details,
in addition to including certain mandatory text about the ACL.
A ‘document’ evidencing a warranty against defects will be taken to mean any material on which there is writing or printing (such as a user manual, supporting documents or warranty guide), and as previously mentioned, may potentially include product packaging itself. However, in circumstances where the packaging may be considered to be a document evidencing a warranty against defects, if the accompanying warranty or other supporting documents contain the required information, the ACCC has stated that it will take this into account when assessing whether a breach of the warranty against defects provision has occurred.
Failure to comply
Failure to comply with the new requirements may result in pecuniary penalties of up to $50,000 for corporations and $10,000 for individuals. Furthermore, misleading representations under the ACL may incur penalties of up to $1.1 million for corporations or $220,000 for individuals.
If you require any advice in relation to the warranty requirements, or believe your business may be affected, please contact us before 30 September, or as soon as possible after that date, so we can assist you to be compliant before the deadline.
Focus covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. Focus is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.