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New mandatory wording set to change the way you do business - services defects warranty

Hayden Delaney, Brett Bolton, and Steven Hunwicks / 16 May 2019

As of 9 June 2019, warranties against defects given to consumers by businesses when supplying services alone, or when supplying goods and services together, must have certain mandatory wording.

This is a new requirement. 

Currently, the mandatory wording is only required in connection with the supply of goods alone. After 8 June 2019, these requirements will apply to the supply of services, or the supply of goods and services, as well.

Current requirements

The Australian Consumer Law requires that most products or services offered to consumers come with automatic guarantees that the goods or services will work and do what the consumer has asked for.

The ACL applies to goods or services (or combinations of them) offered to consumers which a business sells, hires or leases for:

  • under $40 000; or 
  • over $40,000 where the product or service is normally bought for personal or household use.

Services must:

  • be provided with acceptable care and skill or technical knowledge, and taking all necessary steps to avoid loss and damage; 
  • be fit for the purpose or give the results that the consumer and the business had agreed to; and
  • when there is no agreed end date, be delivered within a reasonable time.

If the consumer buys something that does not meet these standards, the ACL provides them with automatic rights:

  • to have the goods repaired, replaced or refunded; 
  • to cancel a service; or
  • to be compensated for damages or loss (if any) they have suffered.

The consumer guarantees apply regardless of, and in addition to, any voluntary warranties (if any) that the business might give or sell to the consumer. 

Warranties

In addition to the mandatory consumer guarantees, some businesses may also provide or sell a voluntary warranty against defects (sometimes called a “manufacturer’s warranty”).

A manufacturer’s warranty is a voluntary promise (or “representation”) by the seller, made at or around the time that goods or services are supplied, that if the goods or services (or part of them) is defective, the business will:

  • repair or replace goods (or part of them); or
  • resupply or fix a problem with services (or part of them); and
  • provide compensation to the consumer.

Most suppliers limit their warranty against defects to a particular time, say 12 months.

A manufacturer’s warranty is additional to the consumer guarantees; it does not limit or replace them. This also means that the consumer guarantees may continue to apply after the manufacturer’s warranty period has expired.

The new mandatory wording

The Competition and Consumer Regulations 2010 (Cth) (Regulations) requires that, unless an exception applies, a business must use mandatory wording to describe the consumer guarantees for goods or services (or a combination of them). Previously, this mandatory wording was only required where a manufacturer’s warranty was provided in connection with the supply of goods.

As from 9 June 2019, the following mandatory wording must be provided in connection with the supply of services, or a combination of goods and services.
For the supply of services only, the mandatory wording 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.

For the supply of goods and services, the mandatory wording 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 exceptions apply?

The mandatory wording is not required in relation to services supplied under a contract of insurance, for the services of a specific kind set out in the Regulations, or for gas, electricity or telecommunication services.

Key takeaways for your business

These changes are intended to standardise consumer rights across goods and services, and increase consumer awareness and protection. 

To ensure you are compliant before next month’s deadline, your business should be updating its customer agreements and warranty documentation now.  

Non-compliance with the new requirements could have a significant financial impact on your business. A failure to make your customers of aware of the mandatory warranty against defects wording may attract penalties of $50,000 for a company or other incorporated business, and $10,000 for all others types of traders such as individual/sole traders.

About us

HopgoodGanim Lawyers’ Intellectual Property & Technology and Competition teams are serviced by legal professionals and patent attorneys with industry expertise across life sciences, engineering, technology, creative and retail sectors. 

For more information or to discuss, please contact HopgoodGanim Lawyers’ Intellectual Property & Technology or Competition team.

Authors
Hayden Delaney
Partner
Hayden is a Partner and he leads HopgoodGanim’s Intellectual Property and Technology team. Hayden specialises in the information, communications and technology sector, and intellectual property law.
Brett Bolton
Partner
Brett is a Partner working across our Dispute Resolution and Competition practices.
Steven Hunwicks
Senior Associate
Steven is a Senior Associate in our Intellectual Property and Technology practice.
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