New laws passed governing the wording of warranties.

Warranty Law – New Rules

From 1 January 2012, new Warranty Law rules will govern the wording of warranties given by suppliers to consumers who purchase goods and services.

Who is affected?

The new rules will apply to retailers and manufacturer – indeed any business that sells goods or services to consumers in trade or commerce.

What should affected businesses do?

Review your warranty documents in advance of 1 January 2012 to ensure they satisfy the requirements.

Background

There are two types of warranties given to consumers when they purchase goods or services. They are:

1. the consumer guarantees created by the Australian Consumer Law (“ACL”) and which are implied into every consumer contract. These cannot be excluded by businesses; and

2. warranties that goods or services will be defect free for a specified period of time noting that there is no legal obligation for a business to give a ‘warranty against defects’ to consumers but if the business does so, it must comply with the new rules.

The New Warranty Law Rules

1. A “warranty against defects” is a representation (unconditional or on specified conditions):
   1. To repair or replace the goods or part of them.
   2. To provide again or rectify the services or part of them.
   3. To wholly or partly recompense the consumer.
2. a warranty can arise through any of the following:
   1. a formal warranty document.
   2. any written material wording on packaging or on a label on an item.
   3. inadvertent statements by retail staff to customers about a product.
3. a warranty can be given:
   1. when the good or service is sold, and/or
   2. when the good or service is supplied; and
4. Under the new rules, all warranties against defects must clearly state:
   1. what the business will do under the warranty.
   2. what the consumer must do to claim the warranty.
   3. the supplier’s name, address, telephone number and email address (if any).
   4. the period in which a defect must appear if the consumer is entitled to claim the warranty.
   5. the procedure for a warranty claim, including the address to which a claim should be sent.
   6. who will pay the cost of claiming the warranty and, if it is the business, the procedure which the consumer must follow.
   7. that the benefits to the consumer under the warranty against defects are in addition to other rights of the consumer.
5. All warranties against defects should state the following mandatory text:“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 for 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.”

Relationship between Warranties and Consumer Guarantees

Warranties against defects are additional to the implied consumer guarantees under the ACL.

In some cases, the consumer guarantees may provide a remedy after the claim period for a warranty against defects period has expired.

Penalties for failure to comply

Failure to comply with the new warranty law rules can result in a fine of up to $50,000 for a corporation and $10,000 for an individual.

A breach of the consumer guarantees can result in a fine of up to $1.1million for a corporation and $220,000 for an individual.

What you should do:

Warranty Documents:
Retail businesses and manufacturers should review their warranty terms and conditions prior to 1 January 2012 to ensure that all warranty documentation complies with the requirements of the new rules.

Staff Training:
Retail staff will need to be educated about the new rules to ensure compliance with the rules and to avoid making inadvertent warranty representations to consumers.

Irish Bentley Lawyers can review your warranty documentation and advise you on what changes need to be made to ensure that your business is compliant with the Warranty Law new rules.