Clayton Utz Insights

02 August 2012

Why it's time to check the wording of your product warranties

By Sara Dennis.

Key Points:

Businesses should check that their products' warranty documentation meets the new requirements of the Australian Consumer Law.

Does your business tell its customers that it will repair, replace or provide compensation if the goods (or part of them) are defective?

This is called a warranty against defects. And since 1 January 2012, new requirements in the Australian Consumer Law have been in force regarding the information that you must provide to your customers about how your business will respond if the goods or services you provide are found to be defective.

The ACCC has indicated that, until September 2012, it is prepared to consider exercising a degree of leniency in enforcing examples of non-compliance – for some, but not all, products. The penalties for failure to comply with the new requirements are high: $50,000 for body corporates and $10,000 for individuals.

With a new financial year underway and September looming, businesses are well advised to check their products' warranty documentation to ensure it meets the new requirements.

What is required?

There are eight new requirements for warranties against defects, including:

  • a statement of the period or periods within which a defect in the goods or services to which the warranty relates must appear if the consumer is to be entitled to claim to warranty;
  • a concise statement of what the person who gives the warranty must do so that the warranty may be honoured;
  • the mandatory inclusion of the following 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."; and
  • a statement 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.

Guidance from the ACCC

The ACCC has prepared guidance materials for business in relation to the new requirements. The ACCC has also indicated that it recognises the practical transitional difficulties associated with applying the new provisions, especially when products are manufactured and packaged many months in advance.

It has indicated that, until September 2012, when considering the appropriate enforcement response to any contravention applying to stock in the supply chain manufactured and packaged prior to 1 November 2011, it will have regard to: 

  • whether there are serious practical difficulties in updating warranty documents; and 
  • whether the supplier has taken all reasonable steps to otherwise convey the mandatory text and information required by the ACL to consumers (for example, by placing a compliant sticker on the outside packaging, or by erecting prominent, clear, point-of-sale signs at all cash registers in a prominent position).

What should you do?

The most prudent response is to ensure that your products are fully compliant. However, if this is not possible in the short term, ensure that you take some steps now to demonstrate a willingness to comply. This may not protect you from facing enforcement action from the ACCC, but it may affect the ACCC's response to your conduct.

 

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For more information, contact...
Email: Sara Dennis, Special Counsel
Tel: +61 3 9286 6869
Disclaimer
Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.
Sara Dennis
Sara Dennis