21 Jun 2011

Getting ready for Australian Consumer Law changes to product warranties against defects

by Michael Corrigan, Stephanie Panayi

From 1 January 2012, any warranties against defects in any consumer products sold in Australia will need to comply with the mandatory requirements in the new ACL - the Australian Consumer Law and the Trade Practices (Australian Consumer Law) Amendment Regulations 2010 (No. 1).

If you have any product warranties against "defects" on any of your products, or sell products bearing these warranties, then you should start looking now at ensuring the packaging complies by the start of next year. Otherwise non compliance will be an offence under the ACL.

What must warranties say under the ACL?

From 1 January 2012 all warranties against defects on any consumer product must include the following statement:

"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."

If you offer your own company warranty, then you must also state that "The benefits under [Our Warranty] are in addition to other rights and remedies under a law in relation to the [goods/services]".

The warranties must also:

  • be in a document that is transparent (that is, a document that is expressed in reasonably plain language, legible and presented clearly);
  • state the warranty period, procedure for claiming, who bears the cost of claiming the warranty; and
  • prominently state the name, business address, telephone number and email address (if any) of the person who gives the warranty.

What is a "warranty against defects"?

A warranty against defects is "a representation communicated to a consumer in connection with the supply of goods or services, at or about the time of supply, to the effect that a person will (unconditionally or on specified conditions):

  • repair or replace the goods or part of them; or
  • provide again or rectify the services or part of them; or
  • wholly or partly recompense the consumer;
  • if the goods or services or part of them are defective, and includes any document by which such a representation is evidenced." (section 102 of the ACL)

Which products will be affected by the amendments?

The new requirements relating to the form and content of warranties against defects will affect all consumer products which have an express warranty against defects.

The prohibition falls on the seller to consumers, but major retailers are likely to require their suppliers to ensure compliance or face stock being deleted or not accepted for sale

Where does the prescribed wording need to be included?

Technically speaking, each instance of a "warranty against defects" must comply with the Regulations. Certainly, the warranty statements commonly included inside product packaging will need to comply with the regulation.

What suppliers and retailers must do

Some points that a supplier or retailer may need to consider include:

  • identification of which products will be affected by the changes;
  • work out a timeframe within which all warranty notices will be compliant given normal stock turn; and
  • develop a means to identify which product stocks as at 1 January 2012 contain non-compliant warranty notices.

 

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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 communication. Persons listed may not be admitted in all States and Territories.