New mandatory wording required when warranties are given for services

The Competition and Consumer Regulations 2010 (Cth) (regulations) have been amended to require businesses giving a warranty against defects to consumers for the supply of services (or the supply of goods and services together) to include mandatory text in the warranty. This change comes into effect, on and from 8 June 2019.

The mandatory text alerts consumers to the existence of the Australian Consumer Law (ACL) and reminds consumers and others involved in the transaction that the consumer guarantees set out in the ACL cannot be excluded by the warranty. Previously, the mandatory text was only required to be included where a warranty was given in connection with the supply of goods.

What is a warranty against defects?

A warranty against defects is a representation made to a consumer in connection with the supply of goods or services, around the time of the supply, that if the goods or services are defective, a person will:

1. Repair or replace the goods;
2. Provide again or rectify the services; or
3. Compensate the consumer.

It is generally supplied free of charge and is otherwise commonly referred to as a manufacturer’s warranty. A warranty against defects includes any document by which such a representation is evidenced, for example, on packaging or a pamphlet accompanying the goods or services.

The following examples are published on the ACCC website as at the date of this article¹:

1. A three year or 100,000km written warranty outlining what the manufacturer will do if there are certain problems with a vehicle;
2. A contract stating that a tiler will repair any tiles that become loose within five years of the tiling being carried out; and
3. A representation on the packaging for a drill that states the manufacture will repair the drill if a fault arises within three years of purchase.

The provisions in the ACL regulating warranties against defects only apply where the warranty is given to a consumer in connection with the supply of goods and/or services.

A person acquires goods or services as a “consumer” under the ACL if:

1. The price of the goods or services is $40,000 or less; or
2. The goods or services are of a kind ordinarily acquired for personal, domestic or household use or consumption;  or
3. The goods comprise a vehicle or trailer for use principally in the transport of goods on public roads.

A person will not acquire goods as a consumer if the goods are acquired for the purpose of resupply or for the purpose of using them up or transforming them in the process of production or manufacture or in the course of repairing or treating other goods or fixtures on land.

The new mandatory wording

On and from 8 June 2019, where a warranty against defects is provided for a service, the following mandatory text must be included in the warranty:

Our services come with guarantees that cannot be excluded under the Australian Consumer Law. For major failures with the service, you are entitled:

1. to cancel your service contract with us; and
2. 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.

On and from 8 June 2019, where a warranty against defects is provided for goods and services together, the following mandatory text must be included in the warranty:

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:

1. to cancel your service contract with us; and
2. 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’.

Exceptions²

The mandatory text is not required to be displayed in relation to services supplied under a contract for or in relation to the transportation or storage of goods for the purposes of a business, trade, profession or occupation carried on or engaged in by the person for whom the goods are transported or stored. However, if the consignee of the goods is not carrying on or engaged in a business, trade, profession or occupation in relation to the goods, then the mandatory text must be displayed.

In addition, the mandatory text is not required to be displayed in relation to:

1. Services supplied under a contract of insurance; and
2. Supplies:
   • of a kind specified in the regulations; and
   • of gas, electricity or a telecommunications service.

Other existing requirements

It is an offence under the ACL (attracting civil and/or criminal penalties) to give a consumer a warranty against defects that does not comply with the requirements prescribed in the regulations.

While the mandatory text to be included when warranties are given for services is a new requirement, the regulations already prescribe³ that a warranty against defects must:

1. Be in a document that is transparent;
2. Concisely state:
   • what the person who gives the warranty must do so that the warranty may be honoured; and
   •  what the consumer must do to entitle the consumer to claim the warranty.
3. Prominently state the following information about the person who gives the warranty:
   • the person’s name;
   • the person’s business address;
   • the person’s telephone number;
   • the person’s email address (if any);
4. State 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 the warranty;
5. Set out the procedure for the consumer to claim the warranty including the address to which a claim may be sent;
6. State who will bear the expense of claiming the warranty and if the expense is to be borne by the person who gives the warranty—how the consumer can claim expenses incurred in making the claim; and
7. State 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.

Key takeaways for businesses

Businesses providing consumers with a warranty against defects in connection with the supply of services must update their warranty documentation to include the new mandatory text by no later than 8 June 2019.

Businesses providing consumers with a warranty against defects in connection with the supply of goods and services must also update their warranty documentation by 8 June 2019, by replacing the mandatory text applying to goods with the new mandatory text applying to goods and services.

This article was written by Teresa Torcasio, Partner and Marian Ngo, Senior Associate.

Teresa Torasio

P: +61 3 8644 3623

E: ttorcasio@hwle.com.au

¹https://www.accc.gov.au/business/treating-customers-fairly/offering-warranties/warranties-against-defects/examples-for-warranties-against-defects#example-for-warranties-against-defects-requirements.
²Section 90(1A) of the Competition and Consumer Regulations 2010 (Cth).
³Section 90 of the Competition and Consumer Regulations 2010 (Cth).