Many product businesses offer a ‘manufacturer’s warranty’ or a ‘warranty against defects’. However, a common misconception is that when the warranty expires, any further problem is the customer’s to deal with.Under the Australian Consumer Law (‘ACL’), warranties and consumer guarantees don’t work that way.
In this article, we cover the difference between warranties and consumer guarantees and what your warranty documents must contain.
What is the difference between a warranty and a consumer guarantee?
Consumer guarantees are rights that the ACL attaches automatically to personal and household purchases, and to most business purchases up to $100,000. Among these are guarantees that your goods or services are of an acceptable quality, fit for any purpose the customer made known, and match their description. You can read more in our article on your returns policy and consumer guarantees here.
A warranty is different in that it is a voluntary promise; it’s not automatically imposed by the ACL like with consumer guarantees. That means you have more freedom to design your warranties on your own terms, but you also have to abide by any warranties that you give. The two limits you should know about are warranties’ relationship to consumer guarantees and the requirements for warranties against defects. We discuss what each of these limits are next.
Can my warranty limit the consumer guarantees?
Even though you have more freedom in setting out your warranties, you can’t take away or modify consumer guarantees. Nothing printed on your packaging, in your terms or on a sign at the counter will change those consumer guarantees.
This is important to note because there is no set duration for consumer guarantees. The relevant guarantee here is the guarantee of acceptable quality, which has no set time limit. It depends on factors like its price and how long that kind of product could reasonably be expected to last. For some products, that period can be considerably longer than the warranty you offer. If a reasonable customer would expect your product to last five years, a 12 month warranty does not limit your obligations to the warranty period.
What are the warranty against defects requirements?
If you promise to repair, replace or refund a product if it turns out to be defective within a stated period, you are giving a warranty against defects. These are also known as manufacturer’s warranties. The warranty document must come with the goods and services, meaning that you cannot refer the customer to a separate website or in-store signage.
Your warranty document has specific contents that it must include. These are set out by regulation 90 of the Competition and Consumer Regulations 2010 (Cth). According to reg 90, your warranty must include:
- Transparent language, meaning that you use language that is easy to read and understand.
- A concise explanation of what warranty you give and what the customer needs to do to claim that warranty.
- The warranty period.
- The contact details of whoever gives the warranty, including name, address, phone number, and email. For sole traders, this would be your own details. For companies, this would be your company’s details.
- Who will pay the costs of making the claim, such as postage or transport. If you decide to bear the costs, you must also include how the customer can recover any expenses they incurred.
- A statement that the it is in addition to the customer’s other rights and remedies under the law.
- Mandatory text that notifies the customer of the automatic consumer guarantees. By mandatory, we mean that the exact wording is required, so it’s best to paste straight from the regulations. There are different versions for whether the warranty is for the supply goods, services, or both. You might have seen other businesses include this mandatory text, such as ‘Our goods come with guarantees that cannot be excluded under the Australian Consumer Law’, along with information about consumer guarantees.
You can add your own material on top, for example, more information about the customer’s consumer rights and guarantees. However, any extra information must not limit or negate the mandatory text.
What happens if my warranty document gets it wrong?
There are two separate risks with having a warranty document that doesn’t meet the reg 90 requirements. The first is that if you give a customer a warranty document doesn’t meet the requirements, then that is a contravention of the ACL. The second is telling a customer that the deficient warranty document applies to a given product or service. Both of these are contraventions of the ACL, and can attract hefty fines.
In addition to this, if this warranty document misrepresents that the warranty limits consumer guarantees, then this could also attract separate liability for false and misleading statements. Given these risks, it’s worth having an experienced lawyer make sure your warranties meet their requirements.
What is a warranty actually good for?
Used properly, a warranty is a selling point. Every business must honour the consumer guarantees, but your warranty can distinguish you from your competition. Not everyone will provide faster turnaround than a guarantee claim, replacement instead of repair, a no-questions-asked window, or cover for situations the guarantees might not reach.
What next?
First, check that your warranty document meets the requirements. In our experience, businesses miss the mandatory text and the expenses paragraph the most. Second, brief whoever answers your customer messages so that customer rights are never misstated.
Warranties can be a huge advertising point for your business, but only if they meet the requirements and are tailored to your business. For help with your warranties, book a free, no-obligation consultation to get a fixed fee quote.
