Changes to Mandatory Warranty Wording for Services

By Rosalyn Gladwin | 21 Mar 2019

Retailers trading in both the online and offline space need to prepare for changes to mandatory warranty wording.

New laws will soon apply, requiring businesses that provide a warranty against defects for goods, and a warranty for services and goods, to include mandatory wording in their warranties.

What is a Warranty Against Defects?

If you are a supplier (including a retailer) or manufacturer of goods or services, and you make promises about what you will do if a product or service is faulty, then this is usually considered a ‘warranty against defects’ under the Australian Consumer Law. There are specific legal requirements for a compliant warranty against defects.

Mandatory Wording for Goods Warranties

To prevent confusion amongst consumers regarding their rights, the law provides mandatory wording to be included in warranties against defects provided in regards to goods:

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 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.

Previously, there was no such wording requirement for services, however, new laws are set to apply for the provision of warranties in relation to services, and those in relation to goods and services.

New Mandatory Wording for Services and Goods and Services Warranties

From 8 June 2019, businesses will be required to include mandatory wording for warranties against defects that apply to the provision of services, and to the provision of goods and services (provided together).

Mandatory Wording – for Services

Where a business is providing a warranty against defects for services, the mandatory text is:

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

  • to cancel your service contract with us; and
  • 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.

Mandatory Wording – for Goods and Services

Where a business is providing a warranty against defects for both goods and services, the mandatory text is:

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:

  • to cancel your service contract with us; and
  • 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.

Your Next Steps if You Offer a Warranty Against Defects

Recently, jewellery company, Michael Hill (New Zealand) was penalised with a NZ$169,000 fine for breaching NZ consumer laws. Like Australian law, the NZ legislation required specific details about how additional warranties should be set out, which were not complied with.

You must ensure that your warranties against defects are updated to reflect these new requirements to avoid infringing the ACL and to avoid the hefty penalties that can be applied. Not only is the wording mandatory but including it can also reduce your risk of infringing the misleading representation provisions of the Australian Consumer Law. Other requirements for warranties against defects apply in Australia, so make sure to have your warranties drafted or reviewed by an experienced retail lawyer.

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