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New law: Update consumer agreements or risk $50k penalty

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As of 9 June 2019, any business that provides services, or goods and services, and offers a warranty to its consumers against defects, must update its warranties with new compulsory wording.


ACL Consumer Guarantees

Australian Consumer Law (ACL) exists to protect consumers of goods or services. Included in the ACL is an automatic consumer guarantee for goods or services under $40k, or goods or services that are acquired for ordinary household use, that they should work and perform as expected by a consumer. If they fail to do so, the consumer has rights to have the goods repaired, replaced or refunded, to cancel a service, or to be appropriately compensated. These rights apply whether or not the business provides a written guarantee.

The ACL definition of a “consumer” also includes supplies made from business to business.

Voluntary Warranties Against Defects

Many businesses also offer consumers a (voluntary) warranty against defects. This does not limit or replace the automatic consumer guarantees in the ACL, but is offered in addition to them. These warranties generally say that the business will repair, resupply, replace and/or compensate the consumer for defective goods or services.

These warranties can be given in customer contracts, trading terms and conditions, on order forms and receipts, in marketing materials, on product packaging or on the business’s website.

New Laws From June 9

In an effort to standardise consumer rights, new laws are now in effect (from 9 June, 2019) requiring mandatory wording for warranties against defects for businesses that provide services, or a combination of goods and services. Laws already existed requiring mandatory wording for the provision of goods only.

The existing law also requires that if you give a warranty against defects it must comply with certain requirements, including (amongst other things) that the warranty clearly state the details about the person giving the warranty, their address, telephone number and email address, as well as the procedure that the consumer must follow to claim the warranty.

How this affects you

If you provide goods, services, or a combination of goods and services, and offer a warranty against defects, you must update your documents (trading terms and conditions, for example) to include the new mandatory wording, as well as comply with the other existing requirements that you must include with your warranty.

Keep in mind, using statements such as “12-month warranty” in your marketing material may qualify as a warranty against defects under the ACL, and mean that you must provide the compulsory wording.

Failure to comply with the new laws may result in penalties of up to $50k for a company or incorporated business, or $10k for individuals or sole traders.

Mandatory wording for the supply of services only

For the supply of services only, the mandatory wording 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 the supply of goods

For the supply of goods only, the mandatory wording is:

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.

Mandatory wording for the supply of goods and services

For the supply of goods and services, the mandatory wording 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.

What you should do

The ACL has rules around how warranties are presented to consumers and penalties if you do not comply.

To review your consumer agreements and ensure your business complies with all current laws, get in touch with our team at redchip@redchip.com.au or phone us on 07 3223 6100.

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