Most businesses in Australia are required to comply with the ACL, and failure to comply can carry hefty penalties.
Recently, some changes to the ACL have been developed. These changes take effect from 9 June 2019.
The ACL applies in all states and territories of Australia.
Generally, if a business is selling goods or services to consumers, then the ACL will apply to it.
For example, if a bike shop is selling bikes to members of the public, then the ACL is likely to apply. If an individual person sells their second hand bike on Gumtree, then the ACL is unlikely to apply.
In addition, in order for the ACL to apply, the business must be selling the goods or services to "consumers". Under the ACL, a "consumer" may be a person or a business, provided that:
- they purchase goods or services that cost less than $40,000; or
- the goods or services cost more than $40,000, but they are of a kind ordinarily acquired for domestic, household or personal use or consumption; or
- the goods are a commercial road vehicle or trailer used primarily to transport goods on public roads.
A business may be considered to be supplying goods or services to consumers if the business is selling, leasing or hiring goods, or if it is providing services.
The ACL also applies to a variety of matters with which businesses may deal. In particular, the ACL includes provisions that relate to:
- specific guaranteed consumer rights (often referred to as "consumer guarantees");
- unfair contract terms;
- unsolicited consumer agreements;
- product safety laws;
- specific penalties and enforcement options.
In addition, the ACL contains some provisions that specifically deal with warranties against defects. Some of these provisions have recently been updated, and this guide will focus on these changes.
A warranty against defects is an assurance or representation, made to a consumer, when goods or services are supplied to the consumer, that if the goods or services contain defects, then the supplier will:
- For goods - repair or replace them; or
- For services - rectify the services, or provide the services again; or
- Compensate the consumer.
Australian businesses are not required to provide a warranty against defects. But if the business chooses to provide a warranty against defects, then the rules set out in this guide will apply to that business.
A warranty against defects might be presented to consumers in many different kinds of documents, such as on packaging, on a pamphlet, or in a traditional sale agreement or services agreement.
If a warranty against defects is made to a consumer, then the mandatory wording (set out in this guide) must also be provided to the consumer.
From 9 June 2019, if a business provides a warranty against defects to consumers, then documents evidencing that warranty against defects must include certain mandatory text. The Australian Competition and Consumer Commission states that this is to ensure that consumers are aware that any warranty against defects operate in addition to consumers' rights under the ACL.
If a business is supplying goods, and provides a warranty against defects, then the following mandatory text must appear in the document which evidences the warranty (for example, in their Contract for Sale of Goods, Service Agreement, Refund Policy, pamphlet, packaging or other relevant documentation):
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.
If a business is supplying services, and provides a warranty against defects, then the following mandatory text must appear in their relevant documents:
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.
If a business is supplying both goods and services, and provides a warranty against defects, then the following mandatory text must appear in their relevant documents:
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.
In addition to this mandatory wording, if a business is providing any warranties against defects, then the ACL also requires certain information to be included in any documents evidencing those warranties (for example, in their Contract for Sale of Goods, Service Agreement, Refund Policy, pamphlet, packaging, or other relevant documentation containing the warranties). The information which must be provided includes:
- details of what the business must do if there is a defect;
- details of what the consumer must do in order to be entitled to make a claim under the warranty (for example, by stopping the use of a defective good);
- details of how the consumer may make a claim under the warranty (for example, how to submit a claim, and how to contact the business);
- clarification of whether the consumer or the business will be responsible for costs associated with the claim (such as postage costs). If the consumer will be responsible for them, then details of how the customer may claim any costs back.
- details about the warranty period (in other words, when the warranty expires);
- contact details for the business, including the business's name, address, phone number and email address (if applicable);
- a notification to the consumer that any benefits under these warranties against defects are in addition to other rights and remedies which are available to the consumer under the law.
In addition, the ACL also imposes requirements regarding the way that warranty documents must be presented to consumers (for example that they be provided with the product itself, rather than consumers being referred to information on a website).
Clearly, there is quite a bit that businesses need to do in order to comply with these laws. Therefore, if providing a warranty against defects, businesses should strongly consider seeking legal advice.
Yes, a warranty against defects is different from the minimum consumer guarantees under the ACL.
It is important to note that the ACL sets out some minimum consumer guarantees. If a business falls under the ACL, then the business cannot avoid these minimum guarantees.
For sales of goods, these minimum consumer guarantees include guarantees that the goods are of acceptable quality, are fit for their purpose, and match any description in any advertisements. For services, these minimum consumer guarantees include guarantees that the services will be provided with due care and skill, within a reasonable timeframe, and will be fit for their purpose
So generally speaking, the consumer guarantees relate to the quality of the goods or services, while a warranty against defects relates to what the business will do if there is a problem with goods or services.
If a business chooses to provide any warranties against defects, these warranties against defects will apply in addition to the consumer guarantees.
If an Australian business provides goods or services to consumers, and provides a warranty against defects to consumers, then the business may need to check its relevant documents to make sure they contain this new mandatory text. If they do not, then the business may need to update its documents to make sure that they do include the text.
Our relevant documents have been updated to include this text, so if necessary, new documents may be purchased from us.
However, it is also important to remember that aside from this mandatory text, there are specific requirements regarding further information to be included (such as contact details for business, and instructions for how to submit a claim), and specific requirements regarding the manner in which the warranties must actually be presented to consumers (see our discussion under the heading "Additional requirements", above).
Therefore these laws create some strict requirements for Australian businesses. In addition, as with all legal matters, personal circumstances may vary significantly. There is no "one size fits all". Therefore businesses should strongly consider seeking legal advice to make sure they are not breaching any relevant laws.
The Australian Competition and Consumer Commission provides some useful resources about the ACL.
The Australian Consumer Law website also provides a lot of useful information.
Each business's circumstances are different so in order to confirm how the ACL may apply to them, businesses should seek legal advice.