Warranty against defects for services
Oct 25, 2019As of June 2019 the Australian Consumer Law (‘ACL’) has additional requirements for those businesses who provide a Warranty Against Defects for services (‘WAD’) in the provision of either:
- Services; or
- Goods with services.
What is a WAD?
This is a representation to consumers that if the goods or services you provide are defective you will:
- Repair or replace the goods;
- Resupply or fix a problem with services; or otherwise
- Provide compensation to the consumer for the defective service or goods.
This representation is generally made at the time the services are provided. This representation does not necessarily need to be in writing in order to be characterised as a WAD, therefore you should ensure that you are aware of your obligations under the ACL if you are in the business of supplying goods or services. It is best practice to have these kind of warranties set out in writing in order to avoid any confusion about the terms under which you are operating. See our previous blog on setting up your business and the importance of terms and conditions.
What are the changes and what do they mean to you?
Previously, if you chose to provide a WAD as part of your terms, only providers of goods had to comply with specific ACL requirements (as they related to WADs). Providers of services will now have to comply with these requirements, in addition to their pre existing obligations under the ACL.
As of 9 June 2019 there are now mandatory text requirements for WADs associated with the supply of services and minimum requirements about the information provided to consumers.
What information do you need to provide?
Where you provide a written WAD, it must state:
- What (in giving the warranty) you must do if your services are defective;
- What the consumer will do to claim the warranty;
- How long the warranty lasts;
- Who will be responsible for the expenses associated with the warranty and how they will be claimed;
- The benefits accrued through the warranty are in addition to all other rights and remedies arising through the ACL; and
- The name, business address, phone number and email (where applicable) of the business giving the warranty.
For a WAD arising from the supply of services, the new mandatory text is as follows:
“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;
- 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.”
For a WAD arising in the supply of goods and services, the new mandatory text is as follows:
“Our goods and services come with guarantees that cannot be excluded under the Australian Consumer Law 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 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 services.”
You must not include any other text which contradicts or limits the effect of the mandatory wording. It is also important that you are able to identify whether you are providing a WAD or an express warranty under the ACL, as your obligations will be different depending on which type of warranty you are offering.
Failure to Comply
If you fail to comply with the above requirements, you may be subject to significant financial penalties and scrutiny from the Australian Competition and Consumer Commission; therefore it is important that you update all relevant information to meet your obligations.
Contact the Shire Legal team if you have any questions.
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