Service Suppliers: Is Your Warranty Defective?

Companies that supply services (or supply goods and services) to “consumers” should be aware of mandatory wording that must be included in warranties against defects from 8 June 2019.

For these purposes, the definition of a consumer is not limited to individuals. A consumer is any person (including a company) who buys:

    • any type of services for a price not exceeding $40,000; or
    • services which are normally used for personal, domestic or household purposes for more than $40,000.

The mandatory wording was introduced by the Competition and Consumer Amendment (Australian Consumer Law Review) Regulations 2018 (Amendment).

Mandatory wording

The Amendment provides two alternate sets of mandatory text, depending on whether the supply is for services or goods and services combined.

The wording for the supply of services 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.”

The wording for the combined supply of goods and services 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.”

Similar mandatory text is already in effect for warranties for the supply of goods.

In addition to the mandatory text, suppliers who provide warranties against defects are required to comply with certain other specific requirements.

Implications

Suppliers of services should note that it is an offence under the Australian Consumer Law to provide warranties that do not comply with the Competition and Consumer Regulations 2010 (Cth). Service suppliers should begin updating their terms and conditions and warranties to ensure that their warranties comply with the Amendment by 8 June 2019.

This article was co-authored by Brendan Sheehan, Senior Associate and Ayesha Singh, Lawyer.