As a business, you may refer to a ´warranty´ that could be one of a number of different types of protections consumers have (or can purchase).
A ´warranty´ may refer to:
- consumer guarantee rights
- an express warranty
- a manufacturer´s warranty or warranty against defects
- an extended warranty.
The following clip, which is part of our film on the Australian Consumer Law, explains the different types of warranties.
When consumers purchase goods or services from your business, you automatically provide ´consumer guarantees´. These rights were previously known as a ´statutory warranty´.
There are nine different consumer guarantees for goods and three for services. In basic terms, they state that goods must be of acceptable quality, match their description and be fit for their normal purpose. Services must be performed with due care and skill and must also be fit for their normal purpose.
If a product or service you sell fails to meet one of the consumer guarantees, you must remedy the problem - usually by providing a refund, repair, exchange or repeat service.
You can not deny a consumer their consumer guarantee rights.
Suppliers and manufacturers often make extra promises about the quality, state, condition, performance or characteristics of goods. These are called ´express warranties´. There is a consumer guarantee that states that any express warranty must be honoured. If it´s not, the consumer will be entitled to a remedy.
An express warranty can be any extra promise, either verbally or in writing.
For example, if a salesperson tells a consumer that the bed they are about to buy will last 10 years, they are making a promise about the performance of the goods. If the bed only lasts six years, the express warranty has not been honoured (that is, the consumer guarantee has not been met) and the consumer will be entitled to a remedy.
Warranty against defects or manufacturer´s warranty
Businesses or manufacturers may provide a warranty that spells out what will be done to fix a problem with goods, if there is a problem with them.
These types of warranties are called a ´warranty against defects´, or a ´manufacturer´s warranty´.
For example, a consumer buys a deck chair that comes with a written warranty. The warranty says the manufacturer will replace the deck chair if it breaks within two years of the purchase date.
Sometimes a warranty against defects may contain an express warranty, but they are not quite the same. Where an express warranty actually promises something about the goods (for example, that they will work properly for two years), the warranty against defects makes no such promise - it just states what the business or manufacturer will do if a problem occurs with the goods such as a repair, replacement or refund. Both types of warranties will usually have a time limit attached to them.
A warranty against defects must be in writing and:
- be expressed in plain language, legible and presented clearly
- contain the warrantor´s name, business address, phone number and email address
- set out relevant claim periods or procedures (for example, relating to authorised repairers and transporting goods)
- include a statement that rights under the warranty sit alongside the consumer guarantees, which cannot be excluded.
If you provide a warranty against defects you must comply with details in that warranty.
A warranty against defects is provided in addition to consumer guarantees and does not limit or replace them.
An ´extended warranty´ is an extension of time on a warranty against defects and/or an express warranty.
You automatically provide ´consumer guarantees´ when you sell goods or services. An extended warranty is offered in addition to consumer guarantees.
A consumer does not need to purchase an extended warranty if it only covers a length of time that it would be reasonable to expect the goods to last for anyway.
If you are selling extended warranties, you need to ensure that you are offering something of value to the consumer - something that is not already their legal right.
It is important that you do not mislead a consumer into purchasing something that is already their legal right. We recommend that, if you are selling extended warranties, you make sure that the consumer is aware of how the extended warranty benefits (or protects) them, above and beyond their consumer guarantee rights.
You can risk breaching the law if you:
- put undue pressure on a consumer or use unfair tactics to get them to buy an extended warranty
- mislead the consumer into paying for the rights that they already have under consumer guarantees.
The maximum civil penalty for providing false or misleading information is $1.1 million for a corporation and $220,000 for an individual. Criminal penalties for the same amounts may also be imposed.
For example, a consumer buys a new LCD television for $2000. It has a one year manufacturer´s warranty, and you offer for sale an extended warranty for a further three years for $300.
If the TV breaks after 18 months, you would still need to fix the TV for free, regardless of whether the consumer purchased the extended warranty or not. This is because it would be reasonable to expect a $2000 TV to last longer than 18 months and the consumer guarantee for acceptable quality has not been met.
Last reviewed 06/05/2013